IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HONOURABLE MR.JUSTICE NOOTY.RAMAMOHANA RAO
THE HONOURABLE MR.JUSTICE T.RAJA
C.M.A.No.2857 of 2011
M.P.No.1 of 2011
M/s.Visteon Automotive Systems India Limited,
Kancheepuram-603 204. .. Appellant
1. The Customs, Excise and Service Tax Appellate Tribunal,
No.26, Haddows Road,
2. The Commissioner of Customs (Import) Sea Port,
Office of the Commissioner of Customs,
Custom House, Chennai-600 001. .. Respondent
Civil Miscellaneous Appeal No.2857 of 2011 filed under Section 35-G of the Central Excise Act, against the Final Order No.1670 of 2009, dated 11.11.2009 on the file of the first respondent-Customs, Excise and Service Tax Appellate Tribunal, Chennai.
For appellant : Mrs.Cynduja Crishnan
For respondents: Mr.T.Pramodkumar Chopda, Senior Standing Counsel
This appeal is preferred by the assessee against the final order rendered by the Customs, Excise and Service Tax Appellate Tribunal in Final Order No.1670 of 2009, dated 11.11.2009.
2. The Civil Miscellaneous Appeal was admitted by this Court on 22.09.2011 on the following substantial questions of law:
“(i) Whether the order of the Tribunal directing levy of penalty under Section 112(a) of the Customs Act, is without jurisdiction and amounts to trenching upon the powers of the adjudicating authority, inasmuch as the power to levy penalty is vested with the adjudicating authority under the Customs Act and the definition under Section 2(1) of the Customs Act, 1962, expressly excludes the Tribunal ?
(ii) Whether the order of the Tribunal directing levy of penalty under Section 112(a) is bad for want of jurisdiction, inasmuch as the above direction amounts to enhancement, for which there is no power under Section 129-B of the Customs Act, 1962, and is thus contrary to the decision of this Court in 1983 (54) STC 62 (Madras) (P.Hajee Mohamed Saliah Co. Vs. The State of Tamil Nadu), wherein it was held that the power to enhance must be specifically provided ? and
(iii) Whether the order of the Tribunal confirming the redemption fine in respect of goods which were not even available for confiscation, is contrary to the following decisions of the Tribunal, which are binding and thus bad for want of jurisdiction:
(a) 2009 (237) ELT 87 (Tri-Ahmd) (Commissioner of C.Ex., Daman Vs. Ramji Board and Paper Mills) and
(b) 2009 (235) ELT 623 (Tri-LB-Mumbai) (Shiv Kripa Ispat Pvt. Ltd. Vs. Commissioner of C.Ex. Cus., Nasik).
3. The facts leading to the decision on the above questions which have fallen for consideration in the above appeal, are that the appellant-Company has been regularly importing certain goods; few of its consignments imported during 1999-2000 were cleared; however, the appellant has found that the goods pertaining to certain invoices were cleared without filing the Bill of Entry and without payment of import duty. Upon realising the error, the appellant-Company itself brought to the notice of the Chief Commissioner of Customs, Chennai, on 11.10.2000 explaining the reasons for the lapse and subsequently paid the duty together with interest, totalling to little more than Rs.54.37 lakhs. It is after payment of duty together with interest, a show cause notice was issued as to why the goods valued at Rs.60,42,924/- as detailed in the annexure to the said show cause notice, should not be held liable for confiscation under Sections 111(l) and 111(m) of the Customs Act, 1962. It was also further set out as to why penalty be not levied under Section 112(a) and 114-A of the Customs Act. The appellant participated in the enquiry and the second respondent-Commissioner of Customs (Import) (Sea Port), Chennai, passed the Order-in-Original No.705 of 2003,, dated 30.06.2003, confiscating the goods valued at Rs.60,42,924/-, imported vide nine Bills of Entry as detailed in the show cause notice and imposing penalty of Rs.13,59,317/- under the first proviso to Section 114-A of the Customs Act, after appropriating Rs.54,37,268/- already paid by the appellant towards duty and interest leviable. A further fine of Rs.3 lakhs had also been imposed under Section 125 of the Customs Act. An appeal was preferred by the appellant against the above Order-in-Original, to the Tribunal. The Tribunal, by its order dated 11.11.2009 in Final Order No.1670 of 2009, has arrived at a finding that proviso to Section 114-A of the Customs Act, is not attracted in the facts and circumstances of the present case, as the appellant-Company has voluntarily disclosed the information after they discovered the mistake and paid the duty and interest in respect of the imported goods, cleared but not covered by the Bills of Entry filed by them. The Tribunal has confirmed the redemption fine of Rs.3 lakhs and set aside the penalty imposed under Section 114-A of the Act, and directed that penalty of Rs.1 lakh be imposed on the appellant under Section 112(a) of the Act, as the show cause notice issued to the appellant has adverted to the same. The appeal was otherwise rejected by the Tribunal. The present C.M.A. has been directed against the above order passed by the Tribunal.
