The Supreme Court ruled that there is a liability to Pay Customs Duty in addition to fine paid to redeem confiscated goods.
Regarding the first issue that whether there is a liability to pay customs duty when confiscated goods are redeemed after payment of fine under Section 125 of the Act, the court observed that the uncertainty about the liability to impose and collect duties in confiscation proceedings was resolved in 1976 by a decision of this court in Union of India v. M/s Security and Finance (P) Ltd.10 while interpreting identical provisions, as they stood under the Sea Customs Act, 1878. In this case, the court was dealing with confiscation of goods that were imported without a proper license which was and is prohibited by law.
The Court stated that it allowed the appeal of the Custom Departments by drawing a distinction between the power to impose
or recover duty under Section 20 (Section 12/28 of our Act) on one hand, and the power to impose penalty and/or fine under Section 183 (Section 125 of our Act). The Court held that they are distinct and operate independently.
“Thus, the owner of goods has a liability to pay customs duty, even after confiscated goods are redeemed after payment of fine and other charges under Section 125 of the Act. This is the first principle,” the court stated.
The bench thus concluded that the second principle that, when confiscation proceedings are initiated under Section 124 of the Act, the obligation to pay duty and other charges under Section 125(2) will arise only when the owner of goods exercises the option to pay fine for redemption of goods and the Department accepting it.
Regarding the second issue that What is the true and correct ratio of the decision in Jagdish Cancer case, the Court concluded by holding that Jagdish Cancer case is not an authority for the proposition that when the liability to pay customs duty has occasioned under Section 125, the calculation, determination or the assessment of such duty cannot be made under Section 28.
Regarding the third issue that whether the liability to pay such duty will include the liability to pay interest on delayed payment under section 28AB of the Act, the court stated that The text of Section 125(2) clearly provides that, where any fine in lieu of confiscation of goods is imposed under sub-Section (1), the owner of such goods shall be ‘liable to any duty and charges payable with respect to such goods’.
The court observed that the sub-section provides that the liability to any duty and charges, that are payable, shall be paid in addition to the fine.
The bench added that once Section 28 applies for determination of duty obligation arising under Section 125(2), the interest on delayed payment of duty arises under Section 28AB. The said provision obligates payment of interest in addition to the duty.
The bench held that that the interest liability under Section 28 AB is also attracted.
Issue Framed
i) Whether there is a liability to pay customs duty when confiscated goods are redeemed after payment of fine under Section 125 of the Act?
ii) Whether, the liability to pay such duty will include the liability to pay interest on delayed payment under Section 28AB of the
Act?
iii) What is the true and correct ratio of the decision in Jagdish Cancer case?
Facts of the Case
Between 30.11.2003 to 18.04.2007, the appellant availed the benefit of exemption from payment of customs duty under a notification dated 01.03.2002, as per which certain self-propelled hydraulic piling rigs were to be utilised exclusively for the construction of roads, bridges etc. for NHAI and PWD. When investigations revealed that the appellant has violated the import conditions, even before a show-cause notice was issued, the appellant deposited Rs.16,29,22,282/- and interest of Rs. 1,84,39,696 between May, 2007 to August, 2007. Thereafter, a show-cause notice was issued on 23.01.2008 proposing confiscation under Section 111(o) with respect to goods that were valued at Rs. 48.55 crores involving duty liability of Rs. 17,37,57,039/- under Section 28, interest under Section 28AB and penalties under Sections 112(a) and (b) and 114A of the Act.
The appellant filed an application under Section 127B of the Act before the Settlement Commission claiming that it has not violated any condition of the notification dated 01.03.2002 and further claimed that in order to avoid prolonged litigation, they had accepted the liability subject to further adjustments as may be approved by the Settlement Commission. The appellant also asserted that the claim for interest under Section 28AB is impermissible as the proceedings were initiated with show cause notice under Section 124 and not under Section 28.
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CASE INFORMATION
Case Name : M/S NAVAYUGA ENGINEERING CO. LTD. v/s UNION OF INDIA & ANR.
Judicial Level & Location : Supreme Court
Appeal Number : CIVIL APPEAL NO. 1024 OF 2014
Date of Ruling : 23/07/2024
Judges : Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar
Counsel for Appellant: Ms. Charanya Lakshmikumaran
Counsel for Department : Mr. V C Bharathi