TaxTMI 
TaxTMI 
2024 (7) TMI 1221
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......................................................................... 7 5. Confiscation of goods under Chapter XIV of the Act: ...................................... 8 6. Section 125 of the Act: ........................................................................................ 9 7. Issues: ............................................................................................................... 11 8. Re: Whether there is a liability to pay customs duty, when the confiscated goods are redeemed after payment of fine under section 125 of the Act? ..... 11 9. Re: What is the true and correct ratio of the decision in Jagdish Cancer case?. ................................................................................................................. 18 10. Re: Whether the liability to pay such duty will include the liability to pay interest on delayed payment under section 28AB of the Act? ........................ 21 11. Conclusion:. ........................................................................................................ 22 JUDGMENT PAMIDIGHANTAM SRI NARASIMHA, J. 1. Introduction: "The fo....
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.... NHAI National Highways Authority of India and PWD Public Works Department. When investigations revealed that the appellant has violated the import conditions, even before a show-cause notice was issued, the appellant deposited Rs.16,29,22,282/- and interest of Rs. 1,84,39,696/- between May, 2007 to August, 2007. Thereafter, a show-cause notice The show cause notice is purportedly issued under Section 124 read with Section 28 of the Act. was issued on 23.01.2008 proposing confiscation under Section 111(o) with respect to goods that were valued at Rs. 48.55 crores involving duty liability of Rs. 17,37,57,039/- under Section 28, interest under Section 28AB and penalties under Sections 112(a) and (b) and 114A of the Act. The appellant filed an application under Section 127B of the Act before the Settlement Commission claiming that it has not violated any condition of the notification dated 01.03.2002 and further claimed that in order to avoid prolonged litigation, they had accepted the liability subject to further adjustments as may be approved by the Settlement Commission. The appellant also asserted that the claim for interest under Section 28AB is impermissible as the proceedings w....
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.... of any specified description. (2) ... (3) ... vests the power in the Central Government to prohibit absolutely or subject to such conditions, as may be specified in the notification, the import or export of goods into or out of India. Under Section 45 of the Act, all imported goods unloaded in a customs area shall remain in the custody of the customs authorities. The importer shall present a bill of entry under Section 46 and self-assess the duty under Section 17. Alternatively, under Section 47 the goods are provisionally assessed by the authority under Section 18 and cleared for home consumption. Goods are cleared for home consumption only after the customs officer is satisfied that the goods are not prohibited for home consumption and the import duty is paid. Duties of customs shall be levied under Section 12 Section 12: Dutiable goods.-(1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or exported from, India. [(2) The provisions of sub-section (1) sh....
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.... (2) [...] (3) [...] (4) Where any duty has not been [levied or not paid or has been short-levied or short-paid] or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,- (a) collusion; or (b) any wilful mis-statement; or (c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been [so levied or not paid] or which has been so short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice." 5. Confiscation of goods under Chapter XIV of the Act: The third circumstance where duty is collected is when goods are improperly imported into or exported out of India. Chapter XIV of the Act provides for confiscation of such goods and imposition of penalties under Sections 111 Section 111. Confiscation of improperly imported goods, etc.-The following goods brought from a place outside ....
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.... and amicable settlement of disputes through resolution. Section 125 is extracted herein below for ready reference: "Sec 125. Option to pay fine in lieu of confiscation. (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods [or, where such owner is not known, the person from whose possession or custody such goods have been seized,] an option to pay in lieu of confiscation such fine as the said officer thinks fit. Provided that where the proceedings are deemed to be concluded under 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 proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imp....
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....on and collection of duty on the ground that Section 183 proceedings authorised only a fine and not customs duty. This court allowed the appeal of the Custom Departments by drawing a distinction between the power to impose or recover duty under Section 20 (Section 12/28 of our Act) on one hand, and the power to impose penalty and/or fine under Section 183 (Section 125 of our Act). This Court held that they are distinct and operate independently. The relevant portion of the judgement is as under: "5. Does the order under Section 183 preclude him from levying duty under Section 20? This is the short issue before us. A close study of the scheme of the relevant provisions, powers and levies discloses a clear dichotomy which has escaped the attention of the High Court. Import/Export duty is an obligation cast by Section 20 of the Act. It is a tax, not a penalty; it is an innocent levy once the exigible event occurs; it is not a punitive impost for a contravention of the law. Confiscation, penalty and fine provided for under Sections 167 (item 8) and 183 are of the species of punishment for violation of the scheme of prohibition and control. Once this distinction and duality are....
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....ring whether there is a liability to pay customs duty in confiscation proceedings when goods are redeemed upon payment of fine. This judgment is not concerned with instances like in the present case where goods are imported without payment of duty under an exemption notification. 8.4. The above referred judicial interpretation has attained statutory recognition in 1985 when the Parliament introduced subsection (2) to Section 125 to clarify and declare that the owner of goods, in addition to payment of fine, shall also be liable to pay duty and other charges upon exercising the option to pay fine to redeem goods. Thus, the owner of goods has a liability to pay customs duty, even after confiscated goods are redeemed after payment of fine and other charges under Section 125 of the Act. This is the first principle. 8.5. In our view, this position gleaned from Security Finance case has remained consistent with amendments introduced to Section 125 in the year 1985. 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. Once the option is exercised, the acce....
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....e final order there could not have been direction to pay the duty. 11. Notwithstanding the aforesaid position, as pointed out above, the Department is taking shelter under the provisions of sub-section (2) of Section 125 of the Act. However, on a plain reading of the said provision, we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods. Only when this contingency is met, the duty becomes payable. In the present case, admittedly, such an option was not exercised and the confiscated machinery was not redeemed by the Institute. As a matter of fact, thus, no fine has been paid." 8.7. This judgment also explains the position when the Customs Department wants to recover duty through ways, other than confiscation at the Chapter XIV. Explaining the alternative modes of recovery of customs duty, the court observed as follows; "16. It is not that the Department is without any remedy. We have gone through the provisions of notification No. 64 of 1988 dated 01.03.1988. As pointed ou....
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....and correct ratio of the decision in Jagdish Cancer case? 9.1. The real contest in this case is about the correct ratio of the judgement in Jagdish Cancer case. According to the appellant, as this judgment holds that duty liability in confiscation proceedings arises because of Section 125 and not Section 28, there is no liability to pay interest on delayed payments under Section 28AB. The facts of this case are necessary to be recounted for a clear understanding of the ratio of this decision. In this case, the department issued a showcause notice under Section 124 of the Customs Act demanding customs duty and proposed confiscation under Section 111(o) and penalty under Section 112. 9.2. The importer contended that as there is no notice under Section 28, the demand and collection of duty are impermissible. We will extract the submission as recorded by this court in para 9 of the judgment, as it is important to know what was argued and what was decided: "9. [...] Section 28 of the Act which falls in Chapter V provides for notice for payment of duties which has been demanded by the notice in this case. Therefore, it is submitted on behalf of the Centre that demand of cu....
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....an order confiscating the imported goods is passed, an option, as provided under sub-section (1) of Section 125 of the Customs Act, is to be given to the person to pay fine in lieu of the confiscation and on such an order being passed according to sub-section (2) of Section 125, the person "shall in addition be liable to any duty and charges payable in respect of such goods." A reading of sub-section (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under sub-section (2) in addition to the fine under sub-section (1). Therefore, where an order is passed for payment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short- levied or erroneously refunded etc. The order for payment of duty under Section 125(2) would be an integral part of proceedings relating to confiscation and consequential orders thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods wa....