4. Before we traverse in detail as to the nature of the redemption fine, contemplated and provided for under Section 125 of the Customs Act, it would only be appropriate to notice relevant provisions under the Customs Act. In Section 2, various expressions found mentioned in the Customs Act, have been defined. In sub-section (1) thereof, “adjudicating authority” has been defined as meaning any authority competent to pass any order or decision under the Act, but does not include the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963 (Act 54 of 1963), the Commissioner (Appeals) or the Customs, Excise and Service Tax Appellate Tribunal constituted under Section 129 of the Customs Act. Under Section 11 of the Act, if the Central Government is satisfied that it is necessary so to do for any of the purposes specified in sub-section (2) thereof, it may, by notification in the Official Gazette, prohibit either absolutely or subject to such conditions to be fulfilled before or after clearance of the import or export of goods of any specified description. Prevention of serious injury to domestic production of goods of any description, is one such purpose specified in sub-section (2) of Section 11, which can impel the Central Government to prohibit the importation of goods.
5. Under Section 12 of the Act, the duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975) on goods imported into India. The rate of duty as per Section 15 applicable to any imported goods, shall be the rate as on date on which the Bill of Entry in respect of such goods is presented under Section 46 of the Act. Under Section 17 of the Act, an importer shall self-assess the duty, if any leviable on imported goods. The proper officer may then verify the self-assessment of such goods and for the said purpose, he may examine or test any imported goods. In case, upon verification or examination or test of the goods, it was found that the self-assessment by the importer is not done correctly, the proper officer may re-assess the duty leviable on such goods, without prejudice to any other action which may be taken under the Act.
6. Under Section 28 of the Act, where any duty has not been levied or has been short-levied or erroneously refunded for any reason other than the reasons of collusion or any wilful mis-statement or suppression of facts, the proper officer shall, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been so levied or short-levied or short paid, requiring him to show cause why he be not asked to pay the amount specified in the notice. Under Section 30, the person-in-charge may deliver to the proper officer the import manifest and he shall duly verify as to the proof of the contents of the imported goods, prior to the arrival of a Vessel or air-craft. Under Section 32, no imported goods, required to be mentioned in an import manifest, except with the permission of the proper officer, be unloaded. As per Section 45 of the Act, all imported goods unloaded in a customs area, shall remain in the custody of the person approved by the Commissioner of Customs until they are cleared.
7. Under Section 46(1) of the Act, the importer of goods, other than those intended for transit or transhipment, shall make an entry thereof in a Bill of Entry presented to the proper officer for home consumption or warehousing purpose. Under sub-section (4) thereof, the importer was also required to produce the invoice if any relating to the imported goods. Under Section 47(1) of the Act, where proper officer is satisfied that the goods entered for home consumption are not prohibited goods, and the importer has paid the import duty assessed thereon and the charges if any payable under the Act in respect of the same, he may make an order permitting the clearance of the goods for home consumption. Under sub-section (2) thereof, where the importer fails to pay the import duty within two days, excluding holidays from the date on which the Bill of Entry is returned to him for payment of duty, he shall pay interest at such rate not below 10% and not exceeding 36% per annum on such duty, till the date of payment of the said duty. Under Section 48, if the imported goods are not cleared for home consumption or warehoused or transhipped within 30 days from the date of the unloading thereof at a customs station, such goods may, after notice to the importer, be sold by the person having the custody thereof. Thus, the interest of the Revenue was sought to be protected to the extent feasible by fastening the obligation to pay duty and then clear the goods on the importer, failing which such goods can be sold away.
