2022 (9) TMI 1131 - AT - Customs

Valuation of imported goods - rejection of declared RSP - reassessment of Additional Duty of Customs on the imported goods as per the RSP in the loose labels found in the warehouse - recovery of differential duty, if the goods are confiscated and allowed to be redeemed but have not been redeemed - Confiscation of goods - penalty - HELD THAT - As per section 125 (2), if the goods are redeemed by the owner or the person from who they are seized, such person shall, in addition to the redemption fine, pay duty on the goods. Evidently, if they are not redeemed, payment of duty in addition to fine shall not apply. If the goods are not redeemed, on confiscation, the goods vest with the Central Government as per section 126 of the Act. If the importer does not clear the goods and for that reason the goods are sold by the custodian under section 48, the duty is to be recovered from the sale proceeds as per section 150 and not from the importer. This has also been made clear by the Board in the Customs Manual. Similarly, if the goods are confiscated absolutely or the option of redemption has not been exercised by the importer, in terms of section 150, such goods must be sold and the duty has to be recovered from the sale proceeds. Thus, goods which are confiscated and which are not allowed to be redeemed or which have not been redeemed vest in the Central Government and the officer adjudicating the case has to take their possession. Whether in the factual matrix of this case, the demand of differential duty and confiscation of the goods and imposition of penalties are sustainable? - HELD THAT - Undisputedly, the process prescribed under section 138B was not followed by the Commissioner with respect to the statements. Therefore, the statements are not relevant to this case on this ground alone. Further, the statements have also been retracted later. Thus, if the statements are removed, what is left are the loose labels found in the warehouse and the price lists found in the warehouse. There is nothing on record to show that the price labels were affixed to the imported goods and sold in the market or offered for sale in the market at the higher prices or that the price list was sent to the buyers or dealers - this is not sufficient evidence to hold that the RSP was mis-declared before the Customs and that the loose labels found in the warehouse reflect the true RSP. Consequently, the rejection of RSP, redetermination of duty, confiscation of the goods and imposition of penalties cannot be sustained. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Liability to pay differential duty if confiscated goods are not redeemed.
2. Justification of rejection of declared Retail Sale Price (RSP) and redetermination of additional duty based on loose labels and price lists found in the warehouse.
3. Sustainability of confiscation of goods under Section 111(d) & 111(m) of the Customs Act.
4. Validity of the imposition of penalties.

Issue-wise Detailed Analysis:

1. Liability to Pay Differential Duty if Confiscated Goods are Not Redeemed:
The Tribunal examined whether the importer is liable to pay differential duty on goods that were confiscated but not redeemed. According to Section 125(2) of the Customs Act, if the goods are redeemed, the owner must pay the duty in addition to the redemption fine. However, if the goods are not redeemed, they vest in the Central Government as per Section 126. The Tribunal emphasized that the charge of duty is on the goods, not on the importer. When the title to the goods moves to the Government, the liability to pay duty also moves along. This principle was supported by the Supreme Court judgment in *Fortis Hospital Limited vs. Commissioner of Customs, Import*, which clarified that duty becomes payable only if the option to pay a fine in lieu of confiscation is exercised. Therefore, the Tribunal concluded that if the confiscated goods are not redeemed, no duty is payable on them.

2. Justification of Rejection of Declared RSP and Redetermination of Additional Duty:
The Tribunal assessed whether the rejection of the declared RSP and redetermination of the additional duty based on loose labels and price lists found in the warehouse were justified. The basis for the rejection of the declared RSP included loose labels, a price list found in the warehouse, and statements made by the importer's officials. However, these statements were retracted, and the Commissioner did not follow the process prescribed under Section 138B, making the statements irrelevant. Without these statements, the evidence was insufficient to prove that the RSP was mis-declared. The Tribunal noted that there was no evidence that the price labels were affixed to the imported goods and sold at higher prices or that the price list was circulated in the market. Thus, the rejection of the declared RSP and the redetermination of duty were not sustainable.

3. Sustainability of Confiscation of Goods under Section 111(d) & 111(m):
The Tribunal evaluated whether the confiscation of goods under Section 111(d) & 111(m) was sustainable. Given that the rejection of the declared RSP and the redetermination of the additional duty were not justified, the basis for confiscation also fell apart. The Tribunal noted that the term "imported goods" as defined in Section 2(25) excludes goods cleared for home consumption. Since the goods were cleared for home consumption, they were no longer "imported goods" and hence could not be confiscated under Section 111. Consequently, the confiscation of goods was not sustainable.

4. Validity of the Imposition of Penalties:
The Tribunal considered the validity of the penalties imposed under Section 112 of the Customs Act. Since the rejection of the declared RSP, the redetermination of duty, and the confiscation of goods were not sustainable, the penalties imposed on the importer and its director also could not be upheld. The Tribunal concluded that the penalties were not justified and set them aside.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief to the appellants. The rejection of the declared RSP, redetermination of duty, confiscation of goods, and imposition of penalties were all found to be unsustainable. The Tribunal emphasized that if confiscated goods are not redeemed, the duty is not payable by the importer, aligning with the Supreme Court's interpretation in *Fortis Hospital Limited*.

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