Case Law Details
Dipesh Shah Vs Commissioner of Customs (Port) (CESTAT Kolkata)
CESTAT Kolkata held that owner of the car is liable to pay customs duty on redemption of the confiscated vehicle/ car even if the owner is not the importer of the car. Accordingly, appeal dismissed.
Facts- The appellant contends to have purchased an Audi Q 7 Car from Sri Basab Paul through one Mumbai based car dealer Sri Haren Choksey for a consideration of Rs.55,00,000/-. Delivery of the said car was taken on 10th October 2007.
Based on reports concerning fraudulent imports of cars, DRI undertook detailed investigations into the matter in October 2009. Statement of the appellant was recorded on 21.01.2010 and the car was seized on 22.01.2010. Provisional release of the car was sought by the appellant upon payment of Rs.18,21,788 and Rs.7,56,167/-. The appellant executed an indemnity Bond for 100% of the ascertained value of the car along with bank guarantee of 25% for provisional release of the seized car.
After due process, the Adjudicating authority held that the imported car was second-hand car and re-determined its Value and Customs Duty payable by the importer. In proceedings before the adjudicating authority, the appellant had taken the stand, that he was not liable for payment of differential duty u/s. 28 (1) of the Customs Act, as he was not the importer and relied upon certain case laws in support of his stance.
Conclusion- Tribunal in the case of Sumant Sood v. Commissioner of Customs, Chennai has held that It is not the case of the Appellant that he is not the owner of the car. Further, even the person from whose possession or custody goods are seized has to suffer duty at the time of redemption of the confiscated vehicle. It is an option given to the owner of the confiscated vehicle which he has to exercise it. The provisions of sub-section (2) of Section 125 have not been qualified by the words that owner/person shall be liable to pay duty only in cases where ―the importer is not known.” We are of the view that once the owner of the confiscated goods exercises his option to redeem such goods, he has to suffer duty leviable thereon. Accordingly the Appellant has to pay duty payable in respect of the impugned car.
Held that in this view of the matter the objection raised by the appellant that they not being importers are not bound by the rigors of Section 28 of the Customs Act is purely an extraneous question having no application to the facts of the present matter.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant contends to have purchased an Audi Q 7 Car from Sri Basab Paul through one Mumbai based car dealer Sri Haren Choksey for a consideration of Rs.55,00,000/-. Delivery of the said car was taken on 10th October 2007. The dealer supplied a copy of the overseas Invoice, Bill of Lading, Bill of Entry and Customs Duty paid challan evidencing that the imported car had suffered Customs Duty. Based on reports concerning fraudulent imports of cars, DRI undertook detailed investigations into the matter in October 2009. Statement of the appellant was recorded on 21.01.2010 and the car was seized on 22.01.2010. Provisional release of the car was sought by the appellant upon payment of Rs.18,21,788 and Rs.7,56,167/-. Statement of the dealer Haren Choksey was also recorded on 22.02.2012 and that of Basab Paul was recorded onknown.‖ We are of the view that once the owner of the confiscated
05.03.2012. The appellant executed an indemnity Bond for 100% of the ascertained value of the car along with bank guarantee of 25% for provisional release of the seized car. On 12.03.2012, Show Cause Notice was issued by DRI to the appellant and the importer and others. After due process, the Adjudicating authority held that the imported car was second-hand car and re-determined its Value and Customs Duty payable by the importer. He also confiscated the car and ordered it to be redeemed upon payment of redemption fine of Rs.2,00,000/- and imposed penalty of Rs.1,00,000 on the appellant. Being aggrieved by the Order in Original, the appellant filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) has remanded the matter to the Adjudicating authority after holding that the appellant would be required to pay the Customs Duty in terms of Section 125(2) of the Customs Act 1962. The operative part of the order reads as under :
“17. I also find that provision of Section 125(2) can be reckoned if the department is unable to invoke Section 28. Here, the lower authority directed Shri Dipesh Shah to pay duty under Section 125(2), whereas as per statutory provisions the duty is required to be collected from Shri Basab Pal, the importer under Section 28. I hold that if the order of lower authority is confirmed as it is, a situation may arise when both these persons escape paying duty using recourse of higher appellate remedies. Therefore, it would be prudent to remand back this matter to adjudicate the case afresh keeping the correct legal position in this case.
18. Accordingly, I remand back the order to the lower authority for de-novo adjudication. Both the appeals are disposed of in the above terms.”
2. To recapitulate the genesis of the case, acting on intelligence concerning diverse modus operandi as deployed by certain fraudulent importers of high-end cars, the present investigation were initiated. The commonly adopted moduses were:
- Misdeclaration of new car as old car, so as to claim substantial depreciation and lower the assessable value.
