2018 (8) TMI 1609 - HC - Customs

Scope of SCN - recovery of Customs Duty - Whether the revenue is entitled to recover the customs duty under Section 125(2) of the Customs Act on the goods which are confiscated under Section 111(d) and allowed redemption under Section 125(1) of the said Act, even when no specific demand is made in the show cause notice? Held that - The provision relied upon, i.e. Section 125(2), no doubt, is in mandatory terms and suggests that when the duty is payable by the concerned party or importer, the quantum of the duty, even on a tentative basis should necessarily be spelt out in the show cause notice, which is essential under Section 124 of the Act. The authority could not as is sought to be canvassed, be read in a wide manner as is proposed. The Adjudicating Officer, who issues a show cause notice is in-charge of the goods seized or otherwise pending clearance. He has the opportunity to tentatively assess the value and also indicate the duty payable - Nevertheless, it broadly outlines the amount meant to be short levy or non levy and the same would have to be spelt out in the notice under Section 124. If that primary obligation, which lies with the State Official is not discharged, it cannot be contended at a later stage that the importer was under an obligation to pay the relevant duty - which was never assessed in the first instance. Appeal dismissed - decided against Revenue.

Summary

Issues:
Whether customs duty can be recovered under Section 125(2) of the Customs Act on confiscated goods allowed redemption under Section 125(1) without a specific demand in the show cause notice.

Analysis:
The case involved the seizure of imported computer components from the respondent, with a show cause notice proposing confiscation of goods and an option to redeem them upon payment of a fine. The Revenue appealed to CESTAT, claiming duty recovery was implicit in Section 125. The Tribunal, citing previous judgments, emphasized the necessity for a show cause notice to propose duty levy to grant a defense opportunity. It concluded that duty recovery cannot be demanded without a notice specifying the duty amount. The Revenue argued that Section 125(2) mandates duty payment upon redemption, relying on the Jagdish Cancer and Research Centre case. However, the Court held that the duty amount must be tentatively assessed and stated in the show cause notice under Section 124 to bind the importer, emphasizing the State Official's obligation to discharge this duty. Consequently, the Court dismissed the appeal, ruling against the Revenue.

This judgment clarifies the importance of a show cause notice proposing duty levy for confiscated goods under Section 125 of the Customs Act. It highlights the necessity for the duty amount to be tentatively assessed and specified in the notice to bind the importer. The Court emphasized the State Official's obligation to discharge this duty, ensuring fair assessment and clarity for the importer. The ruling protects importers from arbitrary duty demands and upholds procedural fairness in customs duty recovery cases.

Overall, the judgment underscores the significance of procedural fairness and clarity in duty recovery cases under the Customs Act. It establishes that duty recovery cannot be demanded without a specific duty proposal in the show cause notice, safeguarding importers from arbitrary duty assessments. The decision ensures that importers are informed of their duty obligations upfront, promoting transparency and fairness in customs proceedings.