Case Law Details

Case Name : Commissioner of Customs Vs Oriental Trimex Ltd. (CESTAT Delhi)
Appeal Number : Customs Miscellaneous Application No. 50665 of 2019 and 50732 of 2019 in Customs Appeal No. 51487 of 2019
Date of Judgement/Order : 13/03/2020
Related Assessment Year :
Courts : All CESTAT (1011) CESTAT Delhi (324)

Commissioner of Customs Vs Oriental Trimex Ltd. (CESTAT Delhi)

If the confiscated goods allowed to redeemed on a redemption fine then the sale proceeds will be paid only after deduction of such fine

In the given case the importer appellant is engaged in the business of import of marble from various countries into India and the goods in question are covered under the category of restricted goods in terms of provisions of Exim Policy and a license is required for valid importation of these goods as per DGFT Policy Circular No. 37 (RE-08) 2004-2009 dated 31/10/2008. The importer – appellant appeared to have not cleared the imported goods namely marble blocks classifiable under heading No. 2515 valued at Rs. 59,07,768/- even after expiry of the period of 30 days as stipulated under Section 48 of the Customs Act, 1962. Accordingly, seven Show Cause Notices having different dates were issued to the importer – appellant as well as to any other person making any claim on the goods. During the course of personal hearing the importer claimed that as they were facing acute financial crisis, a request was made for granting time till 31/10/2012 for taking clearance of the goods. The Adjudicating authority vide order-in-original dated 26/11/2012 ordered for confiscation of the impugned goods in 16 containers under Section 111(d) of the Customs Act, 1962 with an option to redeem the goods on payment of redemption fine of Rs. 20,00,000/- under Section 125 of the Customs Act, 1962 and imposed a penalty of Rs. 10,00,000/- under Section 112 of the Customs Act, 1962 on the importer feeling aggrieved, the importer filed an appeal before the Commissioner (Appeals).

Thus after carefully examining the rival arguments, though CESTAT are of the considered view that once confiscation of the goods is held to be valid in any proceedings, the property in the goods is vested in the Government and the sale proceeds being the total consideration of such property, as a natural corollary such sale proceeds will represent the confiscated goods. Once the confiscated goods allowed to the redeemed on a redemption fine, the sale proceeds which represent the goods, will be paid to the importer only after deduction of such fine. Thus, the redemption fine is to be charged from the importer while releasing the goods, the same also needs to be recovered from the sale proceeds which represent the consideration of the property.

However, in view of the contradicting decisions on the matter at hand by the benches of the Tribunal, CESTAT refer the matter to Larger Bench on the issue “whether the redemption fine and penalty, if any, imposed in the adjudication order needs to be recovered from the sale proceeds, if the confiscated goods are sold/disposed of by auction during the pendency of appeal”.

The miscellaneous applications are disposed off in above terms and the main appeal is referred to the Larger Bench for consideration.