- Misdeclaration of old car as new car, so as to evade leviable higher duty by tampering of chasis number/odometer
- Misdeclaration of model of vehicle, so as to import high-end vehicles in the guise of low-end vehicle
- Separation of value of accessories installed in the vehicle so as to bring down the assessable value
3. In the present case, a sports utility vehicle Audi Q7 3.0 TDI Quatro V6 diesel (Chassis No.WAUZZZ4L8D025900), vehicle was imported by one Shri Basab Paul vide Bill of Entry number 335459, date 9 April 2007, for clearance through Calcutta Custom House. The said vehicle, as per intelligence gathered by the department was registered with the Driver and Vehicle Licensing Authorities, DVLA at UK before its importation into India. The local representative of the original equipment manufacturer (OEM Audi AG Germany), i.e. Audi India vide their letter dated October 20, 2009 furnished the details of the vehicle as also noted in the show cause notice in para 2.2 thereof. It is clear therefrom that the said vehicle was manufactured in July 2006 at Slovakia and was purchased by one Mr R Guy, Birch Grove, Kingston Upon Thames, KT 27, JB, UK and registered thereto on August 3, 2006. Investigations conducted suggest that the appellant Dipesh Shah is said to have purchased the said vehicle through a Mumbai based car dealer, Haren Choksey, for a price, which post negotiations was said to be firmed up at ₹55 lakh. It is stated on record that the appellant issued three cheques totaling ₹45 lakh towards the stated purchase of the said vehicle in favour of M/s Octaga Green Power and Sugar Company Limited – the importing firm, a company of Shri Basab Paul. At the time of its delivery, the vehicle carried a temporary registration number and had approximately covered 2000 kms. It is also on record that neither the intermediary Shri Haren Choksey nor the stated importer Shri Basab Paul had supplied the original documents of the vehicle to the appellant and a dispute is said to have arisen between the concerned parties, the balance amount of Rs.10,00,000/-, of the negotiated amount is said to have remained unpaid. It also flows from records that requisite NOC for registration with RTO, Maharashtra was not given to the appellant, as a result he had to pay fine, penalty and interest upon registration of the said vehicle at RTO Surat, whereby the said luxury vehicle came to be registered in the name of the appellant vide registration number GJ/5C/E5009.
4. Investigations have also brought it to fore, that the imported car being not new was liable for duty at the rate of 165% of the value as assessed by the authorities, whereas having been declared as a new vehicle, duty at the rate of 113% was paid at the time of import. Appellant during the investigations as noted in the records, as owner of the vehicle, indicated his willingness to pay the differential duty along with interest and accordingly made payment of varying amounts as noted in para 1 above. Subsequently, upon seizure, the vehicle was provisionally released to the appellant, subject to certain conditions, as also brought out in para 6 of the notice. While at this juncture, for the context of this appeal, it may not be necessary to go into further factual details, suffice to state that the said imports were executed through a web of intermediaries, including among others, S/Sri Haren Choksey, Rajiv Choksey, Charanjit Singh, Rajesh Jethani, Suresh Halde besides of course the importer, the customs broker and the present appellant – Sri Dipesh Shah.
5. For the purpose of the present appellant, the notice issued by the department calls upon to show cause the following :
“A. ……… Shri Dipesh Shah is called upon to show cause to the above Adjudicating Authority as to why :-
(i) the value of Rs.26,27,591/- CIF, declared in respect of the vehicle namely New Audi Q7 3.0 TDI Quattro V6 Diesel vehicle (CHASSIS NO. WAUZZZ4L87D025900) under bill of entry no 335459 dated 09.04.2007, should not be rejected under the provisions of Section 14(1) of Customs Act, 1962, read with the provisions of Rule 10A of Customs Valuation Rules, 1988;
(ii) the value of the said vehicle for the purpose of Section 14(1) of Customs Act, 1962, read with the provisions of Rule 4 of Customs Valuation Rules, 1988 should not be re-determined on the basis of transaction value of Rs.30,29,100/- CIF, as aforesaid;
(iii) the impugned vehicle should not be held as ‗second hand or used vehicle‘ in terms of import Licensing Notes (1)(l) under Chapter 87 of ITC (HS) classification of Export and Import items;
(iv) the benefit of SN 344 of Notification no.21/2002-Cus dated 01.03.2002 should not be denied while assessing the duty leviable on the impugned vehicle on the basis of above ascertaind/re-determined value of Rs.30,29,100/- CIF;
(v) the differential duty amounting to Rs.20,49,117/-leviable on the said vehicle on the basis of the redetermined value of Rs.30,29,100/- CIF (assessable value of Rs.30,59,391/-) should not be demanded and recovered under the provisions of Section 28(1) of the Customs Act, 1962, with interest under the provisions of section 28AB of the Customs Act, 1962; (Section 28AA after 08.04.2011)
(vi) the said vehicle with a declared value of Rs.26,27,591/- CIF (ascertained value Rs.30,29,100/-CIF) should not be confiscated under the provisions of section 111(d) of the Customs Act, 1962 {read with Section 11(1) of the Foreign Trade (Development and Regulation) Act, 1992 and provisions of Rules 11, 14(1) and 14(2) of the Foreign Trade (Regulations) Rule 1993 and the Import Licensing Notes appended to chapter 87 of the ITC (HS), under the provisions of para 2.12 of the Foreign Trade Policy 2004-2009 and 2.8 of the Hand Book of Procedures} and section 111(m) of the Customs Act, 1962;
(vii) penalty under Section 112(a), Section 112 (b), Section 114A and Section 114AA of the Customs Act, 1962 should not be imposed on him in relation to the said vehicle;
(viii) duty amount of Rs.18,21,788/- and interest amounting to Rs.7,56,167/- paid at the time of seeking provisional release of the impugned vehicle should not be appropriated against differential duty and interest that may be adjudged under section 28 of the Customs Act, 1962;
(ix) the Bank Guarantee of Rs.7,30,404/- given at the time of seeking provisional release of the impugned vehicle should not be encashed and appropriated towards the fine and penalty that may be imposed in the adjudication proceedings.
