2009 (8) TMI 115 - HC - Customs

Whether the goods held to be improperly imported are liable for confiscation under Section 111 of the Customs Act 1962 even though the same are cleared and not available for seizure? Whether on the facts and the circumstance of the case the Hon ble CESTAT is correct in law in holding that since the imported goods were not available as being already cleared the same was not liable for confiscation? Held that - The question of confiscating the goods would not arise if there are no goods available for confiscation nor consequently redemption. Once goods cannot be redeemed no fine can be imposed. The fine is in the nature of computation to the state for the wrong done by the importer/exporter. The tribunal was right in holding that in the absence of the goods being available no fine in lieu of confiscation could have been imposed. The goods in fact had been cleared earlier. The judgment in Weston (2000 (1) TMI 45 - SUPREME COURT OF INDIA) is clearly distinguishable. In our opinion therefore there is no merit in the questions as framed. Consequently appeal stands dismissed

Summary

The core legal questions considered by the Court were:

(a) Whether goods held to be improperly imported are liable for confiscation under Section 111 of the Customs Act, 1962, even if the goods have already been cleared and are not available for seizure;

(b) Whether, on the facts and circumstances of the case, the Customs Excise and Service Tax Appellate Tribunal (CESTAT) was correct in law in holding that since the imported goods were not available as they had already been cleared, the goods were not liable for confiscation.

Issue-wise Detailed Analysis:

Issue (a): Liability for confiscation of improperly imported goods under Section 111 of the Customs Act, 1962, when goods are not available for seizure

The relevant legal framework includes Section 111 of the Customs Act, 1962, which empowers confiscation of goods imported in contravention of the Act, and Section 125 which provides for imposition of redemption fine in lieu of confiscation. The Court also considered precedents including the judgment of the Supreme Court in Weston Components Ltd. v. Commissioner of Customs, which held that even if goods are released on bond, the Customs authorities retain the power to impose redemption fine if irregularities are subsequently found.

The Court examined the facts that the imported goods-artificial flowers-were cleared prior to the initiation of confiscation proceedings and thus were not physically available with Customs at the time of adjudication. The respondents had declared a substantially lower value in the Bill of Entry than the value reflected in incriminating documents recovered during a search, leading to reassessment of duty and imposition of penalties and confiscation orders.

The Court reasoned that the concept of confiscation under Section 111 presupposes the availability of goods for seizure. Confiscation is a physical act directed at goods in possession or custody of Customs authorities. If the goods are not available, confiscation cannot be effected. Similarly, Section 125 empowers Customs to impose a redemption fine only when goods are available and liable for confiscation, offering an option to redeem the goods by payment of fine. The Court emphasized that if goods have already been cleared and are not in custody, the question of confiscation or redemption does not arise.

The Court distinguished the Supreme Court's decision in Weston Components Ltd., noting that in that case, goods were released on bond and were still under an undertaking, whereas in the present case the goods had been cleared and were not under any bond or undertaking. Therefore, the power to impose redemption fine or confiscate was not applicable.

Competing arguments by Revenue relied on the principle that improper importation justifies confiscation and redemption fine regardless of availability of goods. The Court rejected this, holding that the statutory scheme requires goods to be available for confiscation or redemption.

The conclusion was that goods not available for seizure cannot be confiscated under Section 111, and consequently, no redemption fine under Section 125 can be imposed.

Issue (b): Validity of CESTAT's holding that non-availability of goods precludes confiscation and redemption fine

The CESTAT had relied on a Division Bench decision of the Punjab and Haryana High Court in Commissioner of Customs, Amritsar v. Raja Impex (P) Ltd., which held that redemption fine under Section 125 cannot be imposed if goods are not available for confiscation or cleared on bond. The Court found this reasoning persuasive and consistent with the statutory scheme.

CESTAT had also relied on the principle that if partners in a partnership are penalized, separate penalties cannot be imposed on individual partners, setting aside penalties imposed on partners separately. This aspect, though ancillary, was affirmed by the Court as well.

The Court affirmed CESTAT's interpretation that the absence of goods in custody precludes confiscation or imposition of redemption fine. The facts showed that the goods had been cleared earlier and thus were not available for confiscation. The Court held that the tribunal correctly applied the law and that the Revenue's reliance on Weston (supra) was misplaced given the factual distinction.

The Court rejected Revenue's contention that the redemption fine could be imposed even if goods were not available, holding that the redemption fine is inherently linked to the availability and redemption of goods. Without goods, redemption is impossible, and thus no fine can be levied.

Significant Holdings:

"The concept of redemption fine arises in the event the goods are available and are to be redeemed. If the goods are not available, there is no question of redemption of the goods."

"Under Section 125 a power is conferred on the Customs Authorities in case import of goods becoming prohibited on account of breach of the provisions of the Act, rules or notification, to order confiscation of the goods with a discretion in the authorities on passing the order of confiscation, to release the goods on payment of redemption fine. Such an order can only be passed if the goods are available, for redemption."

"The question of confiscating the goods would not arise if there are no goods available for confiscation nor consequently redemption. Once goods cannot be redeemed no fine can be imposed. The fine is in the nature of computation to the state for the wrong done by the importer/exporter."

"In these circumstances, in our opinion, the tribunal was right in holding that in the absence of the goods being available no fine in lieu of confiscation could have been imposed. The goods in fact had been cleared earlier. The judgment in Weston (supra) is clearly distinguishable."

The Court's final determination was to dismiss the appeal, thereby affirming the CESTAT's order that in absence of availability of goods for confiscation, no confiscation or redemption fine under the Customs Act, 1962 could be imposed. The differential duty, penalty, and interest confirmed by CESTAT were not disturbed.