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2025 (4) TMI 255 - AT - CustomsConfiscation of 37.34 kg of saffron - imposition of a redemption fine under Section 111(j) and Section 125 of the Customs Act 1962 - shortage of stock saffron - whether the stocks and shortages have been determined on the basis of assumption and presumptions which do not have any basis in the law? - HELD THAT - In the present case it is observed that stock verification and shortages of stocks has been determined in a unique method by computing the figures from the figures in the balance sheet. Stock was not verified on the basis of stock register/ records that were being maintained or the same were required to be maintained. The entire foundation is based on the assumption and presumptions of examination figures shown in balance sheet not in terms of freight and in terms of value and finally the said calculated quantity of exemption has been deducted from the total quantity source and procured to arrive at the total value. Further while computing these values no reliance has been given to the 20 kg of saffron available in the GM s fridge. As per appellant it was available in the GM s fridge. No reason has been given for not taking into account the said quantity of saffron which was available in the factory premises except that it was not disclosed at the time of stock taking. During the stock taking done on 10.01.2017 it was responsibility of the officers to find out all the stocks of finished goods and raw material and do the stock taking. The admitted position is that after the receipt of the saffron in the factory premises the same is handed over to the Appellant 2 who uses the same in the laboratory were no one else is allowed to enter. He do not maintain any record of consumption of the said saffron in the laboratory - there are certain irregularities are being committed by the Appellants in maintenance of stock register of saffron which should be based on the physical stocks available like any other raw material. For such a contravention a token penalty needs to be imposed upon the appellant-II under Section 117 of the Customs Act. However impugned order imposes penalty under Section 114A on the appellant-I and under Section 112 (b) (ii) of the Customs Act on Appellant-II. There are no merit in the penalties imposed under Section 114A and 112 (b) (ii) of the Customs Act equivalent to amount of duty demanded. The penalty imposed under Section 112 (b) (ii) on appellant-II is upheld to the extent of Rs. 50, 000/- under Section 117 of the Customs Act for various contraventions and not maintaining the proper records/stock register of saffron. Conclusion - i) Confiscation and redemption fines require the physical availability of goods or their provisional release under bond. ii) Stock verification must be based on actual physical records and not on assumptions or balance sheet figures. iii) Penalties for alleged shortages must be supported by clear evidence of stock discrepancies. iv) