TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1652
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....3, the firm imported several consignments of silk fabrics availing the benefit of applicable notifications and by utilising the AA / DEEC / DFIA licenses through Chennai Seaport. It made its exports through inland container Depot, Bangalore (ICD). Dri gathered intelligence that the firm was mis-using these licenses to avail the benefit of Notification No.96/2009-Cus and 98 /2009-Cus., both dated 11.09.2009 by importing duty free silk fabrics and yarn and diverting such imported goods to local market without using the same in manufacture and export of resultant products, and instead were exporting cheap rags by mis- declaring the export goods as printed silk fabrics / made-ups. 3. Based on the intelligence, officers of DRI, Bangalore intercepted a live export consignment submitted for export by Laxmi fabrics at CWC, ICD, Bangalore under Shipping Bill No.3540018, dated 18.01.2013 after customs clearance, and before the consignment was loaded for export. On examination, finding the said consignment to be assorted use / old textile materials and made-ups of various sizes and colours, i.e. of 'rags', as against the 100% natural silk printed fabrics declared in the shipping bill and e....
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....by Laxmi Fabrics more particularly in case of shipping bills no.3540018 dated 18.01.2013, No.3525074 dated 17.01.2013 and no.3492427 dated 15.01.2013 liable to confiscation under Section 113 (d) and 113 (i) of the Customs Act and hence for his such acts of omissions and commissions, Shri J. Uthaman had rendered himself liable to penalty under Sec. 114 and or 114 AA of the Customs Act, 1962. The notice also alleged that Air Cargo helpers, Customs house agent of Laxmi Fabrics are liable to penalty under Section 114 and / or 114AA of the Customs Act 1962 for the acts of omissions and commissions as they allowed their employee Shri J Uthaman to provide CHA services to Laxmi Fabrics which resulted in the export of rags by Laxmi Fabrics in the guise of 100% natural silk printed fabrics / made ups which rendered the goods liable for confiscation under Section 113 (d) and 113 (i) of the Customs Act, 1962. 6. After due process of law, the Adjudicating Authority who confirmed the duty demands made on Laxmi Fabrics and imposed penalties as proposed in the SCN on the said firm, interalia imposed penalty of Rs. two lakhs under Section 114 and Rs. Two lakhs under Section 114 AA of the Customs....
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....pping bills in their name in the capacity of a 'G' Card Holder using the appellants CHA license number only during the investigation by DRI against Laxmi Fabrics. Laxmi Fabrics had never been their client and there wasn't any written agreement that had been entered with the said Laxmi Fabrics as is evident from the statement dated 06.02.2013 given by their Branch Manager Shri C P Ravindran. The SCN contained no allegation, much less documentary evidence, that they had derived any pecuniary benefits out of the transactions with Laxmi Fabrics. The SCN was devoid of any allegation that the appellant had abetted Laxmi Fabrics in their transactions with any malafide. The evidence placed on record in the SCN also demonstrated that the appellant had never entered into any agreement with Laxmi Fabrics and had no role in filing the shipping bills on behalf of Laxmi Fabrics. The Adjudicating Authority, despite noting their submissions, had clearly over looked the same and is silent on the appellant's plea that they had not received any financial benefit from Laxmi Fabrics. While 47 shipping bills of Laxmi Fabrics were allegedly filed by the employee J. Uthaman over a period of one year, ther....
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.... 13. Ld. Counsel for Shri. Uthaman further submits that the appellant as a G- Card Holder has only a clerical function of data entry on the basis of the invoices duly signed by the exporter given to him. It is evident from the export documents relied upon by DRI that the description of the goods, its value, weight and contents and other details are filed and duly signed by the exporter himself and not by the appellant, thus the limited role of the appellant is filling the data in the annexure based on the documents provided by the exporter on which he would act under bonafide belief, to be true and correct. The mere clerical assistance provided by the appellant to the exporter as an employee of a CHA, in the normal course of his employment could not by any stretch of imagination, amount to abetting without any positive or collaborative evidence to show or indicate that the appellant has colluded with the exporter in the alleged offence. The Ld. Counsel submits that the appellant cannot be held responsible and penalised particularly in this case where he has no role in the offense alleged against the exporter. Reliance is placed on the decisions in: a) G. Seenivasan Vs. C....
