2014 (8) TMI 696 - HC - Customs

Prohibited goods - redemption of confiscated goods - import of Car Radial Tyres - Whether the Tribunal has committed an error of law in accepting and upholding the clearance for home consumption allowed by the Commissioner (Appeal) of goods otherwise prohibited for clearance for home consumption in absence of valid BIS certificate with reference to the Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order, 2009, read with 2.2 of the Foreign Trade Policy and General Note 2A of the import policy regarding mandatory compliance with regard to BIS certification as per Schedule III to the import policy - Held that - Definition of the expression prohibited goods covers any goods where the import or export is subject to a prohibition under the Customs Act or any other law for the time being in force. However, the definition does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. Section 125 (1) of the Customs Act confers a discretion upon the Adjudicating Officer to allow an option for the payment of a redemption fine in lieu of confiscation where it is found that the importation or exportation is prohibited under the Customs Act - Commissioner (Appeals) has missed the central aspect of Section 125 of the Customs Act, which is the discretionary element in the exercise of jurisdiction under Section 125 of the Customs Act. Since the Commissioner (Appeals) proceeded to apply a misconceived test under Section 125 of the Customs Act and has failed to consider this aspect, we are of the view that the ends of justice would warrant that the proceedings be restored back to the file of the Commissioner (Appeals). We, accordingly, dispose of the appeal by restoring the proceedings back to the Commissioner (Appeals), who shall decide the appeal afresh after hearing the Assessee and the Department. Since, we are remanding the matter to the file of the Commissioner (Appeals) for a fresh decision on the basis of the view which we have taken, it is not necessary for the Court to answer the question of law as framed - Decided in favour of Revenue.

Issues Involved:
1. Whether the Tribunal erred in upholding the clearance for home consumption of goods without a valid BIS certificate.
2. Whether the Commissioner (Appeals) was justified in deleting the condition of re-export imposed by the Adjudicating Officer.
3. Interpretation and application of Section 125 of the Customs Act regarding the option to pay a fine in lieu of confiscation.
4. Whether the imported goods were of sub-standard quality and the implications of such a determination.

Issue-wise Detailed Analysis:

1. Tribunal's Error in Upholding Clearance for Home Consumption:
The central issue was whether the Tribunal committed an error of law by accepting and upholding the clearance for home consumption allowed by the Commissioner (Appeals) for goods otherwise prohibited for clearance due to the absence of a valid BIS certificate. The assessee had imported "New Passenger Car Radial Tyres" and filed a Bill of Entry on 5 June 2013. The goods were governed by the Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order, 2009. The Additional Commissioner noted that only a part of the consignment had a BIS certificate, which had expired, and the other goods were not covered by any BIS certification. Despite this, the Tribunal confirmed the Commissioner (Appeals)'s decision to allow redemption of the goods for home consumption on payment of a redemption fine, deleting the condition of re-export.

2. Justification of Deleting the Condition of Re-export:
The Commissioner (Appeals) held that it was harsh to impose a redemption fine of Rs. 8 lacs with a condition of re-export and deleted the re-export condition, allowing redemption on payment of an appropriate fine. This decision was challenged by the revenue, arguing that the goods were prohibited and that the Additional Commissioner had valid grounds for imposing the re-export condition, especially since the BIS certification was either expired or non-existent for most of the consignment. The Tribunal upheld the Commissioner (Appeals)'s decision, which was contested by the revenue on the grounds of public safety and compliance with mandatory BIS certification.

3. Interpretation and Application of Section 125 of the Customs Act:
Section 125 of the Customs Act confers discretion upon the Adjudicating Officer to grant an option to pay a fine in lieu of confiscation of prohibited goods. The Commissioner (Appeals) misinterpreted this discretion, believing that the assessee was entitled to redemption on payment of a fine. The Tribunal and Commissioner (Appeals) failed to consider the discretionary nature of Section 125 properly. The Delhi High Court's judgment in Commissioner of Customs and Central Excise Delhi-IV Versus Achiever International was misapplied, leading to the erroneous conclusion that the assessee was automatically entitled to redemption.

4. Determination of Sub-standard Quality of Imported Goods:
The Commissioner (Appeals) and the Tribunal did not adequately address whether the imported goods were of sub-standard quality. The Commissioner (Appeals) noted that some brands were renowned internationally and accompanied by a certificate of origin, concluding that the goods were not sub-standard. However, this reasoning was flawed as it did not segregate certified brands from non-certified ones and overlooked the importance of BIS certification for public safety. The Tribunal confirmed this reasoning without proper scrutiny.

Conclusion:
The High Court found that the Commissioner (Appeals) and the Tribunal erred in their interpretation and application of Section 125 of the Customs Act. The case was remanded to the Commissioner (Appeals) for a fresh decision, considering all relevant facts, including the discretionary element of Section 125 and the safety implications of importing goods without valid BIS certification. The Commissioner (Appeals) was directed to decide the matter expeditiously, preferably within one month, and to consider the new BIS certification obtained by the assessee. The writ petition was disposed of in light of the remand order.

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