8. Under Section 100 of the Customs Act, the power to search suspected persons entering or leaving India, has been conferred on the proper officer, whereas, under Section 105, the power has been conferred on the Assistant Commissioner of Customs or Deputy Commissioner of Customs, to authorise any officer of customs to search for such goods which are secreted in any place, if they are liable to confiscation. Under Section 106-A, the power of inspection of any place covered under Chapter IV-A or Chapter-IV-B of the Act, has been conferred on the Commissioner of Customs. Similarly, the power is conferred under Section 109 on any officer of customs, to require any person in possession of any goods, where such officer has reason to believe that the goods have been imported into India by land, to produce the order made under Section 47, permitting clearance of such goods.
9. The power of seizure of goods which are otherwise liable for confiscation, has been conferred under Section 110 of the Act on the proper officer. Under Section 111, the goods specified therein, which are brought from a place outside India, are liable to be confiscated and the following are some of the instances which are specifically mentioned under Section 111, which could cause confiscation of such goods:-
(i) Any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which are not so mentioned; (clause f);
(ii) Any dutiable or prohibited goods removed from a custom area or a warehouse, without the permission of the proper officer or contrary to the terms of such permission (clause j);
(iii) any dutiable or prohibited goods which are not included or are in excess of that those which are included in Entry made under the Act, or in case of baggage in the declaration made under Section 77 of the Act (clause l);
(iv) Any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under the Act, in respect of which condition is not observed, unless the non-observance of the condition was sanctioned by the proper officer (clause O).
10. Thus, Section 111 of the Act has provided for a far-reaching consequence of confiscation of the goods imported into India. Analysis of the various clauses contained under Section 111 of the Act, clearly brings out that the prohibited goods which are imported, are one such class of goods which are liable to be confiscated. Similarly, the goods which have been imported in excess of those mentioned in the import manifest, or not mentioned in the import manifest, are also liable to be confiscated. Similarly, any imported goods, which have been exempted from payment of duty, subject to any condition in respect of which the condition so imposed, was found to have been not observed, are also liable to be confiscated. Thus, in a variety of circumstances and contingencies, the goods which have been improperly imported into India, are liable to suffer confiscation under this Section.
11. The provisions contained in Section 111 are clearly directed against the goods. In juxtaposition to this, under Section 112(a) of the Act, any person, who in relation to any goods, does or omits to do any act, which act or omission, would render such goods liable for confiscation under Section 111 of the Act, shall be liable to a penalty, in respect of which any prohibition is in force under the Act, not exceeding the value of the goods or Rs.5,000/-, whichever is greater. Under Section 112(b), any person who acquires possession or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling for purchasing or in any other manner dealing with any goods which he knows or has reason to believe, are liable to confiscation under Section 111 of the Act, in case of dutiable goods other than prohibited goods, and a penalty is liable to be imposed not exceeding the duty sought to be evaded on such goods or Rs.5,000/-, whichever is greater. Thus, it is the importer or the person who acquires possession or sells, etc., the goods that are liable to confiscation under Section 111, is liable to be dealt with for imposition of penalty.
12. Section 114-A of the Act deals with penalty for short-levy or non-levy of duty in certain cases. Where the duty has not been levied or has been short-levied, or the interest has not been charged or paid, or has been part-paid, or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or the suppression of facts, a person who is liable to pay duty or interest, shall also be liable to pay the penalty equal to the duty or interest so determined. Section 114-A can be invoked only where the duty has not been levied due to mis-statement of fact or such similar event.
