TaxTMI 
TaxTMI 
2019 (4) TMI 1467
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....s attained finality, but makes such payment belatedly but prior to the date of auction, can the Central Government retain the excess auction proceeds after adjusting the customs duty, interest, penalty and redemption fine or has such excess amount have to be returned paid to the owner of the goods? 2. The answer to the above question would require interpretation of the expression 'vest with the Central Government' occurring in Section 126 (1) of the Act. In this context, this Bench has also been tasked with examining the correctness of the decision of a DB of this Court in MMTC v Surjit Singh Kanda 196 (2013) DLT 725 (DB). The background facts 3. The background facts have been set out in detail in the referral order dated 9th March, 2016 which reads as under: "1. The Petitioner, Gillette India Ltd. ('GIL'), is before this Court aggrieved by the auction process initiated by the Department of Customs ('Department') in respect of the goods imported by GIL under three Bills of Entry ('B/Es'). 2. GIL imported 1008 Power Tooth Brushes under B/E No. 5980646 (hereafter 'B/E No. 1') dated 13th February, 2012 in a single consignment and warehoused the said cons....
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....r Section 125 of the Act within 30 days. A penalty of Rs. 5,000/- was levied under Section 112 of the Act. 8. It is not in dispute that the aforementioned two Orders-in-original dated 31st December 2013 were not challenged by the Petitioner. 9. As far as B/E No. 3 is concerned, on 30th December 2014 the DC (Bond) passed an order confiscating the goods, giving an option to GIL to redeem them on payment of redemption fine of Rs. 50,000/- within 30 days. It was further directed that after redemption of the goods, GIL would pay the custom duty amounting to Rs. 1,58,454/- assessed on the goods lying un-cleared and interest thereon at the applicable rates under Section 61(2) read with Section 72(b) of the Act. A penalty of Rs. 15,000/- under Section 112 of the Act was also levied. 10. It is stated by GIL that the aforementioned order has been appealed against by GIL before the Commissioner of Customs (Appeals) ('CCA'). A copy of the memorandum of appeal along with an application for stay filed by the Petitioner on 4th March, 2015 has been placed on record. 11. Mr Satish Kumar, learned Senior Standing Counsel for the Department, states that the ....
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....h of the B/Es, the duty, redemption fine, penalty and the interest as well as the amount for which the goods have been sold. It is clarified by Mr Satish Kumar that the amount collected from the auction purchaser includes the duty, the redemption fine, penalty and interest as well as the amount for which the goods have been sold. 19. The principal contention of Mr Jayant Mehta is that although the goods confiscated may have vested with the Central Government under Section 126 of the Act, that provision has to be read with Section 125 of the Act which gives the Department the right to recover such fine as the officer in charge of adjudging may think fit in lieu of confiscation of goods. It is contended that the Department cannot appropriate the goods and if the importer has already made payment of the duty, interest, penalty and redemption fine (although belatedly but prior to the date of auction), the Department cannot insist on recovering anything more by way of auction sale. He submits that as far as B/E Nos. 1 and 2 are concerned even if an auction sale of the good imported thereunder has taken place, the amount recovered by the Department, in excess of the duty, intere....
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....ods, only such amount as was due to it, viz., the customs duty, interest, penalty and redemption fine and any excess amount recovered by the Central Government has to be paid to the importer of the goods? This would in turn require an interpretation of the expression "vest in the Central Government" occurring in Section 126(1) of the Act. The Court is of the view that the decision of the coordinate Bench in MMTC v. Surjit Singh (supra) cannot be construed as an authoritative pronouncement on the above issue. Yet, since the said decision is being been relied upon by GIL, the Court is of the view that the above issue and incidentally the correctness of the decision of this Court in MMTC v. Surjit Singh (supra) would have to be considered by a larger Bench. 23. It is stated that the decision of this Court in MMTC v. Surjit Singh (supra) is the subject matter of an appeal before the Supreme Court, being CA Nos. 165-166 of 2015. The Court has been shown a copy of the order dated 6th January, 2015 in SLP (C) No. 35999-36000 of 2013 by which leave was granted giving rise to the aforementioned appeals. By the said order and the interim relief granted earlier was directed to ....