6. In proceedings before the adjudicating authority, the appellant had taken the stand, that he was not liable for payment of differential duty under section 28 (1) of the Customs Act, as he was not the importer and relied upon certain case laws in support of his stance. This proposition of the appellant was however dismissed, disregarding him as not a genuine purchaser having not honoured the deal and the fact that the impugned vehicle was seized from the possession of the appellant, who not only agreed to pay the differential duty and interest at the time of its provisional release, but also did actually pay part of the said sum. The adjudicating authority further observed that the appellant never tried to bring Basab Paul into the picture, before the authorities and invented the innovative ploy and cooked up the said story. He therefore arrived at a finding that the cited case laws could not be used to rescue the appellant as he was not a bonafide purchaser, but a joint owner of the vehicle. The learned adjudicating authority citing the case of Mohan Meakins Limited [2000(115) E.L.T. 3(SC)] inter alia concluded as under :
“The case laws quoted cannot be used to rescue both of them as Shri Dipesh Shah is not a genuine purchaser, hence, he is also liable to action under the provisions of Customs Act, 1962. Case law 2000 (115) ELT 3 (SC) Mohan Meakin Ltd. vs. Commissioner of Central Excise, Kochi, under para 5 discussions, ―Section 125 of the Act empowers the authorities after adjudication to release the goods to the person from whom possession the same has been seized, on collection of redemption fine in lieu of confiscation. But such redemption of goods is subject to the power being called upon to pay any duty and charge that is payable in respect of such goods. The proviso to Section 125(1) also makes it obligatory on the adjudicating authority to evaluate the fine which shall not exceed the market price of the goods confiscated (emphasis supplied). Therefore, there is mandatory requirement on the adjudicating officer before permitting the redemption of goods, firstly, to assess the market value of the goods and then to levy any duty or charge payable on such goods apart from the redemption fine that he intends to levy on sub-clause (1) of that Section‖.
7. Material findings of the adjudicating authority, relevant to the context herein, are extracted as here under :
“8.6 it is on record that the vehicle was manufactured in Slovakia, and name of first purchaser is Mr. R.Guy, address Birch Grove, Coombe Park Kingston, upon Thames, KT27JB, U.K. Further, it is also on record that it was shipped by Audi Zentrum Hamburg Raffay GMbH & Co. Germany. These facts have not been contested by the learned advocate on behalf of Shri Dipesh Shah. The vehicle, which was manufactured in Slovakia and first registered in U.K. and then was shipped from Singapore to India (Kolkata). The learned advocate did not discuss the journey of the vehicle from U.K. to Singapore. The information on record also indicates that the invoice was issued by Audi Zentrum Hamburg. The learned advocate on behalf of the noticee failed to appreciate this fact and did not through any light, as, how the vehicle once sold to an individual, again Shri Basab Paul purchased it from Audi i.e. Manufacturer. No documentary evidence has been brought on record, only they have inferred to suit their cause. In reply, mentioning that when Shri Dipesh Shah purchased the vehicle it was showing 2000 kms in the odometer and having temporary registration no. on it and further inferred that the vehicle was new. Whereas on the contrary the temporary registration in India indicates that the vehicle was only used on foreign soil as it was not registered on regular basis in India. The learned advocate further points out that at the time of assessment of vehicle was examined by officer of Customs, they would have examined whether the car is new or old. Its only when the officers were satisfied that the car is new, then only the benefit of notification no.21/2002-Cus dt.01.03.2002 Sl.No.344 would have been granted. No doubt the vehicle was before Customs and it was subject to examination and verification by Customs officers, however, it is also fact that this is a case of mis-declaration and fraud and any fraudster will not leave any area uncovered and he will take all possible care that his case is not detected. In this case also the car was presented as new. The relevant documents were forged, hence the case could not be detected at the stage of clearance. The learned advocate also takes shelter of Circular No.1/2005-Cus dt. 11.01.2005 to further their cause however, the Circular states when registration is done to facilitate the shipping of car. Whereas in this case the car was shipped from Singapore and registration was done in United Kingdom. Therefore, it was not for the purpose of transportation from the country of shipment to India. Further plea in this regard is placed that the car was not as per Mr. R.Guy‘s requirement. Therefore, as a new car he sold it or returned back and later the Audi Zentrum Hamburg Raffary GMbh vide invoice dated 05.02.2007 sold the car to Mr. Basab Paul. This is nothing but a presumption by learned advocate, there is no evidence in this regard. However, in case the car was sold by Mr. R.Guy to Shri Basab Paul, then it is second hand further the payment was not made to him. Secondly, if it is also presumed that the car was returned to M/s. Audi Zentrum Hamburg Raffay again the remittance was not made to them; it was to M/s .Pride City General LLC at Dubai. Hence the invoice is fabricated and the plea to consider the car as new on the basis of invoice submitted to Customs at the time of clearance is not sustainable and ratio of case laws quoted is not applicable in this case.
…..
