2011 (5) TMI 393 - AT - Customs

Application for Rectification of mistake - the ground that the order directing release of gold on fine and penalty was not at all possible at that stage, as the gold has been disposed of. The prayer therefore, is for direction to return the sale proceeds of the gold after realization of duty, fine and penalty - held that - there is no error apparent on record of Tribunal s Final Order which has only reduced the penalty on him. - the claim of the respondents that they should be given back the entire sale proceeds without deducting the duty amount is unreasonable, contrary to the specific provisions of Section 125(2) of the Customs Act, 1962 as well as the scheme of Customs Law which requires duty to be recovered for all imported goods taken for domestic consumption. - Application rejected

Issues Involved:

1. Rectification of Mistake (ROM) application by the Revenue.
2. Deduction of duty from the sale proceeds of disposed gold.
3. Applicability of Section 125(2) of the Customs Act, 1962.
4. Precedent decisions and their relevance.
5. Specific provisions of the Customs Act, 1962.

Detailed Analysis:

1. Rectification of Mistake (ROM) Application by the Revenue:

The Revenue filed an application for the Rectification of Mistake apparent on record, arguing that the order directing the release of gold on fine and penalty was not feasible as the gold had already been disposed of. The prayer was for the return of the sale proceeds of the gold after the realization of duty, fine, and penalty. The Tribunal granted the Revenue's prayer, directing the return of the balance sale proceeds of the disposed gold after the realization of the duty amount payable thereon, together with fine and penalty imposed. The application against Shri Abdul Malik was dismissed as there was no error apparent on record regarding the reduction of his penalty.

2. Deduction of Duty from the Sale Proceeds of Disposed Gold:

The Tribunal noted that the operation of the Hon'ble Bombay High Court judgment in the case of Shabir Ahmed Abdul Rehman v. UOI had been stayed by the Hon'ble Supreme Court, and therefore, it was not required to be followed. Instead, the Tribunal relied on its own decisions in the cases of Shri K.N. Thiyagarajan and K. Balulchamy, which directed the return of the balance amount of sale proceeds after the realization of fine, penalty, and duty. Section 125(2) of the Customs Act, 1962, was cited to support this position.

3. Applicability of Section 125(2) of the Customs Act, 1962:

Section 125(2) of the Customs Act, 1962, clearly states that when a fine in lieu of confiscation is imposed, the owner or the person from whose custody the goods were seized is liable to pay the duty in addition to the fine. The Tribunal emphasized that the Customs Law requires duty to be collected on all goods entering the domestic territory of India, whether cleared for home consumption, left uncleared, or confiscated and sold. The sale price of imported goods includes the duty element, and the duty must be deducted from the sale proceeds before any balance is returned to the owner.

4. Precedent Decisions and Their Relevance:

The Tribunal referred to several precedent decisions to support its ruling. The Hon'ble Bombay High Court in the cases of Wockhardt Hospital & Heart Institute and Bombay Hospital Trust held that duty is recoverable on confiscated goods irrespective of whether the option to redeem is exercised. The Poona Health Services case further reinforced that duty is payable even if the goods are not redeemed and that the fine is distinct from the duty. The Tribunal rejected the decision in Shabir Ahmed Abdul Rehman as it was stayed by the Supreme Court and rendered per incuriam, not considering earlier precedent decisions.

5. Specific Provisions of the Customs Act, 1962:

The Tribunal detailed the provisions of the Customs Act, 1962, particularly Section 12 (levy of customs duty), Section 21 (treatment of derelict goods), Section 47 (clearance for home consumption), Section 22 (abatement of duty on damaged goods), Section 23 (remission of duty on lost goods), and Section 25 (exemption from duty). It was concluded that the scheme of the Customs Law requires duty to be collected on all imported goods entering domestic consumption. Section 150(2) specifies the allocation of sale proceeds, prioritizing the payment of duty before any balance is returned to the owner. The Tribunal emphasized that refunding the duty portion from the sale proceeds would result in unjust enrichment of the respondents as they neither paid nor bore the duty.

Conclusion:

The Tribunal concluded that the respondents' claim for the return of the entire sale proceeds without deducting the duty amount was unreasonable and contrary to the specific provisions of Section 125(2) of the Customs Act, 1962. The applications were disposed of accordingly, upholding the requirement to deduct duty from the sale proceeds of confiscated goods before returning any balance to the owner.

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