2025 (2) TMI 1281 - AT - Customs

Reduced 25 Percent Penalty Valid; Confiscation and Redemption Fine on Fully Exported Goods Set Aside

CESTAT Kolkata allowed the appeal, holding that while the appellant rightly became liable to differential export duty due to lower actual moisture content ... Demand of differential duty - confiscation of goods - actual moisture content was found to be less than what was declared, resulting in higher realization of consideration from the overseas importers - HELD THAT:- The appellant has realized a higher value from the overseas importer since the moisture content was less. They were required to pay the differential export duty which they have already done and there is no dispute that they have also paid the interest thereon. It is found that the adjudicating authority should have given the option to pay the penalty at the rate of 25% of the penalty decided, which has not been done in this case. So far as the confiscation and imposition of redemption fine is concerned, we find that the goods have already been exported for which export realization has already been received by the appellant. In such a case, the Department could not have confiscated and also sought the imposition of redemption fine on the same. The Tribunal, Hyderabad in the case of Commissioner of Customs, CE & ST, Hyderabad-II v. G.M.K. Products Pvt. Ltd. [2020 (2) TMI 234 - CESTAT HYDERABAD] has held 'In the present case, if the goods are held liable for confiscation under Section 113 and the option is given under Section 125 the exporter may not choose the option at all and he does not have to pay the redemption fine. On the other hand, if he chooses to pay the redemption fine then the department is bound to give him possession of the goods which is impossible as the goods have already left the country. For this reason also, the confiscation under Section 113 and the redemption fine under Section 125 are not sustainable as per law in respect of exported goods.' The 100% penalty imposed on the appellant set aside and it is held that 25% of penalty paid by the appellant would be sufficient and meets the requirement of law. Appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, upon payment of differential export duty and interest, the assessee is entitled to the statutory option of reduced penalty at 25% of the duty amount, despite the adjudicating authority not having extended such option and the payment being made beyond 30 days from the original order. 1.2 Whether confiscation of the exported goods and imposition of redemption fine in lieu of confiscation are legally sustainable when the goods have already been exported and are not physically available for confiscation. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to reduced penalty at 25% of duty amount Legal framework (as discussed) 2.1 The Court noted and relied upon the ratio of decisions of a High Court where, in the context of penalty under Section 11AC of the Central Excise Act, it was held that: (i) when duty and interest are paid, the quantum of penalty is generally restricted to 25% of the duty amount; (ii) if the statutory option of reduced penalty is not given by the adjudicating or appellate authority, such option can subsequently be extended; and (iii) in such cases, the period of 30 days for payment of reduced penalty commences from the date on which that option is actually given. Interpretation and reasoning 2.2 The Court found as an undisputed fact that the appellant, upon being issued a show-cause notice, had paid the entire differential export duty along with applicable interest. 2.3 The Court observed that the adjudicating authority imposed a penalty equal to the duty amount but failed to offer the statutory option to pay 25% of the penalty if paid within 30 days, although such an option ought to have been extended. 2.4 The Court took note of the fact that, despite the absence of a formal option in the order, the appellant on its own had deposited 25% of the penalty amount before filing the first appeal. 2.5 Relying on the High Court decisions, the Court held that where the option of reduced penalty is not given, the appellate forum can grant such option and treat the 30-day period as commencing from the date on which the option is effectively made available to the assessee. Conclusions 2.6 The Court held that the adjudicating authority erred in not extending the 25% reduced-penalty option. 2.7 The Court held that the 100% penalty imposed was unsustainable and that the 25% of penalty already paid by the appellant was sufficient and met the requirement of law; the balance penalty stood set aside. Issue 2: Validity of confiscation and redemption fine when goods already exported Legal framework (as discussed) 2.8 The Court relied upon the reasoning adopted in prior Tribunal decisions interpreting Sections 113 and 125 of the Customs Act, 1962, which clarify that: (i) upon confiscation, title to the goods vests in the Government; (ii) redemption fine under Section 125 is merely an option to the person whose goods are confiscated to pay a fine in lieu of confiscation and retake the goods; (iii) if the person does not exercise this option, the goods remain confiscated and can be disposed of by the Department; and (iv) where the goods have already left the country and are not available, actual delivery of the goods against payment of redemption fine becomes impossible, rendering confiscation and redemption fine inapplicable to such exported goods. Interpretation and reasoning 2.9 The Court found that the goods in question (iron ore fines) had already been exported and export realization had been received by the appellant. 2.10 In light of the nature of confiscation and redemption fine, the Court reasoned that, once goods are no longer within the control or custody of the authorities and have physically left the country, they cannot meaningfully be confiscated, nor can a lawful option of redemption fine be worked out, since the Department cannot restore possession of the goods upon payment of fine. 2.11 The Court held that the ratio of the cited Tribunal precedent, which declared confiscation and redemption fine unsustainable in respect of goods already exported, applied squarely to the facts of the present case. Conclusions 2.12 The Court held that confiscation of the goods was legally untenable because the goods had already been exported and were not available for confiscation. 2.13 Consequently, the imposition of redemption fine in lieu of confiscation was set aside. 2.14 With the penalty reduced to 25% of the duty amount already paid and redemption fine set aside, the appeal was allowed with consequential relief as per law.