8.8 Para 15 of the reply deals with penalty and states that their client is not liable to penalty under Section 112(a) or (b), Section 114A and 114AA as proposed in para 18(A) of the SCN as in para 17 role of all other co-noticees is discussed but nothing is alleged against our client. I have gone through the show cause notice, under para 17.2(a), it is mentioned that, ―a criminal conspiracy was hatched by S/Shri Rajesh Jethani, Haren Choksey, Basab Paul and others to defraud the Government of India of its legitimate revenue, by causing fraudulent import of the Audi Q7 vehicle by resorting to mis-declaration of proper description and value. As pointed out by the advocate of the noticee – the role of Shri Dipesh Shah is only as a bonafide purchaser, hence his role is not attributed to importation in the show cause notice as he had come into picture after importation, i.e. sale of the vehicle to him. Therefore, he has not played any part in importation, filing documents/declarations and payment of duty; however he dealt with the vehicle. And he did not pay full amount to the importer i.e. Shri Basab Paul. Thus, he was knowing the murky dealing and that the vehicle is liable to confiscation under the provisions of Customs Act, 1962. As the deal between Shri Dipesh Shah and Shri Basab Paul is still incomplete, they are co-owner of the vehicle. Shri Dipesh Shsh had attributed non-payment of the balance amount to failure to produce No Objection Certificate from R.T.O. of registration of the vehicle. However, no documentary evidence is produced in this regard. Thus, Shri Dipesh Shsh was very much aware about the genuineness of importation and declarations etc. Otherwise he was free to return the vehicle to Shri Basab Paul as per understanding between them and terms to hold the balance amount. Whereas Shri Dipak Shsh chooses not to return the vehicle even he did not receive the required NOC. This shows his knowledge and his part in keeping the possession of the impugned vehicle at the time of it‘s seizure. Further, Section 125(1) of the Customs act, 1962 empowers the adjudicating authority to impose fine. ―……………. in case of any goods, the importation or exportation where of 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 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‖. Therefore, Shri Dipesh Shah did not complete the deal, hence; he was in the knowledge about the nature of goods in respect of provisions of Customs Act, 1962 and valuation of it. The vehicle was seized by DRI from his possession, therefore, he is liable to pay the differential duty, interest as applicable, fine and penalty under Section 112(b) of the Customs Act, 1962. There is no reply from Shri Basab Paul, the importer on record, however, in respect of notice for personal hearing Shri Sushantha Murthy from M/s. Economic laws practice vide letter VSN/SSM/302 dt. 26-10-12 informed that they intend to approach the Settlement Commission and requested for adjournment for 4 weeks. However, two further hearings were granted on 10-12-12 and 27-12-12, there is no response from him. From the letter informing about approaching Settlement Commission and no reply being put forward it is inferred that Shri Basab Paul accepts the show cause notice and allegations therein, in principal. Further, he failed to avail any opportunity for personal hearing to put his case for testing, the charges against Shri Basab Paul are proved being remain unopposed by way of any reply or attending personal hearing by the noticee or his representative.
8. From the foregoing findings of the adjudicating authority, it is evident that the appellant is indeed the co-owner of the imported vehicle, the said vehicle is registered in his name. In view of the material facts as indicated above the contention of being a bonafide post import purchaser is a mere facade and a smokescreen set up to conceal and camouflage the actual identity of the importer and the role played by the appellant masquerading as a purchaser of the vehicle post import.
9. In appellate proceedings, the Commissioner(Appeals) however doubted the contention of appellant being a bonafide post import purchaser and therefore called upon for determination of the factual position beyond doubt. He cited the instance of not having honoured the stated unwritten deal, said to be played out before the authorities by the appellant in support of his viewpoint. The learned Commissioner also cited in support of his findings, the fact of payment of certain sums towards duty and interest, as mentioned earlier, besides furnishing, a bank guarantee for an amount of ₹730404 alongwith the requisite bond, at the time of seeking provisional release of the said vehicle. He also distinguished the case laws relied upon by the appellant in support of their contention.
10. It is on record that the vehicle was declared as “new” at the time of import, while during investigations it was found to be “old and used” having been registered with DLA in UK. Also, the investigations conducted led the authorities to realise, that the value of the imported vehicle was also misdeclared and the appellants along with Rajesh Jethani (operating out of Dubai, UAE) had arranged for finance for the payment of customs duty as well as other incidental expenses besides the remunerations of the CHA firm.
11. After deliberating on the various factual aspects of the matter and the case law, the learned appellate authority remanded the matter to the original authority, inter alia holding:
“17. I also find that provision of Section 125(2) can be reckoned if the department is unable to invoke Section 28. Here, the lower authority directed Shri Dipesh Shsh to pay duty under Section 125(2), whereas as per statutory provisions the duty is required to be collected from Shri Basab Pal, the importer under Section 28. I hold that if the order of lower authority is confirmed as it is, a situation may arise when both these persons escape paying duty using recourse of higher appellate remedies. Therefore, it would be prudent to remand back this matter to adjudicate the case afresh keeping the correct legal position in this case.“
18. Accordingly, I remand back the order to the lower authority for de-novo adjudication. Both the appeals are disposed of in the above terms.“
12. It is in this context that the present appeal is required to be looked into. We have heard the arguments as contended by the two sides and perused the case records.
13. The learned Advocate appearing on behalf of the appellant submits that the order passed by the Commissioner (Appeals), goes against the statutory provisions of Section 28 and Section 114A and also contrary to his own findings at para 15 of the OIA. He states that it has come up very clearly in the OIO and OIA that the importer was Basab Paul and not the appellant, and that the Commissioner (Appeals) inspite of holding that the duty is recoverable from Basab Paul under Section 28, had held that if this recovery does not materialize, then the duty is to be recovered from the appellant under Section 125(2), for which purpose he remanded the matter to the Adjudicating authority. The appellant submits that for taking this stand and giving such direction to the Adjudicating authority, there exists no statutory power.
14. The Learned Advocate also cited case laws to the effect that no penalty is imposable on the appellant since he is a bonafide purchaser and not the importer. The appellant submitted that only Rs.10 lakh out of the total Rs.55 lakh was held back by him, since all the documents were not handed over by the Dealer. He states that therefore, the genuine transaction of the appellant cannot be questioned.
15. Without prejudice to the above submissions, the learned Counsel makes an alternate submission that if the Adjudicating authority took the view that the imported car is a second-hand car, the benefit of depreciation should have been considered due which would bring down the duty liability.
16. Based on the above submissions, the appellant prays that the present impugned order may be set aside and the appeal may be allowed.
