1999 (12) TMI 58 - SC - Customs

Whether the adjudication was under sub-clause of Section 111? Held that - Having released the goods thus into the market and permitting the sale of the same, in our opinion it is not open to the Collector to initiate another proceedings under another clause of Section 111 to recover the so-called differences in valuation of the imported goods from the ultimate bona fide purchaser for value. If the Collector failed to make a proper enquiry as to the market value of the goods and released the same after a half-hearted adjudication, we fail to see why a subsequent purchaser be saddled with the liability of undervaluation, more so in the background of the fact that the appellant had no role to play either in the import or earlier adjudication proceedings. That apart, it is rather surprising that the fresh proceeding under Section 111(m) is not initiated against the original importer in spite of the provisions of Section 28 of the Act. Counsel for the respondent is unable to convince us why no notice under Section 124 is issued against the original importer who was permitted by the Department to redeem the goods under Section 125 of the Act and sell the same in the open market. In this background, we are of the opinion that the action of the Department to initiate proceedings against the appellant, who is a bona fide purchaser of the redeemed goods for value, is unjust and hence not sustainable in the facts and circumstances of this case. Thus the initiation of proceedings under Section 111(m) of the Act is liable to be quashed.

Summary

Issues:
1. Confiscation of goods under Sections 111(d) and 111(m) of the Customs Act, 1962.
2. Applicability of redemption fine and duty charges under Section 125 of the Act.
3. Liability of a subsequent purchaser for valuation discrepancies post-redemption.
4. Initiation of proceedings against a bona fide purchaser after goods have been redeemed.

Analysis:

1. The case involved the appellant, a beer manufacturer, who imported Lupofresh aromatic hop pellets through an agent. Upon receiving the consignment, the appellant discovered that the goods were subject to a Customs investigation. The Customs Department issued a show cause notice alleging contravention of Section 111(m) of the Customs Act, 1962, leading to a demand for confiscation and penalty imposition.

2. The appellant contended that as a bona fide purchaser post-redemption of the goods by the importer, they should not be subjected to a second confiscation or additional penalties. The Collector imposed a redemption fine, which the appellant challenged before the Customs, Excise & Gold (Control) Appellate Tribunal, raising various legal contentions related to Sections 111 and 125 of the Act.

3. The Department argued that the subsequent proceedings were independent of the earlier adjudication and justified the confiscation under Section 111(m) due to alleged undervaluation of the goods. However, the Tribunal examined the relevant sections, emphasizing the obligation of the adjudicating authority to assess market value, levy duties, and charges before permitting redemption.

4. The Tribunal concluded that once goods were released post-redemption, initiating fresh proceedings against a subsequent purchaser for valuation discrepancies was unjust. It questioned the Department's failure to pursue the original importer under Section 28 of the Act and ruled in favor of the appellant, quashing the proceedings under Section 111(m) and directing the refund of any collected fines or duties.

This judgment clarifies the legal principles governing confiscation, redemption, and subsequent liabilities of bona fide purchasers under the Customs Act, emphasizing the importance of due diligence by Customs authorities and protecting innocent parties from unjust repercussions post-redemption.