13. In the instant case, the penalty under Section 114-A could not have been imposed on the appellant-assessee-Company, inasmuch as they did not file the Bill of Entry as required under Section 46 of the Act, but however, without levying any duty thereon at the first instance, the proper officer has allowed them to be cleared. It is the appellant-Company, the importer himself has discovered the error and brought it to the notice of the proper officer by way of written representation and they have made the payment of duty leviable on such goods together with interest under Section 28 thereon. Therefore, there is no manifest intention on the part of the importer to evade duty. The present case is not a case where the goods have been imported in excess of their numbers mentioned in the Bill of Entry. The import manifest has not been filed covering certain goods amongst other goods imported. However, they were cleared without levying any duty on them. The lapse is equally on the part of the proper officer, who cleared those goods, without verifying as to whether an appropriate Bill of Entry is lodged or not and then they have suffered the incidence of duty or not.
14. In those circumstances, no inference can be drawn against the importer-Company that they have made an attempt to evade the incidence of duty payment all due to mis-statement of fact or such similar reason. Therefore, very rightly the Tribunal has interfered with the penalty imposed by the Commissioner of Customs in the order appealed before it.
15. But unfortunately, the Tribunal has fallen into grave error in imposing penalty against the importer under Section 112(a) of the Customs Act. The inspiration was drawn by the Tribunal on the basis that the show cause notice has proposed to impose the penalty under Section 112(a) of the Act, against the importer. The Tribunal ought to be aware that it has been kept outside the scope of expression “adjudicating authority” under sub-section (1) of Section 2 of the Act. Consequently, the Tribunal has no power to adjudicate at the first instance, any imposition of penalty leviable under the Act, either against the goods or the person concerned. If at all the adjudicating authority has omitted to take action under Section 112 of the Act against an importer, that could be for valid and tenable reasons. It could be, in the present case, for the reason that the goods have been cleared for home consumption by the proper officer without proper verification. Therefore, the blame is apportionable between the importer, the appellant herein and the proper officer of the Department as well. The discretion has been properly exercised and it was not levied in the Order-in-Original. Hence, the penalty now imposed by the Tribunal under Section 112(a) of the Act is not sustainable, as any such imposition, for the first time, is part of exercise of adjudication process and the Statute has kept the Tribunal away from any such exercise.
16. The role and jurisdiction assigned to the Tribunal is specified under Section 129-B of the Act. It would be open for the Tribunal, if it thinks fit, to pass an order confirming or modifying or annulling the decision appealed against or may refer the case back to the authority with such direction as it may think fit for fresh adjudication or a decision, and hence, the power of determination or imposition of penalty on an importer under Section 112(a), is not available to the Tribunal. This jurisdictional limitation has not been borne in mind by the Tribunal while passing the impugned order. Accordingly, questions (i) and (ii) stand answered against the Revenue.
17. Section 125 of the Act has provided for an option to pay fine in lieu of confiscation and since it has certain bearing upon the controversy raised at the Bar, it is only appropriate to re-produce Section 125 hereunder:
“Section 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, and shall, in the case of any other goods, give to the owner of the goods or where such owner is not known, the person from whose possession or custody, such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit:
Provided that, without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
(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.”
18. The principal contention that is canvassed before us is that the fine contemplated under Section 125 is a redemption fine and hence, the goods which are improperly imported, are liable to be cleared. In other words, Section 125 is considered as providing for a redemption fine, and therefore, the availability of goods is a pre-requisite for offering the redemption fine. The argument proceeds that when once the goods imported improperly are not available for redemption, the question of payment of fine would not arise. Where the goods are not physically available, the Department could not have imposed the redemption fine. On that score, the penalty imposed under Section 125 of the Act is sought to be faulted.
19. Per contra, learned Senior Standing Counsel appearing for the Revenue placed reliance upon the meaning of the noun “redemption” as found in “Compact Oxford Dictionary, Thesaurus and Wordpower Guide”, (Ninth impression – 2004) (Dictionary Editor: Catherine Soanes)”, which means, “the action of redeeming or the state of being redeemed”. He therefore contended that any redemption is not necessarily confined to the goods in question, but the redemption is with regard to the conduct as well.
