2023 (9) TMI 937 - AT - Customs

Tribunal Upholds Redemption Fine and Penalty for Imported Clothing, Emphasizes Licensing Compliance

The Tribunal upheld the redemption fine and penalty imposed on imported old and used worn clothing, reducing the fine to 10% of the assessed value and the ... Valuation of imported old and used worn clothing - restricted item or not - enhancement of value - confiscation - imposition of redemption fine and penalty - HELD THAT:- This issue came up before this Tribunal in the case of VENUS TRADERS, RAINBOW INTERNATIONAL, AL-YASEEN ENTERPRISES, GLOBE INTERNATIONAL, KRISHNA EXPORT CORPORATION, PRECISION IMPEX, BMC SPINNERS PVT. LTD., SHIVAM TRADERS, LEELA WOOLEN MILLS, M.U. TEXTILES VERSUS COMMISSIONER OF CUSTOMS (IMPORTS) MUMBAI [2018 (11) TMI 625 - CESTAT MUMBAI], wherein this Tribunal has held that the failure of the original authority to comply with the direction in remand to disclose the margin of profit that prompted the fine and penalty, the matter would normally have to be remitted back by another remand order. However, the paucity of evidence and the negligible scope for ascertainment at this stage deters us from doing so. In the light of the admitted failure to comply with the licensing requirements, we uphold the confiscation of the goods under Section 111(d) of Customs Act, 1962. However, it is our opinion that the ends of justice would be served by reducing the redemption fine to 10% of the ascertained value and penalty to 5% - Against the confirmed duties and the penalties the Redemption Fine imposed by the Adjudicating Authority, the Respondent has not filed any appeals. The redemption fine and penalty imposed on the respondents by the adjudicating authority is sufficient to meet the end of justice. Therefore, the redemption fine and penalty confirmed by the adjudicating authority are upheld - there are no infirmity in the impugned order and the same are upheld - appeal of Revenue dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether import of old and used worn clothing (completely fumigated) is classifiable under the restricted Tariff Item and therefore requires a specific import licence under the Foreign Trade Policy. 2. Whether confiscation of such imports can be validly imposed under Section 111(d) of the Customs Act where import licence is absent, and whether Section 111(m) is appropriately invoked in the absence of a prior bill of entry declaration. 3. Whether the redemption fine and penalty imposed (at specified percentages of the assessed value) are lawful and proportionate, including the validity of post-import market surveys and margin-of-profit determinations used to compute fines. 4. Whether the Revenue is entitled to enhancement of redemption fine and penalty on appeal, having not contested confirmed duties and penalties in separate appeals by the importer. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification and restriction under Foreign Trade Policy Legal framework: The First Schedule tariff classification (Tariff Item No. 63090000) together with Para 2.17 of the Foreign Trade Policy and the ITC(HS) Classification prescribe that certain old and used garments are restricted imports permitted only against a valid specific licence. Interpretation and reasoning: The Tribunal accepts that the imported goods fall within the relevant tariff heading and that import of such goods is restricted without a licence. The adjudicating authority's finding of want of licence is not contested by the importer. Ratio vs. Obiter: Ratio - restriction under the FTP and classification under the tariff item are upheld as the legal basis making licence a prerequisite for import. Conclusion: Import required a specific licence; absence of licence constitutes non-compliance with trade policy and supports enforcement action. Issue 2 - Validity of invocation of Section 111(m) versus Section 111(d) Legal framework: Section 111 of the Customs Act provides distinct heads for confiscation, including (d) for import without required documents or licence and (m) for goods not corresponding with the declaration made under the Act (e.g., bill of entry). Precedent Treatment: The Tribunal relied on its earlier reasoning (as recited) that Section 111(m) cannot be properly invoked where proceedings began before filing of the bill of entry because confiscation under 111(m) presupposes an operative declaration (bill of entry). That earlier decision upheld confiscation under Section 111(d) where licence was absent. Interpretation and reasoning: The Court reasons that confiscation under Section 111(d) is appropriate where importers have admitted lack of licence; invocation of 111(m) is inappropriate without a declaration. The distinction rests on the statutory text: 111(m) targets misdeclaration as to value/description in an existing declaration, whereas 111(d) addresses import without licence. Ratio vs. Obiter: Ratio - where no valid declaration exists at the time proceedings commence, Section 111(m) should not be invoked; confiscation for lack of licence is properly under Section 111(d). Conclusion: Confiscation under Section 111(d) is lawful on the facts; Section 111(m) is inapplicable in absence of a declaration. Issue 3 - Lawfulness and quantum of redemption fine and penalty; use of market survey and margin-of-profit Legal framework: Section 125 permits release of confiscated goods on payment of fine in lieu (redemption fine) and penalties are imposed per the Act; redemption fine should not exceed the market price of the goods. Determination of value for computing fines may involve market surveys and margin-of-profit assessments. Precedent Treatment: The Tribunal follows its prior decision which: (a) accepted confiscation under 111(d); (b) endorsed use of market survey and margin-of-profit to compute ascertained value but criticized ex post facto surveys conducted long after import and remand; and (c) reduced redemption fine and penalty (example reduction to 10% and 5% respectively) where the original authority failed to disclose margin-of-profit and to comply with remand directions. Interpretation and reasoning: The Court emphasizes procedural fairness - where the authority ascertains value or margin-of-profit that triggers fine, those particulars must be disclosed to the importer as directed on remand. A market survey conducted long after import and after remand, without prior disclosure of the margin that informed the fine, is procedurally infirm. Nevertheless, where the importer has not seriously contested the ascertained value and licensing failure is admitted, the Tribunal found limited scope to remit and reduced fines in prior practice to meet ends of justice. In the present matter, the Tribunal applied that precedent to hold the imposed redemption fine and penalty were sufficient and not to be enhanced. Ratio vs. Obiter: Ratio - redemption fine must not exceed market price; margin-of-profit computations used to fix fines must be disclosed and may not be validated by stale post-import surveys; where original authority fails to comply with remand direction to disclose margin-of-profit, remand or reduction of fines is appropriate. Obiter - practical comments on impossibility of ex post facto compliance and constraints on further remand in cases with paucity of evidence. Conclusion: Given admitted licensing breach, and applying the Tribunal's approach, the redemption fine and penalty as imposed are adequate; no enhancement warranted. Procedural lapses in margin disclosure counsel caution but do not automatically nullify confiscation where licence absence is established. Issue 4 - Scope of Revenue's appeal for enhancement where respondent did not separately appeal duties/penalties Legal framework: Appellate review permits challenge to quantum of fines/penalties; however, the Tribunal assesses sufficiency and reasonableness against statutory limits and precedent. Interpretation and reasoning: The Tribunal notes that the importer/respondent did not challenge confirmed duties and penalties by separate appeal. Applying the precedent and considering the admitted non-compliance with licensing requirements, the Tribunal finds no infirmity in the impugned orders and declines to enhance fines sought by Revenue. Ratio vs. Obiter: Ratio - appellate court will not enhance penalties where the existing fines are within permissible bounds and where factual admissions reduce scope for reassessment; absence of contest by the importer is a relevant factor. Conclusion: Revenue's appeal for enhancement is dismissed; redemption fine and penalty as confirmed are upheld.