2023 (7) TMI 1192 - AT - Customs

Absolute Confiscation of imported goods - Arecanut - prohibited goods or not - option to be given to the importer to redeem the goods on payment of fine in lieu of confiscation or not - HELD THAT - Admittedly, in terms of extant Trade Policy and related notifications referred in the show cause notice and Orderin- Original, the goods covered by both the bill of entries were not meeting the criteria of MIP and therefore were in the nature of prohibited goods. However, there were certain exemptions available from the applicability of the policy restrictions in the case of imports by, interalia, 100% EOU. The appellants are EOU is not disputed. It is also not disputed that good was not meant for sale in DTA. It is, however, obvious that while there was a clear revised policy notification for pepper, the Government, however, had not issued any such notification in respect of Arecanut. The notification issued in 2023 has now exempted the applicability of MIP for Arecanut also, if the imports are for EOU. However, there is no indication contained in notification that the said policy change would be having any retrospective effect. The Adjudicating Authority has rightly held that on the date on which the imports were made, the goods were clearly in the prohibited category for having not met the MIP criteria and hence liable for confiscation. It is well settled law that the goods can be confiscated under Section 111(d) of the Customs Act if it is prohibited under Customs Act or any other law for the time being in force - in view of clear position stated in the EXIM policy, as pointed out by the Learned DR, any policy change has to be given prospective effect only and therefore the exemption from MIP criteria for 100% EOU in respect of Arecanut cannot be extended till the time the revised notification was issued on 14.02.2023. There is no ambiguity in the wordings of notification and therefore there is no need to look for intent or interprete the notification. Absolute confiscation of their goods - HELD THAT - The power of Adjudicating Authority to confiscate the goods liable for confiscation is governed by Section 125 of Customs Act. It also gives a discretionary power to give importer an option to redeem the goods on payment of fine in lieu of confiscation. While this option is mandatory for other goods , there is a discretion for giving this option in the case of goods deemed to be prohibited under this Act or under any other law for the time being in force. Therefore, though the authority has a right to refuse this option, it has to be exercised having regard to facts and circumstances and is not an absolute power for not giving the option. There are catena of judgments in support that even in respect of prohibited goods, the options to pay fine in lieu of confiscation, can be given by the Adjudicating Authority. Power for giving option to importers to pay fine in lieu of confiscation or otherwise - HELD THAT - The issue relating to power for giving option to importers to pay fine in lieu of confiscation or otherwise came up before Hon ble Supreme Court in the case of UNION OF INDIA (UOI) AND ORS. VERSUS RAJ GROW IMPEX LLP AND ORS. 2021 (6) TMI 778 - SUPREME COURT has held that an authority acting under the Customs Act, when exercising discretion conferred by Section 125 thereof, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The purpose behind leaving such discretion with the Adjudicating Authority in relation to prohibited goods is, obviously, to ensure that all the pros and cons shall be weighed before taking a final decision for release or absolute confiscation of goods. Therefore, it is apparent Hon ble Supreme Court while upholding the decision of the Appellate Authority for not giving the option for redemption in the given set of facts, also observed that this discretion is not an absolute discretion and the Adjudicating Authority has to taken into consideration various pros and cons and other relevant factors to arrive at his decision. Whether in the given facts of the case, the goods were liable for absolute confiscation or the Adjudicating Authority should have given an option to the importer to redeem the goods on payment of fine in lieu of confiscation, as provided in the Section 125 of the Customs Act? - HELD THAT - There are several mitigating factors which prove that under the given facts, the Adjudicating Authority should have given the option. Firstly, this is an import by 100% EOU for conversion and re-export back to the principal from where the Arecanut was received. Secondly, Commissioner has himself held in para 68 of his order that this is not a case of mis-declaration or misclassification and it is also not a case of deliberate attempt on the part of importer to circumvent the policy provisions. Thirdly, the importer had a bona fied belief that MIP conditions were not applicable to them in view of similar goods having the same exemptions. The fact that they approached the Ministry of Commerce, who agreed with their submissions and requested the DGFT to issue clarification also relevant. It is a different matter altogether that the DGFT did not issue any clarification/notification till 14.03.2023, which has however been held to have prospective effect only. While the tariff value is fixed in terms of Section 2(40) and Section 14(2) of the Customs Act by way of notification in the Official Gazette and such tariff value becomes the basis for charging duty, whereas the MIP is value which is determined by the DGFT for the purpose of imposing certain provision/restriction on import of goods. Therefore, these two cannot be used interchangeably. In this case, admittedly the goods were for job work by EOU on a free of cost basis and therefore a notional value was indicated. Thus, in view of relevant fats discussed, the penalty imposed appears to be excessive. The penalty therefore, is reduced to Rs. 2,00,000/- from Rs. 10,00,000/-. The Original Authority is directed to give an option to appellant to redeem the goods on payment of fine in lieu of confiscation. The amount of fine shall be reasonable and appropriate, having regards to mitigating factors discussed and to be determined as per provisions under Section 125 of Customs Act - the order of the Commissioner is modified to the extent and the order is remanded back to the Original Adjudicating Authority for giving the option to the appellants for redemption of goods on payment of fine for re-export purpose only, subject to stipulated conditions, if any, indicated in the order. Appeal allowed in part.

Summary

Issues Involved:
1. Whether the imported Arecanut was "prohibited goods" and liable for confiscation.
2. Whether the Adjudicating Authority erred in not providing an option to redeem the goods on payment of fine in lieu of confiscation.
3. Appropriateness of the penalty imposed on the appellant.

Summary of Judgment:

Issue 1: Prohibited Goods and Confiscation
The appellant imported Arecanut with declared assessable value and claimed exemption under Notification No. 52/2003(EOU). The Department argued that the imports were below the "Minimum Import Price" (MIP) and thus treated as "prohibited" items under Section 111(d) of the Customs Act. The Original Adjudicating Authority ordered absolute confiscation of the Arecanut and imposed a penalty of Rs. 10 lakhs. The Tribunal upheld the confiscation, noting that the goods did not meet the MIP criteria and were therefore prohibited at the time of import.

Issue 2: Option to Redeem Goods on Payment of Fine
The appellants argued that the subsequent Notification No. 57/2015-2020, which exempted Arecanut from MIP for EOUs, should apply retrospectively. The Tribunal noted that the notification did not have retrospective effect and upheld the confiscation. However, it found that the Adjudicating Authority erred in not exercising discretion under Section 125 of the Customs Act to allow the appellant to redeem the goods on payment of a fine. The Tribunal emphasized that the discretion should be exercised judiciously, considering the facts and circumstances, and noted several mitigating factors, including the appellant's bona fide belief and the non-commercial nature of the import.

Issue 3: Appropriateness of Penalty
The Tribunal found the penalty of Rs. 10 lakhs excessive, given the lack of malafide intention or mis-declaration by the appellant. It reduced the penalty to Rs. 2 lakhs, noting that the declared value had not been re-determined by Customs and the goods were imported on a "free of cost" basis.

Conclusion:
The Tribunal directed the Original Adjudicating Authority to give the appellant an option to redeem the goods on payment of a fine for re-export purposes only, considering the mitigating factors and complying with other statutory obligations. The appeal was partly allowed, and the case was remanded for further action as per the Tribunal's directions.