17. The Learned AR reiterates the detailed findings of the Commissioner (Appeals). He submits that since the question as to who is the actual importer is required to be ascertained with certainty, the Commissioner (Appeals) was correct in remanding the matter to the Adjudicating authority with a direction to recover the Duty from Basab Paul under Section 28 or from the appellant under Section 125(2) of the Customs Act. Therefore, he submits that the present appeal is required to be dismissed.
18. The learned adjudicating authority has however confirmed the liability for payment of differential duty amounting to ₹20,49,117/-, leviable on the redetermined value and directed it to be recovered from the owner of the vehicle under the provisions of Section 28(1) of the Customs Act along with applicable interest. Vide clause D of the operative part of the said order, the adjudicating authority confiscated the said vehicle under the provisions of section 111 (d) of the Customs Act, 1962 read with section 11(1) of the Foreign Trade Development and Regulation Act, 1962 and regulations 11, 14(1) and 14(2) of the Foreign Trade Regulations, 1993 and the import licensing notes appended to Chapter 87 of ITC HS under the provisions of para 2.12 of the Foreign Trade Policy 2004–09 and 2.8 of the Handbook of Procedures and section 111(m) of the Customs Act. The adjudicating authority however gave an option to redeem the said vehicle to the owner of the vehicle Shri Dipesh Shah, under section 125 of the Customs Act.
19. Upon availing the option of redemption, in appeal proceedings before us, the appellant has contested the payment of duty, as he claims to be not the importer of the car. It is thus required to also examine the scope and reach of section 125 of the Customs Act, to inter alia also arrive at the fact of liability for payment of duty, as vested upon redemption under the statute, and/or else upon the appellant given the factual matrix of the case.
20. It would be thus necessary to go through the relevant portion of Section 125(2) of the Customs Act 1962, which is extracted below :
“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:
(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.”
21. A close look at the provisions of section 125(1) of the Customs Act, as extracted above would indicate that it rests on a twofold framework, as regards vesting of the option of redemption.
These are :
i. The owner of the goods, and
ii. The person from whose possession or custody, the goods were seized (However, this is limited to circumstances where the owner is not known).
22. Further, there is an equally relevant and to be read alongwith, subsection (2) of section 125 of the Customs Act, which mandates that where any fine in lieu of confiscation is imposed in terms of subsection (1), the owner of such goods or the person referred in subsection (1) shall in addition be liable to duty and charges payable in respect of such goods.
23. Thus it is very clear that subsection (2) of section 125 does not vest any discretion upon the person exercising the privilege of redemption, to disregard attendant conditions regarding payment of duty or other charges. It is also necessary to take note of the fact that section 125 of the Customs Act uses the term “owner of the goods” and not the “importer”. As a residual measure, the redemption option is also open to a person from whose possession/custody the goods were seized, however under certain circumstances.
24. A question may however arise that the adjudicating authority has not expressly referred to Section 125(2) of the Customs Act in the operative part of the order, while permitting redemption upon payment of certain sum by way of redemption fine. The obvious answer thereto is that the same in the first place is not really required, for the simple reason that the imperatives of Section 125 (2) of the act ibid automatically flow out of Section 125(1) and in fact the two subsections come into play conjointly and mandatorily. There is no independent or a mutually exclusive existence of the two sub-sections, as is evident from the wordings of the statute. Thus the conceivable argument of the appellant citing reference to “C” of the operative part of the adjudicating authority‟s order as demanding duty under Section 28(1) of the act ibid, is only speaking of half truth. It is settled law that what is obvious, need not be stated. At its worse the reference to Section 28(1) by the adjudicating authority can be considered by way of ex abundanti cautela.
25. It be also noted that the adjudicating authority had arrived at a categorical finding that the appellant herein is none else but the owner of the vehicle in question. Operative part of the order in original in para D states so in no uncertain terms. :
Para-11.
“D. I confiscate the said vehicle with a declared value of Rs.26,27,591/- CIF (ascertained value Rs.30,29,100/- CIF) under the provisions of Section 111(d) of the Customs Act, 1962 [read with Section 11(1) of the Foreign Trade (Development and Regulation) act, 1962 and provisions of Rules 11, 14(1) and 14(2) of the Foreign Trade (Regulations) Rules, 1993 and the import licensing Notes appended to Chapter 87 of the ITC (HS), under the provisions of Para 2.12 of the Foreign Trade Policy 2004-09 and 2.8 of the Hand Book of Procedures] and Section 111(m) of the Customs Act, 1962, however, I give an option to redeem the vehicle, to the owner of the vehicle Shri Dipesh Shah under Section 125 of the Customs Act, 1962, on payment of Redemption fine of Rs.2,00,000/- (Rupees two lakh only).‖
[Emphasis supplied]
26. The appellant in proceedings before us has also held himself out to be, a bonafide purchaser of the said imported vehicle and hence the owner thereof. The vehicle is registered in the appellant‟s name with the RTO, Surat. The appellant by virtue of himself holding out to be a bonafide purchaser of the imported vehicle has thereby admitted and ascribed to himself the ownership rights of the vehicle. The adjudicating authority in para 8.8 of the order-in-original has held that the present appellant is a „bonafide purchaser.’ However, the same is alluded to be based as per the appellant’s contentions and in the context of the show cause notice not attributing to the appellant’s role. A clear look at the entire context would reveal that such an observation was the initial prologue to the evaluation of evidence and was certainly not made as a categorical assertion/finding, going by the initial statements and submissions as made by the appellant. But, were it to be so, the automatic liability for payment of differential duty on the appellant under Section 125(2) of the Act ibid is inescapable and a foregone conclusion, both on account of his claim to be the owner of the said vehicle as well as the redemenor thereof.
