2009 (9) TMI 512 - HC - Customs

High Court upholds Tribunal decision on Customs Act penalties emphasizing strict compliance with legal provisions

The High Court upheld the Tribunal's decision to set aside the confiscation of goods and penalty imposed on respondents under the Customs Act. The Court ... Confiscation and penalty- The respondents who were holders of a passbook under the DEEC Scheme, had imported as many as 16 consignments. The Assessing Officer then arrived at the conclusion that the import of 16 consignments was not only in contravention of law but also as a result of conspiracy. The impugned three consignments had also been sold before they were imported into the country in violation of para 281 of the Import Export Policy 1988-91. Therefore the goods are liable for confiscation under Section 111(o) of the Customs Act, 1962. while the Tribunal set aside the order of confiscation and penalty. Held that- the respondents had not cleared the goods. The Bill of Entry was filed by some other person. Therefore, the question of breach of condition by the respondents would not arise. What Section 111(o) of the Act reiterates is “the condition is not observed”. The stage for observing the condition had not yet arisen as the goods themselves had not been cleared by the respondents. In our opinion, therefore, the learned Tribunal was right in placing reliance on the judgment of the Supreme Court in the case of Union of India v. Sampat Raj Dugar, 1992 (58) E.L.T. 163 (S.C.). The learned counsel is unable to point out any other provision under which the goods could be confiscated or penalty imposed insofar as the respondent no. 1 is concerned. Considering the above, in our opinion, the questions as framed in respect of the reference sought by the Revenue would not arise. Consequently, the application is rejected. Issues:1. Confiscation of goods and imposition of penalty based on breach of conditions under Customs Act.2. Interpretation of Section 111(o) of the Customs Act regarding confiscation of goods exempted from duty.Issue 1 - Confiscation of Goods and Imposition of Penalty:The case involved 16 consignments imported by the respondents under the DEEC Scheme, disclaimed after investigations. The Assessing Officer found the import to be illegal and a result of conspiracy, leading to confiscation of three consignments under Section 111(o) of the Customs Act with a penalty of Rs.50,000 imposed. On appeal, the Tribunal set aside the confiscation and penalty, citing that the goods were not liable for confiscation as duty exemption was not granted at the time of seizure. The Tribunal referred to the Supreme Court judgment in Union of India v. Sampat Raj Dugar, emphasizing that confiscation under Section 111(o) only applies when conditions are not observed, which had not arisen as the goods were not cleared by the respondents.Issue 2 - Interpretation of Section 111(o) of the Customs Act:The Supreme Court judgment in Sampat Raj Dugar clarified that Section 111(o) contemplates confiscation of goods exempted from duty if conditions are not observed within the prescribed period. The Court highlighted that the condition must be breached within the specified time frame for confiscation to apply. In this case, as the goods were not cleared by the respondents and the Bill of Entry was filed by another party, the condition had not been violated by the respondents. Therefore, the Tribunal rightly relied on this interpretation, concluding that no other provision justified confiscation or penalty against the respondents.In conclusion, the High Court rejected the Revenue's application for reference, affirming the Tribunal's decision to set aside the confiscation of goods and penalty. The Court upheld the interpretation of Section 111(o) of the Customs Act, emphasizing the importance of conditions being breached within the specified period for confiscation to be applicable. The judgment highlighted the need for strict adherence to legal provisions in cases of confiscation and penalty under the Customs Act.