2019 (8) TMI 1041 - HC - Customs

Compliance of obligation u/s 34 and 35 of the Customs Act - Dutiable or exempt goods - interpretation of statute - scope of NIL rate of Duty - whether the goods leviable at NIL rate of Duty also comes under the category of dutiable goods? - Confiscation of goods - imposition of penalty. Whether, goods leviable at NIL rate of duty comes within the definition of Dutiable goods under Section 2 (14) of the Customs Act, 1962? - HELD THAT - Any goods can be called Dutiable goods under Section 2 (14) of the Customs Act only when it is chargeable to duty and on which duty has not been paid and NIL rate of Duty does not come under the category of Dutiable goods . In the instant case imported goods i.e. Yellow Peas in question were exempted from Duty and not chargeable - decided in favor of respondent importer. Whether goods not chargeable to duty gets immunity from compliance of the statutory obligation under Section 34 and 35 of the Customs Act, 1962 and from penal action in consequences thereof under Section 111 and 112 of the said Act? - HELD THAT - Importing non dutiable goods does not give an importer a licence to violate or flout laws under the Customs Act or grant automatic exemption from complying statutory obligation under Section 34 35 or any other provisions of the Customs Act, 1962 and penal consequence in violation thereof. The action of condonation by the tribunal of the aforesaid violations by the importer by holding that it was procedural violation and secondly that imported goods in question were not chargeable to Duty and hence no contravention of Section 111 (h) of the said Act is not sustainable in law since the language of Section 34 of the Act is Imported goods shall not be loaded.. and in Section 35 of the Act is No imported goods shall be.. The legislator has not used the expression specifically Dutiable goods or Duty exempted goods . The view of the Tribunal that if no Duty is chargeable or exempted from Duty confiscation and penalty would not be justified is wholly incorrect and not legally sustainable in view of the facts and circumstances involve in this case. There was clear violation of Section 34 35 of the Customs Act and penal action under Section 111 and 112 of the Act is justified and the importer cannot take advantage of quoting wrongly Section 111 (h) of the Act by the adjudicating authority and escape penalty in the above admitted factual position. Appeal disposed off.

Summary

Issues Involved:
1. Whether goods leviable at 'NIL' rate of duty come within the definition of "Dutiable goods" under Section 2(14) of the Customs Act, 1962.
2. Whether goods not chargeable to duty get immunity from compliance with statutory obligations under Sections 34 and 35 of the Customs Act, 1962, and from penal action under Sections 111 and 112 of the said Act.

Issue-wise Detailed Analysis:

Issue 1: Definition of "Dutiable Goods"
The primary contention was whether goods with a 'NIL' rate of duty could be classified as "Dutiable goods" under Section 2(14) of the Customs Act, 1962. The Customs authorities argued that 'NIL' duty still constitutes a rate of duty, thus making such goods "Dutiable." They cited several precedents under the Central Excise Act to support their stance. However, the court referred to the Supreme Court's decision in the case of Associated Cement Companies Ltd. vs. Commissioner of Customs, which clarified that "dutiable goods" under Section 2(14) of the Customs Act are those chargeable to duty and on which duty has not been paid. The court concluded that goods exempted from duty or charged at 'NIL' rate do not fall under the category of "dutiable goods." Therefore, the imported Yellow Peas, being exempt from duty, were not "dutiable goods."

Issue 2: Compliance with Sections 34 and 35 of the Customs Act
The second issue was whether non-dutiable goods are exempt from compliance with statutory obligations under Sections 34 and 35 of the Customs Act, and whether violations of these sections could attract penal actions under Sections 111 and 112. The Tribunal had earlier condoned the procedural violations, citing that the goods were not "dutiable." However, the court emphasized that the language of Sections 34 and 35 does not distinguish between dutiable and non-dutiable goods. It mandates that all imported goods must be unloaded under the supervision of a proper officer and accompanied by a boat-note. The court held that the importer's failure to comply with these statutory obligations justified penal action under Sections 111 and 112, irrespective of the duty status of the goods. The court found the Tribunal's condonation of these violations unsustainable in law.

Conclusion:
The court set aside the Tribunal's order, holding that the violations of Sections 34 and 35 warranted penal action. However, considering the circumstances and the explanations provided by the appellants, the court deemed a penalty of ?50,000 on each appellant reasonable. The appeals were disposed of with no order as to costs.

Additional Observations:
The court noted that the misquotation of Section 111(h) instead of the appropriate subsections (a) or (d) did not vitiate the charge. The substance of the charge, which was the violation of Sections 34 and 35, was clear and sufficient to justify penal action. The court reduced the penalty, acknowledging that the goods were non-dutiable and their illegal importation did not cause any loss to the revenue.

Final Order:
The appeals were disposed of with a penalty of ?50,000 on each appellant, and there was no order as to costs.