2025 (11) TMI 614 - AT - Customs

Import seizure, confiscation and penalties set aside where importer acted in good faith; reassessment justified, penalties unsustainable

M/s GM Impex Versus Commissioner of Customs, Ludhiana

CESTAT CHANDIGARH - AT allowed the appeal, holding seizure, confiscation, redemption fine and penalty unsustainable where importer's bonafide belief in ... Confiscation u/s 111(d) of Customs Act - redemption fine - penalty - impugned order passed without properly appreciating the facts and law and binding judicial precedents - it is submitted that present is the case of re-assessment where seizure, confiscation and consequent fine and penalty was not warranted - HELD THAT:- This is a case where the appellant had a bonafide belief that he is liable to pay the custom duty on the basis of the transaction value and he has no malafide intention to evade. He filed the bill of entry but a query was raised under EDI system and he filed the reply to the said query but the Original authority demanded the duty as per the Notification No. 38/2015-2020 dated 05.02.2016 issued by Directorate General of Foreign Trade which stands paid by the appellant. It is also found that the said notification was under challenged before the various High Courts and even the appellant had also challenged the said notification and was under a bonafide belief that is liable to pay the duty as per the invoice. It is case of re-assessment of the bill of entry filed by the appellant and there exists no reason to seize the goods, confiscate the goods and to impose redemption fine and penalty. This Bench of the Tribunal in the case of M/s Hindustan Distributors [2024 (6) TMI 59 - CESTAT CHANDIGARH] has examined this issue in detail and after considering the various decisions cited by the importer, the Bench has held 'It is pertinent to note that in the impugned order dated 08.10.2018 passed by the learned Commissioner (Appeals), sufficient reasons have not been given for imposing the redemption fine and penalty. Further, I find that in the impugned order dated 27.07.2013 relating to the same impugned goods, the learned Commissioner (Appeals) has categorically held that there was no attempt by the appellant to mis-declare the description or transaction value; and consequently the learned Commissioner (Appeals) set aside the confiscation under Section 111(d) of the Customs Act, 1962 and also set aside the imposition of redemption fine, but still retained the penalty imposed under Section 112(a) of the Act.' The impugned order imposing redemption fine and penalty is not sustainable in law - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether goods can be confiscated under Section 111(d) of the Customs Act when dispute relates to valuation (transaction value) in the face of a challenged Directorate General of Foreign Trade (DGFT) Minimum Import Price (MIP) notification and the importer had a bona fide belief in paying duty on transaction value. 2. Whether seizure, confiscation and imposition of redemption fine are justified where the proper course is re-assessment under the self-assessment regime (Sections 17(1)-17(4) of the Customs Act) rather than penal action. 3. Whether penalty under Section 112(a) of the Customs Act is sustainable where confiscation under Section 111 has been set aside. 4. The legal effect of a bona fide, good-faith reliance by the importer on transaction value in circumstances where the MIP notification was under judicial challenge at the time of import. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 111(d) confiscation where dispute is valuation on account of DGFT MIP notification Legal framework: Section 111(d) permits confiscation where goods are imported contrary to any prohibition imposed by or under the Act or any other law; valuation and minimum import price regimes intersect with customs assessment rules. Precedent treatment: The Tribunal referred to and followed prior Bench and High Court decisions addressing imports affected by MIP notifications and valuation disputes, where confiscation under Section 111(d) was found unsuitable when the matter involved interpretation rather than a restriction/prohibition being knowingly violated. Interpretation and reasoning: The Court reasoned that the present dispute concerned assessment of transaction value vis-à-vis a DGFT MIP notification which was under challenge; the importer declared correct description, chapter heading, quantity and invoice value and acted under a bona fide belief to pay duty on transaction value. The factual matrix indicated a valuation/re-assessment issue rather than an import in contravention of a prohibition. Because the MIP notification's legal validity was contested, and the importer had no mala fide intent, confiscation under Section 111(d) - which targets imports in violation of prohibitions - was not warranted. Ratio vs. Obiter: Ratio - where the impugned act is valuation/interpretation and the importer has bona fide belief, confiscation under Section 111(d) is not appropriate; this is a core decision point relied upon to set aside confiscation. Obiter - observations on the status of particular