FULL TEXT OF THE CESTAT JUDGEMENT

The importer – appellant is engaged in the business of import of marble from various countries into India and the goods in question are covered under the category of restricted goods in terms of provisions of Exim Policy and a license is required for valid importation of these goods as per DGFT Policy Circular No. 37 (RE-08) 2004-2009 dated 31/10/2008. The importer – appellant appeared to have not cleared the imported goods namely marble blocks classifiable under heading No. 2515 valued at Rs. 59,07,768/- even after expiry of the period of 30 days as stipulated under Section 48 of the Customs Act, 1962. Accordingly, seven Show Cause Notices having different dates were issued to the importer – appellant as well as to any other person making any claim on the goods. During the course of personal hearing the importer claimed that as they were facing acute financial crisis, a request was made for granting time till 31/10/2012 for taking clearance of the goods. The Adjudicating authority vide order-in-original dated 26/11/2012 ordered for confiscation of the impugned goods in 16 containers under Section 111(d) of the Customs Act, 1962 with an option to redeem the goods on payment of redemption fine of Rs. 20,00,000/- under Section 125 of the Customs Act, 1962 and imposed a penalty of Rs. 10,00,000/- under Section 112 of the Customs Act, 1962 on the importer feeling aggrieved, the importer filed an appeal before the Commissioner (Appeals). However, during the pendency of the appeal the goods were got auctioned by the department. The Commissioner (Appeals) held that the imported goods required an import licence as same are in the category of restricted goods, in terms of EXIM policy at the relevant time of import. Since, the importer – appellant failed to furnish a valid import licence the Commissioner (Appeals) held that the goods were liable for confiscation under Section 111(d) of the Customs Act. As it is a matter of fact that the subject consignment of imported marble required a specific import licence for its valid importation as per the provisions of import – export policy and the importer – appellant failed to produce such specific licence for valid importation. The order of confiscation of the imported goods cannot be faulted with. The redemption fine and penalty were imposed in view of the facts and circumstances of the present case. However, as the imported goods had already been disposed of by the Department during the pendency of appeal and without waiting for outcome of the appeal/ legal remedies by the owner of the goods, as such the goods are no longer available and thus the same cannot be redeemed by the importer-importer on payment of fine. Consequently, there is no question of payment of redemption fine as well as Customs duties when goods cannot be released for home consumption. Therefore, the importer will be entitled to receive the part of sale proceeds received by the Customs at the time of auction of the imported goods, subject to the Rules and regulation in this regard and thus, importer has a valid claim from the Department on the sale proceeds of the auctioned goods. The penalty imposed to the extent of Rs, 10,00,000/- is legally valid as goods were liable for confiscation and penalty imposable. Accordingly, the Commissioner (Appeals) set aside the order of payment of redemption fine of Rs. 20,00,000/- and also held that the penalty imposed to the extent of Rs. 10,00,000/- may be deducted out of the sale proceeds and the importer be paid back the sale proceeds as due. The relevant operating portion of the impugned order-in-appeal is reproduced as under :-

“I find that the appellant had not exercised their option of payment of RF and redeeming the goods after the outcome of the appeal before the Commissioner of Customs (Appeals), New Delhi and therefore, they cannot be compelled to pay the RF when they have no option left with them to redeem the goods. The redemption fine was required to be paid when the goods are redeemed by the importer but in this case, the goods have been confiscated and auctioned by the Department; there was no question of charging redemption fine from the importers.”

2. Now the revenue is in appeal before us on the ground that Commissioner (Appeals) has clearly erred in holding that there is no question of payment of redemption fine while he has upheld the confiscation of the imported goods. The ground that the imported goods have already been disposed off during the pendency of appeal has no relevance to the payment of Redemption Fine. The seized goods are disposed off as per the disposal process and many a times pre-trial disposal can also be undertaken. In this process, the sale proceed replaces the goods, which can be retained in full in case of absolute confiscation or in part upto the amount of redemption fine if the goods are allowed to be redeemed on payment of redemption fine. At the time of disposal of goods, even if it is during the process of appeal, the legal obligation of payment of Redemption fine, Customs duties and other charges, as per Section 125 of the Customs Act, 1962, on the importer cannot be waived. Thus, non-availability of goods at the time of order-in-appeal cannot be a valid ground for setting aside the payment of Redemption fine and Customs duty leviable on the goods.