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....ected to redemption fine. c) The DEEC bond executed by the Respondent Lakshmi Fabrics is a bond for duty exemption and does not equate to a provisional bond under Section 110 A of the Customs Act, 1962. The DEEC bond executed specifically provides for recovery of customs duty and interest under Sec.142(1) of the Customs Act and does not contain any conditions regarding redemption fine for goods already cleared and therefore imposing a redemption fine would be inconsistent with the bonds terms. Consequently, confiscation or redemption fine cannot be imposed on already cleared goods without physical availability. Reliance was placed on the decisions in a) Shiv Kripa Ispat Pvt. Ltd. Vs. Commissioner - reported in 20098 (235) E.L.T. 623 (Tri.LB) b) Commissioner Vs. Finese Creation Inc. - 2010 (255) E.L.T.A120 (S.C.) 16. We have heard the rival submissions, perused the appeal records as well as the citations submitted. 17. The issues that arise for our consideration are: A) Whether the penalties imposed on the appellants under Section 114 and Section 114AA of the Customs Act, 1962 are tenable? and B) Whether the Adjudicating Authority, ....
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....scertaining who is their real owner or who was actually concerned in their illicit import." [pp. 550, 551 and 554] 32. This distinction between the nature of the two penalties, viz., penalty in rem and penalty in personam, has been maintained in the Act. The provision regarding confiscation of goods contained in Sections 111 and 113 of the Act is a penalty in rem which is enforced against the goods, while the personal penalties imposed under Section 112 and other provisions of the Act are in the nature of penalty in personam which are enforced against the person concerned." (emphasis supplied) 21. Further, Abetment is not defined in Customs Act, 1962. The expression "abetment" has been defined under the General Clauses Act as one known in the Indian Penal Code and under the Indian Penal Code section 107 defines abetment. It is noticed that there is no material change under Section 45 of Bharatiya Nyaya Sanhita, 2023. It can also be noted with profit that the Honourable Supreme Court has in its decision in Shri Ram and others v State of UP, AIR1975 SC 175:1974 INSC 230, held that "Section 107 of the Penal Code which defines abetment provides to the extent materi....
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....ealt with under the provisions of the CHA regulations prevailing for the relevant period that are applicable to a Customs House Agent or its employee as a holder of 'G' card, i.e. CHALR Rules 2004. It cannot be that the appellants are liable to be visited with penalties under the Customs Act, and yet are not being proceeded against under the applicable CHA Regulations. Pertinently, there is nothing on record indicating that the customs authorities were intending to proceed against the appellants under the CHA regulations at that relevant point in time. Nothing has also been brought to our notice which would indicate that the appellants had been proceeded against under the CHA regulations since then. Therefore, considering the above facts, on preponderance of probabilities, we are of the firm opinion that the penalties imposed on the appellants under Section 114 are unsustainable and are liable to be set aside. 25. In order to examine the correctness of the penalty imposed on the appellants under Section 114AA, We notice the provisions of Section 114AA of the Customs Act, 1962, which read as under: "If a person knowingly or intentionally makes, signs or uses, or causes t....
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....in the notice. There is no gainsaying that a notice would be read as a whole to find out as to whether the person concerned is made aware of the various grounds on the basis of which action is proposed to be taken as well as nature of the action. However, that in itself cannot be taken as a sanction to cryptically summarise that "for various omissions and commissions" the person is liable to penalty under the specified penal sections, and thereby jettison the detailing of the action that is sought to be brought under the specified penal section being invoked. We find that the appellants herein have not been put to notice as elucidated supra while being proposed to be visited with the penalty under Section 114AA, thereby rendering such imposition of penalty unsustainable on this count. 28. That apart, it is only a person who deliberately and consciously, aware that the declaration, statement or document is false or incorrect in any material particular, thereafter makes, signs or uses, or causes it to be made signed or used, who can then be said to be knowingly or intentionally performing the said acts so as to be made liable for penalty under Section 114AA. The requirement of men....