27. Be as it may, viewed from another angle, it is necessary to understand the concept of ownership. Thus, whereas Concise Law Dictionary – 2015 Reprint at page 796 describes “owner” as – ―The person in whom is vested the ownership, dominion, or title of the property; ……….. He who has a dominion of a thing, real or personal, corporeal or in corporeal, which he has a right to enjoy and do with as he pleases……………. ” The term “own”, in the case of State of Uttar Pradesh v. Renusagar Power Co. [AIR 1988 SC 1137] has been held as ―to possess to have or hold as property“. Justice R.P. Sethi’s Supreme Court on Words and Phrases (1950-2021), 3rd edition at page 1019 thereof states-
“Under the common law owner means a person who has got valid title legally conveyed to him after complying with the requirements of law In nutshell the ownership rights can be construed upon a person who has the right to possess, use and enjoy the thing owned, and a right to consume, destroy or alienate it, which may be indeterminate in duration and residuary in character.
28. Viewed within the perimeter of the term “owner”/”ownership” of the imported vehicle, and the factual assertions as presented in the matter, there is no doubt that the appellant is the owner of the said vehicle both de jure as well as de facto, amply demonstrated among others by the fact of registration of the vehicle in his name with RTO, Surat.
29. The learned adjudicating authority has further analysed the evidence collected during investigations to point out that Dipesh Shah was in fact, the owner of the vehicle, going by various other piece of evidence like the awareness and knowledge of the market deals, the fact that the appellant chose not to return the vehicle back, despite the alleged dispute with the said importer. The learned authority has clearly taken note of the wordings of the statute made use of in section 125(1) while allowing redemption to the appellant. Section 125(2) automatically fastens the duty liability on the appellant. The question of having not completed and honoured the stated deal, if any, as was said to be made out between the alleged importer Shri Basab Pal and the appellant, in the absence of any formal written agreement on record, is of no significance in the matter. In view of the stated premise, we are of the view that there is nothing wrong in the order in appeal passed by the learned Commissioner(Appeals), whereby the Commissioner(Appeals) had remanded the matter to the lower authority for a denovo adjudication and the challenge thereto thus fails. An express finding concerning, what has been admittedly conceded by the appellant, claiming himself to be a “bonafide purchaser” aka the “owner” of the seized vehicle, redeemed by the appellant, therefore largely relegates itself to an academic one. Further, it is an accepted principle in law that a case for redemption would not arise in the absence of ownership claim of the goods – refer Keshav Kumar v. Commissioner of Customs [2002 (141) E.L.T. 383 (T)]. The redemption provisions, in the statute cannot be read only halfway through to adopt what‟s beneficial for the appellant and leave out the rest. A provision in law is to be read in its entirety to effectuate it and give it a wholesome meaning. Sub-clauses (1) and (2) of Section 125 of the Customs Act are inextricably and intricately woven into, to give the provision its completeness of meaning and impact. Upon redemption the provisions of Section 28 of the Act ibid, are however not required to come into play and in view of the matter it cannot be used as a shield to make out a case of non-payment of duty as the two provisions operate and act in different streams and circumstances and are independent of one another.
30. Furthermore, it would be imperative to add here the following in order to expound the judicial construct of the legality of the issue as made out in appeal. It is a fact on record that the appellant in their appeal posed no challenge to the aspect of fraudulent import by misdeclaration and forging of certain vital documents, tendered at the time of import, nor have they challenged the seizure and/or confiscation of the said vehicle or even its provisional release or the final redemption. The only challenge is with regard to payment of differential duty by them, holding out that the appellant has not been an importer of the vehicle, but only a legitimate post import purchaser of the same. The fact that payment of duty as leviable is an obvious sequel to the fact of availemnt of redemption by the owner (in this case the appellant) the duty liability gets inextricably and automatically fastened onto the appellant, having exercised the option of availing the offer of redemption and having paid the arbitrated redemption fine. The hon‟ble apex court in the case of Commissioner of Customs (Import), Mumbai v. Jagdish Cancer & Research Centre [20101 (132) E.L.T. 257 (SC)] had inter alia stated –
“A reading of sub-sections (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under sub-section (2) in addition to the fine under subsection (1). Therefore, where an order is passed for payment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc. The order for payment of duty under Section 125(2) would be an integral part of proceedings relating to confiscation and consequential orders thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods was granted, without attracting the provisions of Section 28(1) of the Customs Act. [para 11]”
[Emphasis supplied]
31 . In fact the Larger Bench of the Tribunal in the case of Sumant Sood v. Commissioner of Customs, Chennai [2001 (134) E.L.T. 661 (T-LB) to a direct question referred to the Larger Bench for its consideration as to ―whether the owner of the goods or the person or whose possession or custody goods were seized is liable to pay duty leviable on goods ordered to be redeemed on payment of fine“, was answered in the affirmative. Further, even well before the aforesaid authoritative pronouncements in the matter, the division Bench of the Tribunal had also held on similar lines, Thus in the case of Sumant Sood v. Commissioner of Customs, Chennai [2001 (8) TMI 164 – CEGAT, COURT NO.I, NEW DELHI], the Tribunal on the impugned question in law had the following to state:
“8. Now we come to the question as to whether the Appellant is liable to pay duty on redemption of the car. We find ourselves unable to agree with the view taken by the West Zonal Bench in VXL India case. Relevant provisions of Section 28 are extracted below :-
xxxx
“SECTION 28. Notice for payment of duties, interest etc. – (1) When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, –
(a) in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year;
(b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice :“
As rightly submitted by the learned SDR Customs duty is an indirect tax levied on goods and not on person. The duty is to be paid in respect of goods, Section 28 nowhere provides that the duty short paid etc. is to be charged from ―importer” as contended by the learned Advocate appearing for the Appellant. Duty short-paid/levied, etc. can be demanded from any person chargeable with the duty. If ―person” is to be equated with importer, notice under Section 28 cannot be issued to a buyer whom erroneous refund has been made to. We also find that sub-section (2) of Section 125 of the Customs Act specifically provides as under :-
“(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 charge payable in respect of such goods.“
It is not the case of the Appellant that he is not the owner of the car. Further, even the person from whose possession or custody goods are seized has to suffer duty at the time of redemption of the confiscated vehicle. It is an option given to the owner of the confiscated vehicle which he has to exercise it. The provisions of sub-section (2) of Section 125 have not been qualified by the words that owner/person shall be liable to pay duty only in cases where ―the importer is not known.” We are of the view that once the owner of the confiscated goods exercises his option to redeem such goods, he has to suffer duty leviable thereon. Accordingly the Appellant has to pay duty payable in respect of the impugned car.“
32. It is however a different matter that in view of divergent views of two co-ordinate benches, the issue was therein referred to the Larger Bench for resolving the difference, outcome of which is referred to in para 31 supra.