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....ed goods were concerned, the customs/'adjudging' officer had the discretion to give the owner/possessor of the goods an option to pay fine in lieu of confiscation. As regards 'other goods', the 'adjudging' officer 'shall' give that option. According to Mr. Mehta, a conjoint reading of Sections 125 and 126 of the Act revealed that they did not give the customs officers an 'expropriatory' power. The option to pay fine and 'confiscation' were mutually exclusive. Confiscation had to be made at the time of adjudication and not later. 6. In other words the 'vesting' that Section 126 of the Act talks of occurs at the time of adjudication and not later. It is submitted that in respect of the 'other goods' that Section 125 of the Act speaks of, there cannot be any confiscation. The word 'vest' in Section 126 of the Act has to take colour from other provisions of the Act. Therefore, for the second category of goods viz. 'other goods', the word 'vest' would mean a limited vesting for the purposes of realisation of duty, interest and fine. This interpretation is stated to be supported by the language of Section 150 of the Act. 7. The legislative intent that was apparent on a reading of S....
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....rson with the full title to the property; to give such person an immediate fixed right for present or future enjoyment. The word 'confiscate' is defined as appropriation of property, as forfeited to the government i.e. to seize property by authority of law. The word 'confiscate' in Webster's Dictionary is defined to mean 'to appropriate as forfeited to public use or treasury, usually as penalty'. The word 'vest' is defined as conferring ownership, authority, etc. upon some person or persons. Analysis of relevant provisions 12. In order to answer the above questions, it is first necessary to examine the relevant provisions of the Act. Section 2 (39) of the Act defines the word 'smuggling', in relation to any goods, as a meaning "any act or omission which will render such goods liable to confiscation under Sections 111 or 113". Section 111 provides for confiscation of improperly imported goods. Section 110 of the Act authorizes the proper officer to seize such goods "that are liable for confiscation under this Act". Section 115 of the Act provides for confiscation of conveyance. Section 115 (2) states that any conveyance or animal used as means of transport in the smuggling of ....
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....r the proviso to sub-section (2) of section 28 or under clause (i) of sub-section (6) of that section in respect of the goods which are not prohibited or restricted, the provisions of this section shall not apply. Provided further that] without prejudice to the provisions of the provision to sub- section (2) of section 115, such fine shall not exceed the price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. (2) Where any fine in lieu of confiscation of goods is imposed under sub- section (1), the owner of such goods or the person referred to in sub- section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods. (3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless and appeal against such order is pending. "126. On confiscation, property to vest in Central Government. (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government. (2) The officer adjudging confiscation shall ....
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....toms Department. 6700.700 gms of gold jewellery was sealed and handed over to MMTC for safe custody. The Commissioner of Customs also confiscated and seized 11120.88 gm of gold, then valued at Rs. 50,04,396/- under panchnama dated 16th October, 1997. On 20th June, 2000, the Commissioner of Customs directed confiscation of 40.775 kg. of silver, then valued at Rs. 2,43,950/- in different forms. He also confiscated non-duty paid imported capital goods valued at Rs. 1,08,59,192/- lying at the unit of Mr Kanda. 17.4 The Indian Bank preferred an application before the Debt Recovery Tribunal-I ('DRT'), Delhi in which a recovery certificate in the sum of Rs. 75,90,977/- was issued against Mr. Kanda, his firms and the guarantor Mr. T. Shah Singh. It was directed that in case they did not make the payment of the above amount, it would be recovered by auction/sale of hypothecated assets, the mortgaged properties and other personal properties. 17.5 With no payment forthcoming under the recovery certificate, the immovable property, plant and machinery was sold by the Recovery Officer of the DRT in favour of M/s Panna Jewellery. The DRT formulated the question "who has the first charge of ....
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....artment can appropriate the said goods forever, even when the penalty, duty and other charges are paid by the importer". 17.10 Accordingly, it was held that "no further claim of the Customs Department in respect of the said gold can survive". It was held that in that case, the Customs Department did not even bother to appear before the DRT to stake its claim on the recovered gold and was proceeded 'ex-parte'. The claim of the Customs Department was characterized as 'frivolous'. 18. Mr Mehta has placed extensive reliance upon the above judgment to contend that even in the present case, when the Petitioner has come forward to pay the redemption fine prior to the public auction, but beyond the deadline, it would be unfair for the Customs Department to be permitted to appropriate the entire auction sale proceeds permitting it to be profited from the lapse of the Petitioner. The interest of the Department is completely protected since it had recovered the entire duty, interest and penalty amounts. As far as the Petitioner was concerned, nothing more was to be payable beyond those amounts to the Customs Department. It is submitted that it is only logical and fair that the excess am....