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....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." 33. On a plain reading, Section 125(1) stipulates: a) Whenever confiscation of any goods is authorised by this Act b) The officer adjudging it c) 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 d) and shall, in the case of any other goods, e) 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 f) an option to pay in lieu of confiscation such fine as the said officer thinks fit 34. Thus, in every situation where confiscation of any goods is authorised by the Customs Act, it is governed by Section 125 of the Act. The officer adjudicating such confiscation, is given a discretion to allow the owner of such goods, that is the goods whose importation or exportati....
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....ppropriate to first take a look at the judicial decisions that have evolved over the years, and which hold the field; wherein Section 125 of the Customs Act ibid had come up for consideration of the Honourable Supreme Court and High Courts. 38. One of the earliest decisions where Section 125 post the insertion and substitution introduced by S.9 of the Customs (Amendment) Act, 1985, was opined upon by the Hon'ble Apex court, is in the case of Mohan Meakin Ltd v. CCE, Kochi, 2000 (115) ELT 3 (SC). The appellant before the Apex Court was asked to show cause why the hop pellets purchased by it should not be confiscated and action taken for imposition of penalty under Section 112(b) of the Act. The Notice was issued on the ground that that the import of the entire consignment of hop pellets made by the importers, a part whereof was purchased by the appellant, was also in contravention of Section 111(m) of the Act. The appellant's contention was that that they are bona fide purchasers of the goods in question in the normal course of their business and they had come to know that the goods in question was the subject-matter of an earlier proceeding under Section 111(d) of the Act; conse....
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....ny duty and charges payable in respect of such goods. The Respondent, Jagadish Cancer and Research Centre (referred to as Centre in the Judgement), submitted that that demand of customs duty and the order for payment of the same is relatable to only Section 28(1) of the Customs Act, as also found by the CEGAT. That being the position, the notice was beyond time and not by a "competent officer" authorised to issue the same. 40. The Apex Court, after reproducing Section 124 and Section 125 of the Customs Act, went on to hold as under: "11. Whenever 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-sections (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 a....
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....ce, 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." 10. From the aforesaid two sections, it is apparent that both operate in different fields, namely, one requires imposition of penalty and other provides for confiscation of improperly imported goods. Section 111 provides that goods brought from the place outside India are liable to confiscation if the goods are improperly imported as provided therein. In cases where goods are liable to confiscation, discretion is given to the authority to impose penalty. Further, Section 125 empowers confiscation of such goods and thereafter, confiscated goods vest in the Central Government. The Section further empowers the authority to give an option to the owner or the person from whom goods are seized to pay fine in lieu of such confiscation for return of the goods and the fine is also limited up to the market price of the goods. Therefore, levy of fine in lieu of confiscation is in addition to levy of penalty imposable u....
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....s, it could not have been possible for the Commissioner to arrive at a legally justified and correct quantum of redemption fine to be imposed. Any such determination would also be without following the procedure prescribed under the Act. 15. We also feel that as of now also, no useful direction could also be given to the Commissioner to get a market survey made even at this stage due to lapse of number of years in the meantime and also because of the fact that no sample of the goods imported by the respondents has been retained or kept by the Department. Therefore, in our considered opinion, in the aforesaid appeals, no useful purpose would be served by interfering with the orders passed by the Tribunal, particularly in view of the fact that even the Department is unable at this time to ascertain and determine the market price of the goods confiscated so as to enable the authorities to levy appropriate redemption fine. In that view of the matter, we dismiss these appeals on the aforesaid grounds leaving the parties to bear their own costs." (emphasis supplied) 43. A decade ago, in Fortis Hospital Ltd v. Commissioner of Customs, Import, 2015 (318) ELT 551 (SC), ....
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.... In the Fortis Hospital Judgement, the Apex Court also disagreed with the contention of the senior counsel appearing for the Department that that even if an option was not exercised, the moment it was stated in the order of the Commissioner that fine is being "imposed," sub-section (2) of Section 125 would get attracted. The Apex Court held that 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. Indubitably, unless an option is exercised, fine does not become payable. The stipulation contained in the adjudicating order was only contingent in nature which contingency would have arisen only on exercising the option by the importer to pay fine in lieu of confiscation and to redeem the goods. The Apex Court in the Fortis Hospital Judgement has also gone on to hold as under: "19. It is not that the Department is without any remedy. We have gone through the provisions of Notification No. 64/88, dated 1-3-1988. As pointed out above, importer would be exempted from payment of import duty on hospital equipment only when the conditions contained in the said notification are....
