1

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 11.08.2017

CORAM:

THE HONOURABLE MR.JUSTICE NOOTY.RAMAMOHANA RAO

AND
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,

Keelakaranai Village,
Malrosapuram,
Kancheepuram-603 204. .. Appellant

Vs.
1. The Customs, Excise and Service Tax Appellate Tribunal,
No.26, Haddows Road,
Shastri Bhavan,
Chennai-600 006.

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.

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For appellant : Mrs.Cynduja Crishnan

For respondents: Mr.T.Pramodkumar Chopda, Senior Standing Counsel

JUDGMENT

NOOTY.RAMAMOHANA RAO,J

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

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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

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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

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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

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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

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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

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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;

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(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

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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-

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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

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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.

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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

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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

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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

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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

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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

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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.

(N.R.R.J) (T.R.J)
11.08.2017

Index: Yes
Internet: Yes
cs

Copy to

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.

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NOOTY.RAMAMOHANA RAO,J

and

T.RAJA,J

cs

Judgment in

C.M.A.No.2857 of 2011

11.08.2017

http://www.judis.nic.in