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2025 (6) TMI 1278 - AT - CustomsConfiscation of the consignment under import and imposition of penalty - assessment was undertaken on the value declared for the purpose of charging duties under section 12 of Customs Act 1962 - appellant submitted that the goods had been seized owing to which non-issuance of the show cause notice under section 124 of Customs Act 1962 for confiscation was inappropriate - HELD THAT - The clearances effected against the earlier bill of entry are not connected with the present proceedings as is abundantly clear in the order of the original authority confiscating goods imported vide bill of entry no. 2749408/30.07.2013. The appellant had discharged duty liability on the current as well as past imports on 13th August 2013 despite which the goods under import were seized on 20th August 2013. It would thus appear that the intention to confiscate the goods had not been made known to the importer at any stage and the waiver of show cause notice as preliminary to adjudication appears to have been grounded on the lack of such intent even as late as September 2013. Indeed the original authority had failed to verbalise the proposals sought to be invoked against the importer. There is not a whiff of allegation that any post-importation conditions were breached and also it is noticed that section 3 of Customs Tariff Act 1975 does not extend to declarations made nor does responsibility devolve upon importers for distinguishment of declaration for the purpose of basic customs duty and in special cases for additional duty of customs. In such circumstances and in the absence of any finding that the value to be declared for the purpose of section 3(1) of Customs Tariff Act 1975 was different the scope for invocation of section 111(m) of Customs Act 1962 does not exist. Moreover it is seen that the appellant had made good the differential duty liability immediately upon it being pointed out that the goods were to be subjected to duties on the basis of retail sale price (RSP) and not on the basis of transaction value. It may also be noted that even for the purposes of assessment of basic customs duty the scope for confiscation arises from a specific provision in rule 11 of Customs Valuation (Determination of Value of Imported Goods) Rules 2007 and by no stretch does that extend to declaration or non-declaration of the price at which the goods were intended to be sold. Especially in the light of immediate discharge of duty liability along with interest on past imports there is no reason to sustain confiscation under section 111 of Customs Act 1962 or for retention of penalty under section 112 of Customs Act 1962. Appeal disposed off.
The core legal questions considered in this appeal concern the validity of confiscation of imported goods and imposition of penalty under the Customs Act, 1962, specifically:
Issue-wise Detailed Analysis 1. Justification for Confiscation under Section 111 of the Customs Act, 1962 The relevant legal framework includes section 111 of the Customs Act, which authorizes confiscation of goods in cases of contravention of customs laws, and section 124 which mandates issuance of show cause notice before such confiscation. The Customs Tariff Act, 1975, particularly sections 3(1) and 3(2), governs the levy of additional customs duty based on valuation principles. Precedents cited include decisions emphasizing the necessity of mala fide intention for confiscation and penalty, and the principle that mens rea is not essential under fiscal laws for imposition of penalty but relevant for confiscation. The Court noted that the differential duty arose solely because the importer had declared the value for customs duty based on transaction value but had not affixed the retail sale price (RSP) on the goods, which was required for levy of additional duty under the proviso to section 3(2) of the Customs Tariff Act. The importer had promptly rectified this by paying the differential duty and interest on both current and past consignments. The Court found that there was no allegation of misdeclaration of value or fraudulent intent. The confiscation was based on the ground that the importer attempted to clear goods without payment of appropriate duty, but since the differential duty was paid immediately upon detection, the justification for confiscation under section 111(m) was weak. Further, the Court observed that the original authority failed to verbalize the intent to confiscate goods by issuing a show cause notice under section 124, which is a procedural safeguard. The waiver of the right to receive such notice by the importer appeared to be grounded on the lack of such intent at the time. This procedural lapse undermined the validity of confiscation. Moreover, the Court held that the scope of confiscation under section 111(m) does not extend to mere non-affixation of retail price labels when the differential duty has been paid, and no misdeclaration of transaction value was involved. The Court also noted that section 3 of the Customs Tariff Act does not extend to declarations for basic customs duty, and confiscation provisions under the Customs Valuation Rules are limited and do not cover such cases. 2. Imposition of Penalty under Section 112 and Fine under Section 125 of the Customs Act, 1962 The penalty and fine were imposed alongside confiscation. The Court examined whether such imposition was justified when the importer had made good the duty deficiency promptly and there was no mala fide intention. The Court referred to precedents where imposition of penalty and fine in absence of mala fide intent and after rectification of duty has been held to be inappropriate. The Court emphasized that fiscal laws do not require mens rea for penalty but confiscation and associated penalties must be proportionate and just. The Court found that since confiscation was not sustainable, the penalty and fine imposed as conditions of redemption were also not tenable. The absence of show cause notice and non-application of mind by the original authority further weakened the case for penalty. 3. Procedural Compliance and Show Cause Notice under Section 124 The Court underscored the importance of procedural safeguards under section 124 of the Customs Act, which requires issuance of a show cause notice before confiscation and penalty imposition. The notice must communicate the intent to proceed with such detriments and allow the importer to make representations. In this case, the Court found that no such notice was issued prior to confiscation. The importer had waived the right to receive such notice based on the absence of any communicated intent to confiscate. This procedural failure was fatal to the enforcement of confiscation and penalty. 4. Valuation for Additional Customs Duty and its Legal Implications The dispute arose because the additional customs duty under section 3(1) of the Customs Tariff Act was initially computed on transaction value, whereas the proviso to section 3(2) requires levy based on retail sale price (RSP) for pre-packaged goods. The importer had not affixed labels showing RSP initially but rectified this by paying the differential duty. The Court held that the Customs Tariff Act provisions do not extend to misdeclaration of value for basic customs duty and that the importer was not responsible for distinguishing declarations for basic and additional duties. The payment of differential duty and interest negated the justification for confiscation or penalty on this ground. 5. Role of Mens Rea in Fiscal Offences under Customs Law The authorities had contended that mens rea was not essential for confiscation and penalty under fiscal laws. The Court agreed that mens rea is not a prerequisite for penalty but noted that confiscation is a serious detriment requiring clear statutory basis and procedural compliance. The Court found no evidence of mala fide intention or fraudulent conduct by the importer. The immediate discharge of differential duty and interest further negated any presumption of culpability. Conclusions The Tribunal concluded that the confiscation of goods under section 111 of the Customs Act, 1962 was not justified given the absence of misdeclaration, the prompt payment of differential duty, and the procedural lapses including non-issuance of show cause notice. Consequently, the penalty under section 112 and fine under section 125 were also not sustainable. The impugned order affirming confiscation and penalty was modified accordingly and the appeal was allowed to that extent. Significant Holdings "The differential duty in the dispute arose solely on the ground that assessment was undertaken on the value declared for the purpose of charging duties under section 12 of Customs Act, 1962 that, in most cases, are applied also for discharge of additional duty of customs; there is no allegation of misdeclaration of such value." "In failing to do so, not only was the appellant not placed on notice of intent to confiscate the goods but there is also demonstrated non-application of mind in invoking section 111(o) of Customs Act, 1962." "The scope for confiscation arises from a specific provision in rule 11 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, by no stretch does that extend to declaration or non-declaration of the price at which the goods were intended to be sold." "For the above reasons, especially in the light of immediate discharge of duty liability along with interest on past imports, there is no reason to sustain confiscation under section 111 of Customs Act, 1962 or for retention of penalty under section 112 of Customs Act, 1962." Core principles established include:
Final determinations:
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