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....e only when the owner of goods exercises the option to pay fine for redemption of goods and the Department accepts it. Liability to pay customs duty in such confiscation proceedings under Section 125(2) is distinct from the assessment and determination of duty, which can rise only under Section 28. The duty liability arising under Section 125(2) must be assessed under Section 28. Thus, we answered the second question by holding that once Section 28 applies for determination of duty, interest on delayed payment of duty under Section 28AB follows. We have also clarified that Jagdish Cancer case is not an authority for the proposition that when the liability to pay customs duty arises under Section 125(2), the calculation, determination or the assessment of such duty cannot be made under Section 28." (emphasis supplied) 47. In the deliberations to arrive at the aforesaid conclusions elaborated in the decision, the Apex Court has observed as under: 5.1 Confiscation of goods is appropriation of property by the revenue. The right, title and interest in the property, if any, is transferred and vested in the state under Section 126. Considering the serious consequences....
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.... of confiscation. Thus, this duty obligation is inextricably connected to the option to redeem the confiscated goods. In other words, it is a precondition for redemption. xxxxx 8.8 We can thus conclude the second principle that, when confiscation proceedings are initiated under Section 124 of the Act, the obligation to pay duty and other charges under Section 125(2) will arise only when the owner of goods exercises the option to pay fine for redemption of goods and the Department accepting it.(emphasis supplied) 8.9 An important principle that needs to be recognised is that, the customs duty obligation in confiscation proceedings does not occasion either under Section 12 or 28. It has arisen because of the option available and exercised under Section 125. This obligation should not be confused with the method and procedure by which that customs duty is assessed and determined, which is provided under Section 28. It is in this context that we need to consider and explain the decision of this court in Jagdish Cancer case. 48. The Apex Court, in the Navayuga Engineering Judgement, then proceeds to examine its decision in Jagadish Cancer case and holds as ....
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....ively. Once the vesting of the goods in the Government is absolute, it would be inconsistent with the character of that vesting to contend that the Central Government can only recover through the sale of such goods the duty, penalty and interest and should return the excess to the owner/possessor of the goods 50. When the Apex Court examines a section and opines on it, a court, tribunal or any authority, down the hierarchical echelon cannot then express a view to the contrary, as it would be an affront to the said interpretation and subversive of judicial discipline. The binding value such interpretation carries is undeniable. In fact, the Apex Court in Secundrabad Club Etc v. C.I.T - V Etc. [2023] 12 S.C.R. 979 : 2023 INSC 736, has held that even the obiter dictum of the Supreme Court is binding under Article 141 to the extent of the observations on points raised and decided by the Court in a case. So would the decision taken by a larger bench of the High Court be binding on us. 51. Thus, on a careful consideration of the aforecited decisions and the judicial dicta laid down, it is evident that the scheme of Section 125 shows that it is in respect of any goods the confiscati....
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....inquishment, he shall not be liable to pay the duty thereon. Proviso to the said subsection however stipulates that the owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under the Act or any other law for the time being in force. In other words, with respect to the improperly imported goods or goods attempted to be improperly exported etc., the order of confiscation directly affects the status of such goods, being a proceeding in rem. The title or right in such goods, under Section 126, by a statutory appropriation, stands transferred as an absolute title to the Central Government and thus such goods vest in the Central Government. 53. As has also been held by the Delhi High Court in the Gillette case supra, Section 125 and 126 form one continuous scheme and cannot be read disjunctively. While under Section 126(2) the action mandated is for the officer adjudging confiscation to take and hold possession of the confiscated goods, Under Section 125 (1), the officer adjudging confiscation has been given the discretion in case of goods the importation or exportation of which is prohibi....