external decisions (without naming) made in passing. Conclusion: Confiscation under Section 111(d) was not sustainable on the facts; the proper remedy was reassessment, not confiscation. Issue 2 - Appropriateness of seizure, confiscation and redemption fine versus reassessment under Sections 17(1)-17(4) Legal framework: Sections 17(1)-(4) set out self-assessment by importers, verification by proper officers, requisition of documents/information and re-assessment where self-assessment is incorrect. Redemption fine and confiscation are punitive remedies distinct from re-assessment procedures. Precedent treatment: The Tribunal relied on prior decisions holding that where discrepancies are primarily assessment issues and the importer has made full disclosure/paid additional duty (where applicable), punitive measures such as seizure/confiscation and redemption fine are excessive. Interpretation and reasoning: The Tribunal emphasized that the Department had the statutory power to verify and re-assess under Section 17, and that the record showed the importer responded to EDI queries and paid MIP duty when demanded. Given the posture of re-assessment and the absence of concealment or mis-declaration of essential particulars, seizure/confiscation and redemption fine were disproportionate and not called for. Ratio vs. Obiter: Ratio - where assessment issues exist and no fraud/mala fides is shown, the statutory framework contemplates verification and re-assessment rather than punitive seizure/confiscation and redemption fines. Obiter - comments on procedural propriety of earlier adjudicating orders that lacked sufficient reasons for fines. Conclusion: Seizure, confiscation and redemption fine were unjustified; the matter should be addressed by verification/re-assessment under Sections 17(2)-(4) rather than by imposing punitive measures. Issue 3 - Sustainability of penalty under Section 112(a) once confiscation under Section 111 is set aside Legal framework: Section 112(a) penalizes acts or omissions which would render goods liable to confiscation under Section 111; penalty is contingent on the factual/legal basis for confiscation. Precedent treatment: The Tribunal followed prior authority holding that imposition of penalty under Section 112(a) is consequent to a valid finding of confiscation under Section 111; if confiscation is set aside, the foundation for Section 112(a) penalty collapses. Interpretation and reasoning: The Court observed that the appellate authority had previously set aside confiscation in related orders and that, on the present facts, confiscation was set aside for lack of applicability of Section 111(d). Since Section 112(a) is derivative of Section 111, the penalty cannot be sustained independently where confiscation is invalidated. The absence of mala fide intent further undercuts justification for penalty. Ratio vs. Obiter: Ratio - penalty under Section 112(a) is not sustainable where the goods are not liable to confiscation under Section 111; this is a binding legal consequence applied to the facts. Obiter - discussion of case law distinctions invoked by the Revenue that were deemed inapplicable to these facts. Conclusion: Penalty under Section 112(a) must be set aside once confiscation under Section 111 is quashed. Issue 4 - Legal significance of bona fide reliance on transaction value while MIP notification is under challenge Legal framework: Customs rules recognize self-assessment and permit departmental verification; bona fide conduct and honest interpretation of law are relevant to determination of penal consequences. Precedent treatment: The Tribunal applied and followed prior decisions holding that honest, bona fide disputes of legal interpretation (valuation/MIP) do not attract confiscation or penal consequences where there is no intent to evade duty. Interpretation and reasoning: The importer declared full particulars, engaged with EDI queries, and paid the differential duty under the MIP after the notification was upheld in other fora; the Tribunal treated this sequence as evidence of bona fide belief and lack of fraudulent intent. When the primary dispute is interpretative and pending judicial resolution, punitive measures are inappropriate and the correct course is reassessment or recovery of duty rather than confiscation/penalty. Ratio vs. Obiter: Ratio - bona fide reliance on a contested legal position regarding valuation precludes imposition of confiscation/penalty absent evidence of mala fide or concealment. Obiter - remarks on administrative fairness and proportionality in enforcement actions. Conclusion: Bona fide belief in paying duty on transaction value, in circumstances where the MIP notification was under challenge, militates against confiscation and penalty; appropriate remedy is reassessment and recovery of duty as applicable. Overall Disposition Applied to the Present Facts Having applied the foregoing principles, the Tribunal concluded that confiscation, redemption fine and penalty were not sustainable in law on the given facts, and accordingly set aside the punitive orders, directing relief consistent with reassessment and statutory provisions.