20. The question which is now required to be addressed has to be looked at from proper perspective. As we have already noticed supra, the pre-requisite for making an offer of fine under Section 125 of the Act is pursuant to the finding that the goods are liable to be confiscated. In other words, if there is no authorisation for confiscation of such goods, the question of making an offer by the proper officer to pay the “redemption fine”, would not arise. Therefore, the basic premise upon which the citadel of Section 125 of the Act rests is that the goods in question are liable to be confiscated under the Act. It, therefore, follows that what is sought to be offered to be redeemed, are the goods, but not the improper conduct of the importer or exporter to atone the improper conduct of the person concerned. The conduct of the importer or possessor of goods which are liable for confiscation was already dealt with under Section 112 of the Act. At the same time, the reliance placed by the learned counsel for the appellant upon the Bombay High Court decision rendered in the case of Commissioner of Customs (Import), Mumbai Vs. Finesse Creation Inc., reported in 2009 (249) ELT 122 (Bom) is of not much help to their case. As we have noticed supra, certain classes of goods can be prohibited from being imported by the Central Government by a Notification. If an importer, in contravention thereof, imports any such goods, the only option that is available to a proper officer in such cases, is not to clear such goods for home consumption. When once importation of goods is prohibited, there is no way that they can be cleared for home consumption, otherwise, the very object of prohibiting their import by way of the Notification by the Central Government, gets completely frustrated or neutralised. Further, without levying the duty under the Customs Act, no clearance thereof can be granted under the Act, and when once certain goods are prohibited from being imported, the question of levy of duty thereon would not simply arise and hence, such goods cannot be cleared for home consumption.
21. We are, therefore, of the opinion that insofar as the prohibited goods are concerned, they are prevented from being imported either absolutely or conditionally and consequently, the question of making an offer for payment of fine under Section 125 of the Act, would not arise, without studying the implication of such import.
22. We must also bear in mind that for improper importation of the dutiable goods or the prohibited goods, the importer is liable to be proceeded against under Section 112 of the Act by subjecting him to a penalty. Therefore, the fine proposed to be imposed under Section 125 of the Act is directed against the goods, in addition to the one that was already provided for under Section 112 of the Act. The fine contemplated is for redeeming the goods, whereas, the importer is sought to be penalised under Section 112 for doing or omitting to do any act which rendered such goods imported by him, liable to be confiscated under Section 111 of the Act and for that act or omission, the appellant is liable to be penalised.
23. The penalty directed against the importer under Section 112 and the fine payable under Section 125 operate in two different fields. The fine under Section 125 is in lieu of confiscation of the goods. The payment of fine followed up by payment of duty and other charges leviable, as per sub-section (2) of Section 125, fetches relief for the goods from getting confiscated. By subjecting the goods to payment of duty and other charges, the improper and irregular importation is sought to be regularised, whereas, by subjecting the goods to payment of fine under sub-section (1) of Section 125, the goods are saved from getting confiscated. Hence, the availability of the goods is not necessary for imposing the redemption fine. The opening words of Section 125, “Whenever confiscation of any goods is authorised by this Act ….”, brings out the point clearly. The power to impose redemption fine springs from the authorisation of confiscation of goods provided for under Section 111 of the Act. When once power of authorisation for confiscation of goods gets traced to the said Section 111 of the Act, we are of the opinion that the physical availability of goods is not so much relevant. The redemption fine is in fact to avoid such consequences flowing from Section 111 only. Hence, the payment of redemption fine saves the goods from getting confiscated. Hence, their physical availability does not have any significance for imposition of redemption fine under Section 125 of the Act. We accordingly answer question No.(iii).
24. The appeal stands partly allowed. No costs. The Miscellaneous Petition is closed.
1. The Registrar,
Customs, Excise and Service Tax Appellate Tribunal,
South Zonal Bench, Shastri Bhawan Annexe, 1st Floor,
26, Haddows Road, Chennai-600 006.
2. The Commissioner of Customs (Import) Sea Port,
Office of the Commissioner of Customs,
Custome House, Chennai-600 001.
C.M.A.No.2857 of 2011