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....lhi (supra), would show that the Apex Court has taken the view that redemption fine can be imposed even in the absence of the goods as the goods were released to the appellant on an application made by it and on the appellant executing a bond. Since the goods were released on a bond the position is as if the goods were available. The ratio of the above decision cannot be understood that in all cases the goods were permitted to be cleared initially and later proceedings were taken for under-valuation or other irregularity, even then redemption fine could be imposed. We are, therefore, not inclined to accept the contention raised by the appellant on this issue and set aside the redemption fine. 13. The reliance of learned counsel for the revenue upon the provisions of Section 125 of the Act is also misconceived. Section 125 of the Act is applicable only in those cases which have been cleared by the concerned authorities subject to furnishing undertaking/bond etc. However, in the present case, admittedly, the goods were cleared by the respondent authorities without execution of any bond/undertaking by the assessee. Thus, in view of the fact and circumstances of the case, we f....
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....abrics, namely, that once imported goods are cleared for home consumption, they cease to be imported goods as defined in Section 2 of the Customs Act and are consequently not liable to confiscation, has found favour with a coordinate bench of this Tribunal. In the decision in M/s. Bharath FIH Ltd. Versus The Commissioner of Customs, Chennai And (Vice-Versa),2025 (2) TMI 110-CESTAT CHENNAI, to which one of us was a party, (Shri. M. Ajit kumar, Member Technical), the decision of the Bombay High Court in Finesse Creation was also relied upon and it was held as under: "9.16 Whether redemption fine can be imposed when goods are not available. As regards the Department's appeal against the impugned order for non- imposition of redemption fine, the Hon'ble Supreme Court in Asstt. Collector v. Bussa Overseas and Properties Pvt. Ltd. [2004 (163) E.L.T. A160 (S.C.)], dismissed the SLP against the judgment and order dated 04/08/1992 of the Bombay High Court in Bussa Overseas and Properties Pvt. Ltd. v. C.L. Mahar, Asstt. Collector [2004 (163) E.L.T. 304 (Bom.)] The High Court had held that once the imported goods are cleared for home consumption they cease to be 'imported go....
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....tions are reproduced as under: 71. Thus, when it comes to discretion, the exercise thereof has to be guided by law; has to be according to the Rules of reason and justice; and has to be based on the relevant considerations. The exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretence. A holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion. 71.1. It is hardly of any debate that discretion has to be exercised judiciously and, for that matter, all the facts and all the relevant surrounding factors as also the implication of exercise of discretion either way have to be properly weighed and a balanced decision is required to be taken. ....
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....d cons shall be weighed before taking a final decision for release or absolute confiscation of goods." 59. Therefore, in substance, the fine in lieu of confiscation which may be imposed on the owners, does fall to be determined in the discretion of the said officer adjudging confiscation. In doing so, he will undoubtedly have to take into account all relevant and material circumstances, that he notices, including the extenuating factors on which the owners may rely. We are therefore of the considered view that such an exercise, when done judiciously, ought not to be lightly interfered with and the discretion so exercised, is liable to be left undisturbed. 60. We find that admittedly in the instant case, in so far as the goods at Annexure E to the SCN are concerned, they are not physically available nor is their present state or their ownership stated in the SCN or in the Order in Original. That apart, it is also admitted that the Deputy Director General of Foreign Trade vide letter dated 08.02.2013 has provided copies of all advance authorisations issued to Laxmi Fabrics and furnished statements regarding details of Advance Authorisations where Laxmi Fabrics has not completed....
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....ieu of confiscation. While confirming the differential duty and consequent penalty and interest, CESTAT quashed the imposition of redemption fine because the goods were not available for confiscation. In that context, the High Court said that the concept of redemption fine would arise in the event the goods were available and were to be redeemed; and if the goods were not available, there was no question of redemption of goods. The said decision cannot be pressed into service in the present case merely because the said importer M/s. Harihar Collections has been able to obtain release of all the goods after passing of the order-in-original of the Adjudicating Authority dated 28.08.2020 when the same was under challenge. The present one is not a case where the subject goods were not available on the day of passing of the order by the Adjudicating Authority." Thus, the very fact that the Apex Court, apart from noting that the said decision of the Bombay High Court could not be pressed into service in the instant case, has not found the decision to be untenable or liable to be set aside, also makes it a decision that is valid, and one that can be tenably relied upon. 62. That apa....