2025 (8) TMI 18 - AT - Customs

Proper Officer Assessing Bill of Entry Must Sanction Exemption Breach Under Customs Act Sections 111(o) and 112

M/s Infinia Greentech Pvt. Ltd. Versus Commissioner of Customs, Air Cargo Export, New Customs House, Near IGI Airport, New Delhi

The CESTAT held that the proper officer to sanction non-observance of exemption conditions under the Customs Act is the officer who assesses the Bill of ... Confiscation of imported vehicle - import under the “ATA Carnet Scheme” for exhibition claiming the benefit of exemption N/N. 157/90-Cus dated 28.3.1990 but appellant failed to re-export it within the time prescribed under the notification - Levy of penalties - who is the proper officer who can sanction the non-observance of the condition of exemption from prohibition on import or from duty? - HELD THAT:- 'Proper officer' as per section 2(34) of the Act, in relation to any functions to be performed under this Act, means the officer of customs who is assigned those functions by the Board or the Principal Commissioner of Customs or Commissioner of Customs under section 5. The proper officer who assesses the Bill of Entry has to look into the eligibility of exemption from duty and the prohibitions or restrictions on import and therefore, is the proper officer who can sanction the non- observance of the conditions. This is for the reason that assessment of Bill of Entry under section 17 of the Act and the power of sanction under section 111(o) are very closely linked. In this case, the non-observance of the conditions happened after importation and the matter was adjudicated by the Commissioner. At that stage, he could have, sanctioned the non-observance of the conditions under section 111(o). It does not appear that a decision was taken to „Not sanction the non-observance of the conditions‟. This possibility was not considered at all by the Commissioner. The non-observance of the condition of the exemption notification as per section 111(o) is sanctioned. Consequently, the imported goods are not liable to confiscation under section 111 and consequently no penalty is imposable under section 112. The adjudicating authority, therefore, always has the discretion to confiscate the goods under section 111 or not and to impose penalty under section 112 or not. He should judicially and not arbitrarily exercise and decide on confiscation and penalty. The non-observance of the condition of re-export within time by the appellant under section 111(o) sanctioned - the impugned order is set aside - appeal allowed. ISSUES: Whether the vehicle imported under the ATA Carnet Scheme and exempted from duty under Notification No. 157/90-Cus is liable to confiscation under section 111(o) of the Customs Act for failure to re-export within the prescribed time.Whether the redemption fine under section 125 of the Customs Act is properly imposed in respect of the vehicle.Whether penalty under section 112(ii) of the Customs Act can be imposed for non-compliance with conditions of exemption.Whether penalty under section 117 of the Customs Act is imposable when penalty under section 112 is already imposed.Whether the non-observance of conditions for exemption can be sanctioned by the proper officer, thereby negating liability for confiscation and penalty.The scope and exercise of discretion vested in the adjudicating authority under sections 111 and 112 regarding confiscation and penalty. RULINGS / HOLDINGS: The vehicle is not liable to confiscation under section 111(o) because the non-observance of the condition of re-export within time is sanctioned by the proper officer in view of the exceptional circumstances, including the war and transport disruption. The Court held: 'we sanction the non-observance of the condition of the exemption notification as per section 111(o). Consequently, we hold that the imported goods are not liable to confiscation under section 111.'The redemption fine under section 125 is not sustainable as confiscation itself is not justified.Penalty was imposed only under section 112(ii) and not as a composite penalty under clauses (a), (b), and (ii). The penalty under section 112(ii) is not imposable once confiscation is negated by sanctioning non-observance of conditions.Penalty under section 117, being a residuary provision, cannot be imposed when penalty under section 112 is already imposed. The Court stated: 'no penalty under section 117 is imposable' where penalty under section 112 applies.The 'proper officer' who assesses the Bill of Entry is empowered to sanction non-observance of conditions attached to exemption notifications, and such sanction removes liability for confiscation under section 111(o). The Court emphasized that the adjudicating authority 'must take a decision to sanction the non-observance of the condition or not' during adjudication.The expressions 'shall be liable to confiscation' and 'shall be liable to penalty' in sections 111 and 112 confer discretion on the adjudicating authority to decide judicially whether to confiscate or impose penalty, and such discretion must not be exercised arbitrarily. The Court cited precedent holding that discretion must be exercised 'judicially and not arbitrarily.' RATIONALE: The Court applied the statutory framework of the Customs Act, specifically sections 111(o), 112(ii), 117, and 125, and interpreted the phrase 'liable to confiscation' as conferring discretion rather than mandating automatic confiscation.It relied on the definition of 'proper officer' under section 2(34) and the linked powers under section 17 (assessment of Bill of Entry) and section 111(o) to hold that sanctioning non-observance of conditions is within the proper officer's authority, including during adjudication.The Court recognized exceptional factual circumstances (war and transport disruption) rendering re-export impossible within prescribed time, justifying sanction of non-observance of conditions.Precedents from the Delhi High Court and Madras High Court were cited to establish that the adjudicating authority's discretion under sections 111 and 112 must be exercised judicially and not arbitrarily, and that confiscation is not automatic upon finding liability but subject to judicial discretion.The Court noted that penalty under section 117 is a residuary provision and cannot be imposed where penalty under a specific provision (section 112) applies.This judgment clarifies the interplay between exemption conditions, sanctioning powers of the proper officer, and the adjudicating authority's discretion in confiscation and penalty matters under the Customs Act.