2006 (6) TMI 117 - HC - Customs

Hospital Equipment - Demand (Customs) - Powers Of Customs Authorities - confiscation of goods - seeking to recover duty u/s 125 - HELD THAT - It is pertinent to note that the duty liability u/s 47 is on the importer, whereas, the duty liability u/s 125(2) is on the owner of the goods. This distinction is made by the legislature because once the goods are cleared u/s 47, there is every possibility that the goods may change hands. To obviate any difficulty in recovering duty payable on such goods, the legislature has provided that, where the goods are confiscated with an option to redeem the goods by imposing fine in lieu of confiscation, then on imposition of fine in lieu of confiscation the duty and charges payable have to be paid by the owner of such goods. Thus, we do not find any merit in the argument of the petitioner that the judgment delivered in the case of Wockhardt Hospital needs reconsideration. Since the issues raised in this appeal are squarely covered by the judgment delivered in the case of Wockhardt Hospital (Customs Appeal No. 22 of 2004) 2006 (4) TMI 137 - BOMBAY HIGH COURT , we answer the questions raised in this appeal by holding that in the facts and circumstances of the customs authorities are justified in seeking to recover duty from the assessee u/s 125 of the Customs Act even though the assessee has not opted to redeem the goods by paying fine in lieu of confiscation. Accordingly, the appeal fails and the same is hereby dismissed with no order as to costs.

Summary

Issues involved:
1. Recovery of customs duties de hors the provisions of Sections 28 and 125 of the Customs Act.
2. Recovery of duty on confiscated goods when the option of redemption is not exercised.

Issue 1: Recovery of customs duties de hors the provisions of Sections 28 and 125 of the Customs Act

The case involved an appeal under Section 130 of the Customs Act, 1962, where the appellant, a Public Charitable Trust, imported medical equipment under an exemption notification but failed to comply with post-importation conditions. The Customs authorities issued show-cause notices for non-payment of duty, leading to confiscation and recovery of duties. The Commissioner of Customs upheld the confiscation and directed payment of customs duty. The Tribunal held that the department can recover escaped duty under Section 12 of the Customs Act when post-importation conditions are not met. The appellant challenged this decision, arguing that duty payment is linked to redemption fines under Section 125(2). However, the Court rejected this argument, emphasizing that duty and charges on confiscated goods must be paid on imposition of fine in lieu of confiscation, regardless of redemption. The Court clarified that duty becomes payable on confiscation, ensuring compliance with exemption conditions.

Issue 2: Recovery of duty on confiscated goods when the option of redemption is not exercised

The appellant contended that duty payment under Section 125(2) is contingent on redemption fines and if redemption is not opted for, duty is not payable. However, the Court disagreed, stating that duty and charges on confiscated goods must be paid upon imposition of fine in lieu of confiscation, irrespective of redemption. The Court highlighted that the word 'payable' in Section 125(2) refers to duty becoming due and payable on confiscation. It clarified that duty liability arises when goods are confiscated before clearance, emphasizing the legislative intent to ensure duty payment when goods are confiscated with an option to redeem. The Court differentiated between duty liability under Section 47 on importers and under Section 125(2) on owners post-clearance, aiming to prevent duty evasion in case of ownership transfer.

In conclusion, the Court dismissed the appeal, affirming the Customs authorities' right to recover duty under Section 125 of the Customs Act even if redemption of goods is not pursued. The judgment aligned with the precedent set in a similar case, emphasizing the duty payment obligation on confiscated goods to maintain compliance with statutory provisions.