2014 (6) TMI 159 - HC - Customs

Confiscation of goods - Claim of waiver from imposition of redemption fine - Bonafide conduct of parties - Held that - though the quantum of redemption fine would depend upon totality of the fact and circumstances of the case but merely because the importer acted in good faith will not entitle the importer to complete waiver of redemption fine. if the conduct of the importer was beneficial then no redemption fine is to be imposed for allowing redemption of confiscated goods. In the present facts, there is no dispute that the seized cut and polished diamonds are liable for confiscation. In view of the Jain Exports -II (1990 (1) TMI 73 - SUPREME COURT OF INDIA) decision, there can be no dispute that redemption fine is imposable on confiscated goods even if the conduct of the parties is bona fide. Once the goods are liable for confiscation, redemption fine was imposable. The petitioner before us sought to emphasize the bona fide conduct of its manager by pointing out that diamonds were being taken out to show to the Japanese buyer who was leaving the country next day. This excuse or reason for not recording the removal of diamonds in petitioner s record was found on facts by the Tribunal to be an after thought as it was not so mentioned by its manager when the diamonds were seized on 31 May 1990 at the gate of SEEPZ. In this case, the market value of the goods is ₹ 1.06 Crores. The benefit of which the petitioner would obtain by the illegal conduct of its Manager would have resulted in non-payment of excise duty which is equivalent to customs duty i.e. 60% ad-valorem. The petitioner being a limited company cannot act but through the human agency of its Directors, Manager and Workers. Therefore, the submissions of the petitioner that it cannot held liable for the acts of its Manager/employees is unacceptable. The confiscation of the diamonds and the redemption fine of ₹ 20 lacs on the confiscated diamond was reached taking into account the overall facts and appreciation of evidence on record. This finding is not shown to be arbitrary and/or perverse - no question of law arises so as to direct the Tribunal to send any case for our consideration - Decided against assessee.

Issues Involved:
1. Dutiability of cut and polished diamonds manufactured in SEPZ.
2. Invocation of Section 111(j) of the Customs Act for unauthorized actions of an employee.
3. Principles for determining fine in lieu of confiscation under Section 125 of the Customs Act.
4. Quantum of redemption fine imposed by the Tribunal.
5. Tribunal's authority to adjudicate on conduct not under appeal.
6. Imposition of redemption fine on the employer for the employee's actions.
7. Tribunal's consideration of the owner's bona fide conduct in determining redemption fine.

Issue-wise Detailed Analysis:

1. Dutiability of Cut and Polished Diamonds:
The petitioner questioned whether cut and polished diamonds manufactured in a SEPZ area are dutiable, referencing Entry No. 7101.10 of the Central Excise Tariff and Notification No. 247/76 dated 2 August 1976. The Tribunal dismissed this question, stating it did not arise from its order and therefore, no referable question of law was present.

2. Invocation of Section 111(j) for Unauthorized Employee Actions:
The petitioner challenged whether Section 111(j) could be invoked for unauthorized actions of an employee. The Tribunal rejected this question, asserting it did not arise from its prior order and thus, did not present a question of law.

3. Principles for Determining Fine in Lieu of Confiscation:
The petitioner sought clarity on the principles and discretion for determining fines under Section 125 of the Customs Act. The Tribunal dismissed this, considering it a question of fact rather than law.

4. Quantum of Redemption Fine:
The core issue was whether the Tribunal was justified in imposing a redemption fine of Rs. 20 lakhs on confiscated diamonds, despite not imposing any penalty on the petitioner. The Tribunal's order was based on the fact that the diamonds were seized while being removed unauthorizedly by the petitioner's manager from SEEPZ. The Tribunal allowed redemption of confiscated diamonds on payment of a fine, considering the market value of Rs. 1.06 crores and the overall conduct of the petitioner. The High Court found no arbitrariness or perversity in this finding and upheld the Tribunal's decision.

5. Tribunal's Authority to Adjudicate on Conduct Not Under Appeal:
The petitioner questioned the Tribunal's authority to adjudicate on the manager's conduct, which was not under appeal. The High Court noted that the Tribunal's findings were based on undisputed facts and the overall circumstances, thus within its jurisdiction.

6. Imposition of Redemption Fine on Employer:
The petitioner argued against the imposition of a heavy redemption fine on the employer for the employee's actions. The High Court dismissed this argument, emphasizing that the company acts through its employees and is liable for their actions.

7. Consideration of Owner's Bona Fide Conduct:
The petitioner contended that the Tribunal should have considered its bona fide conduct, as no penalty was imposed. The High Court referred to the Supreme Court's decision in Jain Exports (P.) Ltd. v. Union of India, which held that bona fide conduct does not exempt from redemption fine. The Tribunal's imposition of a fine was justified based on the facts and circumstances.

Conclusion:
The High Court concluded that no question of law arose from the Tribunal's order and dismissed the petition. The Tribunal's decision to impose a redemption fine of Rs. 20 lakhs was upheld, considering the overall facts and circumstances, including the bona fide conduct of the petitioner and the actions of its manager. The High Court found no reason to interfere with the Tribunal's order.

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