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....ssessor of the goods. 22. Section 150 of the Act makes it clear that the legislature has drawn a conscious distinction between what should happen to the sale proceeds when it comes to goods that are confiscated and those that are not. In other words, the goods that form the subject matter of Section 150 of the Act are not the improperly imported goods which are liable for confiscation on a collective reading of Sections 125 and 126. This differential treatment accorded to the two kinds of goods is based on an intelligible, rational criteria. The objective of Section 150 of the Act is for the government not to recover more than the duty, penalty and interest. This explains the requirement under Section 150 (2) for the 'balance, if any' after adjusting the sums spelt out in clauses (a) to (e) thereunder, to be 'paid to the owner of the goods.' 23. The submission of Mr Mehta for the Petitioner that the same treatment should be accorded to goods that have 'vested' in the central government under Section 126 of the Act overlooks the obvious distinction in the two situations. Under Sections 125 and 126 of the Act, there is no restriction on the use of the auction proceeds following....
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....) 4 SCC 753 & 757. 13.17. The settled principles of interpretation are that the Court must proceed on the assumption that the legislature did not make a mistake and that it did what it intended to do. The Court must, as far as possible, adopt a construction which will carry out the obvious intention of the Legislature. Undoubtedly, if there is a defect or an omission in the words used by the Legislature, the Court would not go to its aid to correct or make up the deficiency. The Court could not add words to statutes or read words into it which are not there, especially when the literal reading produces intelligible results. Reference may be made to Dadi Jaganath Dham v. Jammullu Ramulu AIR [2001] (SC) 2699 at 2703. Any presumption to the contrary in the absence of any ambiguity would be contrary to the settled legal position as the legislature as far as possible is presumed to know what it intends to stay." Supreme Court decisions 25. There are a large number of decisions that explain what happens when a property 'vests' in the government. In Shewpujanrai Indrasanrai Ltd v. The Collector of Customs AIR 1958 SC 845, it was recognized that the property vests absolutely....
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....s". If the redemption fine was not paid within the time stipulated, the officer was authorized by law to take and hold possession of confiscated goods and also to take consequential action for its auction in accordance with provisions of Act and the Rules made thereunder. It was held that in such circumstances the auction sale was not illegal. 27.1 In this context, it is necessary to deal with one more judgment relied upon by Mr Mehta in Shabir Ahmed Abdul Rehman v Union of India 2009 (235) ELT402 (Bom). In that case, the Petitioner on his arriving from Muscat on 17th April, 1997 was apprehended at the Bombay Airport. He was carrying 41 gold bars valued at Rs. 18,88,337/- (international market value) and Rs. 23,16,500/- (local market value) concealed in a pouch. The gold bars were seized from the Petitioner on the belief that they were liable to be confiscated. After an SCN was issued only 3rd July, 1997, by an order dated 11th November, 1997, the said gold was liable to be confiscated. A penalty of Rs. 3 lakhs was imposed. 27.2 The Petitioner then filed an appeal in which the gold was directed to be reshipped subject to the payment of fine Rs. 6 lakh and the personal penalty....
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....pendency of the appeal before it was not proper. What the Court found fault was that the auction took place during the pendency of the Petitioner's appeal before the Tribunal and yet no permission was obtained of the Tribunal. Here again, the judgment does not discuss Sections 125 of 126 of the Act. The only principle decided was that "during the pendency of the appeal confiscated goods could not have been auctioned without the prior permission of the appellate court". The entire value of the confiscated goods was directed to be returned to the Petitioner. The context in the present case is different. This decision too, is therefore, not of any assistance to the Petitioner. Conclusions 30. To summarise the conclusions: (a) Once there is a failure to pay the redemption fine in lieu of confiscation as determined under Section 125 of the Act, within the time stipulated, the consequence of the 'confiscation' becoming absolute and the confiscated goods vesting absolutely in the central government inevitably has to follow in terms of Section 126 of the Act. The consequence is the same whether the goods are 'prohibited goods' or 'other goods'. (b) Sections 125 and 126 of the A....