2025 (5) TMI 2023 - HC - Customs

Seeking release of goods - appropriate direction to the authorities for compliance of the directives given by the Tribunal - redemption of fine and penalty - period of limitation - monetary limit in preferring the appeal - HELD THAT - The learned Senior Counsel appearing for the petitioners however contends that since the redemption fine and the penalty amount both added together as awarded by the Tribunal is only around Rs.18.45 lakhs which is much below the monetary limit prescribed by the department for preferring an appeal. There is no likelihood of any challenge to be made in the light of the circulars of the CBIC in this regard. Even otherwise the learned Senior Counsel submits that even the original order of the adjudicating authority also if the redemption fine and the penalty amount is added together it comes to less than Rs.1 crore. Even then it is below monetary limit in preferring the appeal. Even on that ground also there is hardly any charge for the department to contest the case. To this the learned Standing Counsel contends that the aspect of monetary limit in the instant case may not be applicable in accordance with the said circular of the CBIC as the amount of penalty and the redemption fine which the petitioners are liable to pay exceeds Rs.1 crore though the adjudicating authority or the CESTAT may have awarded lesser redemption fine and penalty. Therefore that would not be covered by the said circular. At this juncture it would be relevant to take note of a decision of this very High Court under similar circumstances in the case of NASEER CHITTETHUKUDY MAJEED vs. UNION OF INDIA 2023 (2) TMI 403 - TELANGANA HIGH COURT Given the aforesaid facts and circumstances more particularly taking into consideration the fact that it is now more than about 40 days time having already elapsed from the order of CESTAT and also more than a month from the impugned order served upon the department and till date there does not seem to be any appeal having preferred by the department. Hence we are left with no other option but to dispose of the writ petition at this juncture directing respondent No. 1 to take appropriate steps in ensuring compliance of clause vi of the paragraph 39 of the order of the Tribunal at the earliest preferably within a period of four weeks from today. The writ petition accordingly stands disposed of. There shall be no order as to costs.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• Whether the respondents are legally bound to comply with the directions issued by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the release of seized gold jewellery upon payment of redemption fine and penalty.
• The applicability and effect of the monetary limit prescribed by the Central Board of Indirect Taxes and Customs (CBIC) circular on the department's right to prefer an appeal against the Tribunal's order.
• Whether the department can withhold compliance with the Tribunal's order on the ground that the period of limitation for filing an appeal has not expired.
• The legal consequences of non-compliance with the Tribunal's order in the absence of any stay by a higher forum.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Obligation to comply with the Tribunal's order directing release of seized goods upon payment of redemption fine and penalty

The relevant legal framework involves the Customs Act, 1962, particularly Section 113(k) relating to confiscation of goods, Section 125 concerning redemption fine, and Section 114(iii) regarding penalties. The CESTAT, acting as an appellate authority, has the power to confirm confiscation but also to reduce redemption fines and penalties and order release of goods upon payment.

The Tribunal's order dated 18.03.2025 upheld the confiscation of 1194 pieces of gold bangles weighing 54,096 grams but significantly reduced the redemption fine from Rs. 80 lakhs to Rs. 15 lakhs and the penalty from Rs. 19 lakhs to Rs. 3,45,000. It directed release of the seized gold jewellery upon payment of these amounts.

The Court relied on a precedent from its own jurisdiction where it was held that once the appellate authority has passed an order directing release of goods on payment of redemption fine, the officer lower in hierarchy is bound to comply unless the order is stayed by a higher forum. The Court emphasized the principle of judicial discipline to prevent chaos in tax administration.

The department's contention that compliance should be withheld pending the expiry of the limitation period for appeal was rejected, as no appeal had been filed within the prescribed period of 180 days. The Court reasoned that delay in compliance would defeat the purpose of the Tribunal's order and undermine the appellate process.

Issue 2: Applicability of CBIC circular on monetary limit for preferring appeal and its impact on department's right to challenge the Tribunal's order

The CBIC circular prescribes a monetary threshold for the department to prefer an appeal against orders passed by adjudicating authorities or appellate bodies. The petitioners contended that since the total redemption fine and penalty imposed by the Tribunal was approximately Rs. 18.45 lakhs, which is below the monetary limit, the department would not be entitled to appeal.

The department countered that the monetary limit prescribed by the circular does not apply where the aggregate liability (redemption fine plus penalty) exceeds Rs. 1 crore, even if the Tribunal reduced the amounts. They argued that the original confiscation value and penalty exceeded this threshold, thus the circular did not bar the department from filing an appeal.

The Court noted this dispute but observed that no appeal had been filed within the limitation period. It also referred to the principle that the appellate authority's order must be complied with unless stayed or set aside by a higher forum, regardless of the department's subjective intention to challenge the order.

Issue 3: Effect of limitation period and department's delay in filing appeal

The limitation period for filing an appeal against the Tribunal's order is 180 days. The department submitted that this period had not expired and thus it was premature to comply with the order.

The Court found that more than 40 days had elapsed since the Tribunal's order and more than a month since the department was served the impugned order, yet no appeal had been filed. The Court held that the mere availability of limitation period does not justify non-compliance with the Tribunal's order in the absence of any appeal or stay.

The Court emphasized that adherence to judicial discipline requires that orders of higher appellate authorities be complied with promptly to maintain orderly administration and prevent chaos in tax law enforcement.

Issue 4: Legal consequences of non-compliance with Tribunal's order without stay

The Court underscored that the department, being subordinate to the appellate authority, cannot refuse to release goods once the Tribunal has ordered release upon payment of redemption fine and penalty, unless a higher forum has stayed the order. This principle is essential to uphold the hierarchy of judicial and quasi-judicial bodies and ensure effective enforcement of their decisions.

The Court referred to the earlier decision of the High Court which held that non-compliance in such circumstances is impermissible and would lead to administrative chaos.

3. SIGNIFICANT HOLDINGS

"Once the appellate authority has passed the order-in-appeal and directed release of the goods on payment of redemption fine, it is not open to respondent No.5 to decline release of such goods despite payment of redemption fine by the petitioner. Respondent No. 5, being an officer lower in hierarchy than the Commissioner of Appeals, is bound to comply with the order of the higher appellate authority, unless the order of the higher appellate authority is stayed by a still higher forum."

The Court established the core principle that compliance with appellate orders is mandatory unless stayed, to maintain judicial discipline and orderly administration of tax laws.

The Court concluded that in the absence of any appeal filed by the department within the limitation period, the authorities must release the seized gold jewellery upon payment of the reduced redemption fine and penalty as directed by the Tribunal.

The writ petition was disposed of with a direction to the respondents to comply with the Tribunal's order within four weeks, underscoring the finality of the appellate order in the absence of any challenge.