Customs duty liability arises when confiscated goods redeemed after fine payment under Section 125

The SC held that when confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 1962, customs duty liability arises as a precondition for redemption. The court clarified that while duty obligation originates from exercising the Section 125 option, the assessment and determination follows Section 28 procedures. The SC ruled that interest on delayed payment under Section 28AB applies to such duty obligations, as Section 125(2) mandates payment of duty and charges in addition to the fine. The HC decision was upheld and appeal disposed of.

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Issues Involved:

1. Liability to pay customs duty when confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 1962.
2. Liability to pay interest on delayed payment under Section 28AB of the Customs Act, 1962.
3. True and correct ratio of the decision in Jagdish Cancer case.

Issue-wise Detailed Analysis:

1. Liability to Pay Customs Duty When Confiscated Goods Are Redeemed After Payment of Fine under Section 125 of the Act:

The Supreme Court affirmed that the owner of goods has a liability to pay customs duty even after confiscated goods are redeemed by paying a fine under Section 125 of the Customs Act, 1962. This principle was established in the Security Finance case (1976) where the court distinguished between the power to impose or recover duty under Section 20 (now Section 12/28) and the power to impose penalty and/or fine under Section 183 (now Section 125). The judgment clarified that the duty liability arising under Section 125(2) must be assessed under Section 28.

The Court noted that the customs duty obligation on once-exempted goods, liable to be confiscated for violation of conditions, arises only after the option to redeem them is exercised under Section 125. This was further affirmed in the Fortis Hospital case (2015), where it was held that the duty becomes payable only when the option to pay the fine and redeem the confiscated goods is exercised.

Thus, the court concluded that the obligation to pay customs duty in confiscation proceedings under Section 125(2) is distinct from the assessment and determination of duty, which can arise only under Section 28.

2. Liability to Pay Interest on Delayed Payment under Section 28AB of the Act:

The Court held that once Section 28 applies for the determination of duty obligation arising under Section 125(2), the interest on delayed payment of duty under Section 28AB follows. The text of Section 125(2) clearly provides that the owner of goods shall be "liable to any duty and charges payable with respect to such goods" in addition to the fine. As Section 28 is used for assessing and determining the duty and other charges payable, the interest liability under Section 28AB is also attracted.

3. True and Correct Ratio of the Decision in Jagdish Cancer Case:

The Court clarified that the Jagdish Cancer case is not an authority for the proposition that when the liability to pay customs duty arises under Section 125(2), the calculation, determination, or assessment of such duty cannot be made under Section 28. The Jagdish Cancer case held that the liability to pay customs duty in confiscation proceedings arises under Section 125(2) and does not require a separate notice under Section 28. However, this does not preclude the use of Section 28 for the assessment and determination of such duty.

Conclusion:

The Supreme Court upheld the High Court's decision, affirming that the owner of goods has a liability to pay customs duty and interest on delayed payment when confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 1962. The court clarified that the duty liability arising under Section 125(2) must be assessed under Section 28, and interest on delayed payment of duty under Section 28AB is applicable. The decision in the Jagdish Cancer case was explained to support this interpretation. The Civil Appeal was disposed of with no order as to costs.

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