33. A reading of sub-sections (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under sub-section (2) in addition to the fine under sub-section (1). Therefore, where an order is passed for imposition of fine in lieu of confiscation of goods, the payment of Customs duty shall only be referable to sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc. The requirement for payment of duty under Section 125(2) would be an integral part of proceedings, relating to confiscation and consequential orders thereon.
34. The apex court in Mohan Meakins Ltd. v. Commissioner of Central Excise, Kochi [2000 (115) E.L.T. 3 (S.C.) = (2000) 1 SCC 462)] observed in Para 6 :
“…….. Therefore, there is a mandatory requirement on the adjudicating officer before permitting the redemption of goods, firstly, to assess the market value of the goods and then to levy any duty or charge payable on such goods apart from the redemption fine that he intends to levy under sub-section (1) of that section.”
In this view of the matter the objection raised by the appellant that they not being importers are not bound by the rigors of Section 28 of the Customs Act is purely an extraneous question having no application to the facts of the present matter.
35. In the case of Gautam Diagnostic Centre v CC, Mumbai [2003 (159) E.L.T. 678 (Tri – Mum.)] in similar circumstances it was held by the Bench that ―if and when the goods are redeemed by the importer, duty in addition to the redemption fine will have to be paid as provided in sub section (2) of section 125‖ without attracting the provisions of Section 28.
36. In view of what is thus stated, it is obvious that law on this issue is well settled, if the option to redeem the goods is not exercised, the duty in addition to the fine so payable as per provisions of Section 125 cannot be demanded since on confiscation the property in the goods, if not redeemed, would continue to vest with the Government. However, having exercised the option of Section 125, there obviously is no excape from payment of duty and charges, as applicable.
37. In view of the aforesaid the appellant’s plea that they not being importers were not liable to pay any duty, as the same can only be demanded under section 28 of the Customs Act is required to be dismissed forthwith.
38. Further, the Hon’ble Bombay High Court in the case of Commissioner of Customs (Imp.) ACC, Sahar v. Wockhardt Hospital & Heart Institute [2006 (200) ELT 15 (Bom.)], in respect of goods confiscated with option to redeem goods on payment of redemption fine in lieu of confiscation under Section 125 (1) ibid had held that the Revenue was entitled to recover duty payable on such goods. It had further held that the fact of exercising of the said option or otherwise was irrelevant for the purpose [However this aspect of the order was later reversed by the apex court in Fortis Hospital case – 2015 (318) ELT 551(SC)]. In the said case it was categorically held that the owner of such goods (or the person referred in Section 125(1)) was liable to pay duty and charges thereon.
39. Yet another question that arises for consideration is the term “liable” and its meaningful expression as made use of in Section 125(2). In its judgement in Zunjarrao Bhikaji Nagarkar v. Union of India [1999 (112) E.L.T. 772 (S.C.)], the Hon’ble Supreme Court examined the meaning of the word “liable” in the context of section 11AC of the Central Excise Act, 1944 (―the person who is liable to pay duty as determined under sub-section (2) of section 11A shall also be liable to pay a penalty equal to the duty so determined:“) and Rule 173Q of the Central Excise Rules, 1944, (―then, all such goods shall be liable to confiscation and the manufacturer, producer, registered person of a warehouse or a registered dealer, as the case may be, shall be liable to a penalty.)“. The meaning as flows therefrom is similar to the context in this case. The Hon’ble Court held as under:-
“30. ………. Two principal issues arise for our consideration : (1) if levy of penalty under Rule 173Q was obligatory and (2) was there enough background material for the Central Government to form a prima facie opinion to proceed against the officer on the charge of misconduct on his failure to levy penalty under Rule 173Q. Appellant has contended that it is only now after insertion of Section 11AC in the Act that levy of penalty has become mandatory and that it was not so under Rule 173Q. This contention does not appear to be correct. In both Rule 173Q and Section 11AC the language is somewhat similar. Under Rule 173Q ―such goods shall be liable to confiscation” and the person concerned ―shall be liable to penalty” not exceeding three times the value of excisable goods or five thousand rupees whichever is greater. Under Section 11AC the person, who is liable to pay duty on the excisable goods as determined ―shall also be liable to pay penalty equal to the duty so determined“. What is the significance of the word “liable” used both in Rule 173Q and Section 11AC? Under Rule 173Q apart from confiscation of the goods the person concerned is liable to penalty. Under Section 11AC the word ―also” has been used but that does not appear to be quite material in Interpreting the word ―liable” and if liability to pay penalty has to be fixed by the adjudicating authority. The word ―liable” in the Concise Oxford Dictionary means, ―legally bound, subject to a tax or penalty, under an obligation“. In Black‘s Law Dictionary (sixth edition), the word ―liable” means, ―bound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution…………. Obligated; accountable for or chargeable with. Condition of being bound to respond because a wrong has occurred. Condition out of which a legal liability might arise……….. Justly or legally responsible or answerable“.
