2015 (1) TMI 711 - AT - Customs

Confiscation of goods - Redemption fine - imposition of penalty for violation of Section 111(m) - Held that - Appellant imported a consignment of 500MT of 2- Ethyl Hexanol but a quantity of 15.160 MTs was received in excess in the shore tanks. Appellant filed a post B/E and paid the differential duty also. Adjudicating authority in Para 4.3 and 4.4 of the Adjudication order dated 09.10.2013 has recorded that appellant is a regular importer and has also paid duty on 515.160 MTs. It was also recorded that there is no modus involved in the import and that there could be a variation between the weight based on volume calculation and actual delivery of Cargo. Once it is held that weight of the cargo of the nature imported is liable to vary it is not coming out from the records as to why 1% difference is condonable and 3% is not condonable. Appellant never knew that there could be any quantity in excess of what is available in the import documents and what was ordered. It is not a case for confiscation of imported goods and imposition of redemption fine. - Decided in favour of assesse.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the excess quantity of 15.160 MT of 2 Ethyl Hexanol found in the imported cargo justifies confiscation of goods under Section 111(m) of the Customs Act, 1962.
• Whether the imposition of redemption fine under Section 112(a) of the Customs Act, 1962 is justified in the facts of the case.
• Whether mens rea (guilty intention) is a necessary element for confiscation under Section 111(m) of the Customs Act, 1962.
• The applicability of the principle of variation in quantity during import and whether such variation can be condoned.
• The relevance and application of precedent, specifically the Bombay High Court judgment in Oriental Containers Limited vs. Union of India, in determining liability for confiscation and penalty.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for confiscation of excess imported goods under Section 111(m)

Relevant legal framework and precedents: Section 111(m) of the Customs Act, 1962 empowers confiscation of goods in certain circumstances including violation of customs laws. The Bombay High Court judgment in Oriental Containers Limited vs. Union of India is a key precedent where confiscation was held unjustified in absence of mala fide intention or fraud on part of the importer.

Court's interpretation and reasoning: The Tribunal noted that the adjudicating authority confirmed a demand for excess quantity found in the imported cargo but the first appellate authority had set aside the duty demand while upholding penalty. The excess quantity was 15.160 MT over the declared 500 MT. The adjudicating authority itself recorded that the appellant was a regular importer, had paid duty on the entire quantity of 515.160 MT, and there was no modus operandi or concealment involved. It was further observed that variation in quantity can occur due to volume-to-weight calculations and actual delivery differences.

Key evidence and findings: The appellant filed a post Bill of Entry (B/E) and paid the differential duty for the excess quantity. The documents from the supplier and shipping bill showed the quantity as 500 MT. No concealment or fraud was found. The adjudicating authority acknowledged the possibility of quantity variation and absence of any mala fide intention.

Application of law to facts: Applying the precedent from Oriental Containers Limited, where the Court held that innocent importers who suffer due to supplier fraud and pay duty on the declared goods cannot be penalized by confiscation, the Tribunal found that the appellant was similarly an innocent party. The excess quantity was not due to any wrongdoing by the appellant but a variation in actual delivery.

Treatment of competing arguments: The Revenue argued that mens rea is not necessary for confiscation under Section 111(m). However, the Tribunal emphasized the absence of any concealment or fraudulent intent and relied on the precedent that innocent importers should not be punished by confiscation.

Conclusions: Confiscation of the imported goods was not justified in the circumstances as the appellant was not guilty of any violation warranting confiscation.

Issue 2: Justification for imposition of redemption fine under Section 112(a)

Relevant legal framework: Section 112(a) of the Customs Act allows imposition of a redemption fine in lieu of confiscation of goods if the goods are liable to confiscation.

Court's interpretation and reasoning: The adjudicating authority imposed a redemption fine of Rs. 75,000, which was reduced to Rs. 40,000 by the first appellate authority. The Tribunal, relying on the finding that confiscation itself was not justified, held that imposition of redemption fine was also not warranted.

Key evidence and findings: Since the appellant had paid duty on the entire quantity and there was no concealment or fraud, the basis for imposing redemption fine was absent.

Application of law to facts: Redemption fine is a substitute for confiscation. If confiscation is not justified, redemption fine cannot be imposed. The Tribunal accordingly set aside the redemption fine.

Treatment of competing arguments: The Revenue maintained that penalty and redemption fine were justified due to violation of Section 111(m). However, the Tribunal rejected this in light of the absence of mens rea and the precedent cited.

Conclusions: Redemption fine was not justified and was quashed.

Issue 3: Requirement of mens rea for confiscation under Section 111(m)

Relevant legal framework and precedents: Section 111(m) does not explicitly require mens rea for confiscation. However, judicial precedents have often considered intention or knowledge relevant in determining liability for confiscation.

Court's interpretation and reasoning: The Tribunal acknowledged the Revenue's argument that mens rea is not necessary but emphasized that in the present case, the appellant was a regular importer who paid duty on the entire quantity and was unaware of the excess quantity. The Tribunal noted the absence of any concealment or fraudulent intent.

Key evidence and findings: The appellant's conduct and documentary evidence showed no intention to evade duty or conceal quantity.

Application of law to facts: The Tribunal followed the principle that innocent importers who have paid duty and have no fraudulent intention should not be penalized by confiscation.

Treatment of competing arguments: The Tribunal balanced the strict statutory language with equitable considerations and precedent, favoring the latter.

Conclusions: Mens rea, while not explicitly required, is a significant factor in determining confiscation liability. Its absence in this case weighed against confiscation.

Issue 4: Allowance of variation in quantity during import

Relevant legal framework: Customs practice and judicial pronouncements recognize that minor variations in quantity due to measurement methods are common and sometimes condonable.

Court's interpretation and reasoning: The adjudicating authority recorded that variations could occur due to volume-based weight calculations and actual delivery. However, it was unclear why a 1% difference is condonable but 3% is not. The Tribunal implicitly accepted that some variation is natural and the excess quantity here was not a result of concealment.

Key evidence and findings: The appellant was unaware of any excess quantity and had relied on shipping and supplier documents. The excess quantity was detected only upon physical receipt.

Application of law to facts: The Tribunal treated the excess quantity as a permissible variation rather than an attempt to evade duty.

Treatment of competing arguments: The Revenue did not dispute the possibility of variation but relied on strict liability under Section 111(m). The Tribunal preferred a reasoned approach considering practical realities.

Conclusions: Variation in quantity during import is acceptable within reasonable limits and does not automatically trigger confiscation or penalty.

Issue 5: Application of precedent from Oriental Containers Limited vs. Union of India

Relevant legal framework and precedents: The Bombay High Court in Oriental Containers Limited held that innocent importers who suffer due to supplier fraud and pay duty on declared goods cannot be penalized by confiscation.

Court's interpretation and reasoning: The Tribunal extensively relied on this precedent, highlighting that the appellant was similarly an innocent party who had paid duty on the entire quantity and had no fraudulent intent.

Key evidence and findings: The facts were analogous: no concealment, payment of duty, and no revenue loss due to the appellant's conduct.

Application of law to facts: Applying the principles from the precedent, the Tribunal concluded that confiscation and redemption fine were not justified.

Treatment of competing arguments: The Revenue's reliance on strict statutory provisions was balanced against the equitable principles laid