3. During the course of arguments, the learned Departmental Representative on behalf of the revenue has placed reliance on this Tribunal’s decision in the case of Collector of Customs & Central Excise, Chandigarh Versus Essma Woolen Mills (P) Ltd. [1994 (74) E.L.T. 0588 (Tribunal)]. The relevant extract from the order is reproduced below :-

“4. I have considered the submissions made by both the sides and gone through the circumstances of the case. Merely because respondent did not exercise the option to redeem the goods within the stipulated period in order-in-original would not mean that they have abandoned their claim on goods particularly when it has come out that they had, in the meantime, filed the appeal to Collector (Appeals) against this order. In appeal memo the Revenue have submitted that appeal filed by the respondents should have been rejected in view of the fact that it was incumbent upon the respondent to intimate the department that it had gone in appeal and the option to redeem the goods was not being exercised till the disposal of the appeal. Merely because the respondents did not intimate the fact of going into appeal in regard to the goods confiscated would not have the effect of vesting these goods in the Govt., particularly when the order of the Asstt. Collector was subject matter of the appeal. It is held by the Tribunal in the case of Collector (Customs) Madras v. Shri T.D. Adiyapatham- 1988 (33) E.L.T. 514 that if the confiscated goods have been disposed of during pendency of the appeal, the Department is liable for payment of sale proceeds after deducting the amount of redemption fine. I do not find any merit in the contentions that sale proceeds of the goods should be vested with the Government. In fact the respondent had a right to receive the goods after paying the redemption fine and penalty as adjudged by the Collector (Appeals). Having been deprived of that right, they could not be subjected to further burden by way of deprivation even of sale proceeds of these goods. Once they pay redemption fine and penalty as adjudged in appeal, they are justified in claiming the sale proceeds of the goods sold through auction”.

4. Accordingly, learned Departmental Representative has claimed that the redemption fine has to be deducted alongwith the penalty for remitting the sale proceeds to the respondent.

5. However, per Contra the learned Counsel appearing on behalf of the respondent has argued that once the goods are not available for redemption, the redemption fine cannot be deducted from the sale proceeds. He has placed reliance on the Tribunal’s order in their own case reported at 2017 (358) E.L.T. 1113 (Tri.-Del.) wherein the Hon’ble Bench has observed as under :-

“5. The goods imported are “Rough Marble Blocks” which require an import license. They are in the category of restricted goods, in terms of EXIM policy at the time of import. Since, the importer failed to submit a valid import license, the goods are liable for confiscation under Section 111(d) of the Customs Act. In view of the above, order of confiscation of the imported goods cannot be faulted. The redemption fine and penalty imposed are considered reasonable, keeping in view the facts and circumstances of the present case.

6. It is noted that the imported goods have already been disposed of by Customs Authorities since the importer has failed to clear the same within a reasonable period of time. Since, the goods are no longer available, the same cannot also be redeemed by the appellant-importer. Consequently, there is no question of payment of redemption fine as well as Customs duties. However, the importer will be entitled to receive the part of sale proceed received by the Customs at the time of auction of imported goods, subject to the Rules and regulation in this regard. The same may be claimed from the Customs authority. The penalty imposed to the extent of Rs. 1,50,000/- may be deducted out of the sale proceeds”.

6. On being asked from the revenue whether the department has challenged the above said order in the case of the respondents, Learned DR has deposed that the order was not challenged due to low monetary effect as per Revenue Policy.

7. Thus after carefully examining the rival arguments, though we are of the considered view that once confiscation of the goods is held to be valid in any proceedings, the property in the goods is vested in the Government and the sale proceeds being the total consideration of such property, as a natural corollary such sale proceeds will represent the confiscated goods. Once the confiscated goods allowed to the redeemed on a redemption fine, the sale proceeds which represent the goods, will be paid to the importer only after deduction of such fine. Thus, the redemption fine is to be charged from the importer while releasing the goods, the same also needs to be recovered from the sale proceeds which represent the consideration of the property. However, in view of the contradicting decisions on the matter at hand by the benches of the Tribunal, we refer the matter to Larger Bench on the issue “whether the redemption fine and penalty, if any, imposed in the adjudication order needs to be recovered from the sale proceeds, if the confiscated goods are sold/disposed of by auction during the pendency of appeal”.

8. The miscellaneous applications are disposed off in above terms and the main appeal is referred to the Larger Bench for consideration.

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