[Emphasis supplied]
31.When we examine Rule 173Q it does appear to us that apart from the offending goods which are liable to confiscation the person concerned with that shall be liable to penalty up to the amount specified in the Rule. It is difficult to accept the argument of the appellant that levy of penalty is discretionary. It is only the amount of penalty which is discretionary. Both things are necessary : (1) goods are liable to confiscation and (2)) person concerned is liable to penalty.
(emphasis added)“
40..It thus clearly flows that there is no discretion vested with the “owner”, having availed redemption, for not to pay duty and charges as due in terms of section 125 (2) in itself. Payment of duty, under the circumstances has no bearing with the provisions of Section 28 of the Customs Act, that would ordinarily seek to recover duties not levied/not paid/short levied or short paid etc. It also be noted that the word used in the statute is “shall”, making the factum of need to pay duty evidently binding and leaving no scope to read shall as “may” and thereby derive a leeway for the owner/redemnor of goods.
41. We are also not quite impressed with the argument of the Ld.Advocate for the appellants to state that Commissioner(Appeals) was shorn of any statutory power to remand the matter to the original authority imparting him certain directions in the matter. In this regard we invite reference to the provisions of section 128A of the Customs Act. Sub-section 3 thereof reads as :
SECTION 128A. Procedure in appeal. —
(1) XXXXXXX
(2) XXXXXXX
(3) The Commissioner(Appeals) shall after making such further inquiry as may be necessary, pass such order, as he thinks [just and proper, —
(a) confirming, modifying or annulling the decision or order appealed against; or
(b) referring the matter back to the adjudicating authority with directions for fresh adjudication or decision, as the case may be, in the following cases, namely :—
i. where an order or decision has been passed without following the principles of natural justice; or
ii. where no order or decision has been passed after re-assessment under section 17; or
iii. where an order of refund under section 27 has been issued by crediting the amount to Fund without recording any finding on the evidence produced by the applicant :]
Provided…………….
Provided……………..
(4) The order of the [Commissioner (Appeals)] disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.
(4A) XXXXX
(5) XXXXXX
In this connection while, it be noted that sub-section (b) of section 128A, qualifies the kind of cases where the law expressly provides for a reference back to the adjudicating authority for fresh adjudication, however we feel that the scope and amplitude of sub section (a) cannot be narrowly interpreted. With law permitting the Commissioner(Appeals) to pass such order as deemed “just and proper,” in itself would not prohibit passing of any direction or order directing a fresh adjudication by the adjudicating authority. Moreover, Clause (a) of sub section (3) section 128A vests in the Commissioner(Appeals), full powers to “modify” the decision or order appealed. No fetters are appended to limit this discretion. Thus the law has to be given its widest amplitude while considering the said aspect and cannot be interpreted restrictively. In terms of sub-section (4), thereof, the Commissioner(Appeals) is mandatorily required to state the “points for determination”, as could arise as a result of order passed by him.
41.1 In fact, asking adjudicating authority to adjudicate the matter afresh taking note of the “correct legal position” cannot be strictly said to be imparting certain directions. The adjudicating authority even otherwise is required to bear in mind the law and act in accordance with the legal stipulations when adjudicating the matter. Thus, this argument of the appellant holds no sway and deserves to be dismissed forthwith.
42. The apex court in the case of Union of India vs. Umesh Dhaimode [1998 (98) E.L.T. 584 (S.C.)] had categorically held that the appellate authority was vested with powers of remand, as remand necessarily entailed annulling the decision under appeal. Relevant para of the said decision is quoted hereunder :
“2. As the order under appeal itself notes, the aforesaid provision vested the appellate authority with powers to pass such order as it deemed fit confirming, modifying or annulling the decision appealed against. An order of remand necessarily annuls the decision which is under appeal before the appellate authority. The appellate authority is also invested with the power to pass such order as it deems fit. Both these portions of the aforesaid provision, read together, necessarily imply that the appellate authority has the power to set aside the decision which is under appeal before it and to remand the matter to the authority below for fresh decision.‖
In view of the law as expounded by the hon‟ble apex court, this Tribunal in the case of Commissioner of Cus. & C.Ex., Meerut-II vs. H.S.A. Chadha Exports [2014 (302) E.L.T. 244 (Tri-Del.)] upheld the order passed by Commissioner(Appeals), whereby he remanded the matter back to the adjudicating authority for a reexamination of the matter in the light of observations made in the order.
11. In view of our aforesaid discussions, we hold no legal infirmity in the impugned order passed by Commissioner(Appeals), which remands the case back to the original authority for a de novo adjudication in the matter. The order of Commissioner(Appeals) is therefore required to be upheld and maintained. We thus disallow and dismiss the appeal filed by the appellant.
(Order pronounced in the open court on 11.12.2024.)
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