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2016 (10) TMI 334 - KERALA HIGH COURT

2016 (10) TMI 334 - KERALA HIGH COURT - TMI - Demand of customs duty on confiscated goods - Hospital - import of Echo Cardiography system - exemption as per Notification No.64/1988 dated 01/03/1988 - non-compliance of condition as mentioned in N/N. 64/1988 - whether the petitioner was justified in holding that when the equipment imported by the petitioner is confiscated and when the petitioner has not chosen the option to redeem the equipment, there is no reason to impose a further obligation to .....

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ay customs duty arises only when fine is imposed in lieu of confiscation. Though such an order can be passed, if the petitioner does not pay fine in lieu of confiscation, the remedy of the respondent is only to confiscate the goods. In such an event, there is no provision to recover the customs duty and other charges. - The decision in the case of Fortis Hospital Ltd. v. Commr. of Custom [2015 (4) TMI 348 - SUPREME COURT] apply. - The equipment could be confiscated as the petitioner is n .....

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at the respondents 2 to 6 have no authority to demand and recover ₹ 16 lakhs towards redemption fine and ₹ 33,84,757/- towards payment of duty as demanded in Exts.P7 and P8. 2. The short facts involved in the writ petition would disclose that the petitioner hospital imported an Echo Cardiography system in 1990. The equipment was valued at ₹ 24,65,451/-. Petitioner availed of the benefit of customs duty exemption as per Notification No.64/1988 dated 01/03/1988. Later, a show cau .....

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etitioner, ordered confiscation of the equipment under Section 111(o) of the Customs Act, 1962. However, the petitioner was given an option to pay a redemption fine of ₹ 16 lakhs in lieu of confiscation. The petitioner was also imposed a penalty of ₹ 6,50,000/- under Section 112(a) of the Customs Act, 1962. Ext.P1 is the said order. Petitioner preferred an appeal which came to be rejected, pursuant to which a demand had been made as per Exts.P3 and P4. Petitioner, challenging the sam .....

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der. A demand had been made pursuant to Ext.P7, which is Ext.P8. 4. According to the petitioner, during the pendency of the writ petition, ₹ 6,50,000/- was deposited by him. While admitting the writ petition, this Court stayed realization of the duty and redemption fine on condition of the petitioner depositing 1/3rd of the amount demanded. Petitioner deposited ₹ 16 lakhs in compliance with the direction dated 10/09/2013. The main contention urged by the petitioner is that when the e .....

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The contention is that there is no provision enabling the authorities to pass an order of confiscation along with an order of penalty, payment of fine and duty. It is stated that the petitioner has paid the entire penalty under Section 112 and the petitioner is not liable to pay duty under Section 125(2) as they are not availing option for redemption. It is stated that when an order of confiscation has been passed under Section 126, the goods vests with the Central Government and therefore the i .....

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nder Section 112(a) of the Customs Act. Petitioner preferred an appeal before the CEGAT, Bangalore. The Tribunal remitted the matter back for fresh consideration. The matter was considered on merits by the Commissioner of Central excise and Customs, Thiruvananthapuram and Ext.P1 order was passed ordering confiscation under Section 111(o) with an option to the petitioner to pay ₹ 16 lakhs as redemption fine in lieu of confiscation. The adjudicating authority had also imposed penalty of S .....

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tutory remedy under Section 130E of the Act and having failed to do so, the Tribunal's order cannot be challenged in the present writ petition. 6. The contention that the writ petition is not maintainable on account of availability of an alternate remedy, though can be appreciated, having regard to the fact that the petitioner had only raised a legal issue and this Court had already admitted the writ petition as early as on 10/09/2014, it may not be appropriate for this Court to send the mat .....

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er has not chosen the option to redeem the equipment, there cannot be any liability to pay duty as contemplated under Section 125(2) of the Customs Act. 7. Section 125 of the Customs Act reads as under: "125. Option to pay fine in lieu of confiscation.- (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it 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, .....

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(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." 8. Section 125(1) permits the owner or person in possession an option to pay in lieu of confiscation such fine as the officer thinks fit. Sub Section (2) indicates that where any fine in lieu of confiscation is imposed under sub Section (1), the own .....

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y not complying with the conditions of exemption, the goods in question became liable to be confiscated and therefore the petitioner had become liable to penalty as well as confiscation of goods. 9. This is an instance where orders are passed confiscating the goods as provided under the Statute. In other words, the question is very simple. If the goods are confiscated by the Government, under Chapter XIV, whether the owner of the goods or the person in possession at the time of seizure, will hav .....

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of false and incorrect material. Sec.115 relates to confiscation of conveyances. Sec.116 relates to penalty for not accounting for goods and Sec.117 relates to penalties for contravention of provisions for which no express penalty is provided under the Act. Sec.118 relates to confiscation of packages and their contents. Sections 119, 120 and 121 relates to confiscation of goods used for concealing smuggled goods, confiscation of smuggled goods and confiscation of sale proceeds of smuggled goods .....

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eem the goods in lieu of confiscation. In the case on hand, there is an exercise of jurisdiction under Section 125 of the Act and therefore, sub Section (2) of Section 125 clearly applies. The words in sub section (2) are "where any fine in lieu of confiscation of goods is imposed under sub Section (1)". The meaning is very clear that when such a fine has been imposed in lieu of confiscation, the owner of the goods or the person referred in sub Section (1), shall be liable to pay any d .....

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harges. In fact, there is no clarity in this matter. Sec.126 reads as under: "126. On Confiscation, property to vest in Central Government. (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government. (2) The officer adjudging confiscation shall take and hold possession of the confiscated goods." Sec.127 further indicates that an award of confiscation or penalty by an officer of customs shall not prevent the infliction of any punishment .....

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e goods. In such an event, there is no provision to recover the customs duty and other charges. 10. In some what a similar situation, the Apex Court in Fortis Hospital Ltd. v. Commr. of Customs, [(2015) 12 SCC 715], while considering section 125 of the Customs Act held as under: "It may be seen from the bare reading of the aforesaid section that under Section 125(1) of the Act, option is given to the importer whose goods are confiscated, to pay the fine in lieu of confiscation and redeem th .....

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first, relating to confiscating of the goods and second, pertaining to imposition of penalty. Pertinently, this action does not deal with payment of import duty at all. 10. It is not in dispute that show-cause notice in the instant case was issued under Section 124 of the Act. Once such a show-cause notice was issued and as can be seen from the proposed action which was contemplated in this provision (as has been taken note of above), it was also confined to confiscation of the imported machiner .....

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to pay the duty. 11. Notwithstanding the aforesaid position, as pointed out above, the Department is taking shelter under the provisions of sub-section (2) of Section 125 of the Act. However, on a plain reading of the said provision, we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods. Only when this co .....

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ot agree with the aforesaid submission of Mr Radhakrishnan. The order confiscating the goods has already been reproduced above. Insofar as the payment of fine is concerned, only option was given (and that was only course of action which could be visualised under Section 125). The order categorically states that "the importer may' redeem the confiscated goods on payment of fine of ₹ 1,00,000 (Rupees one lakh only)". 13. Indubitably, unless an option is exercised, fine does not .....

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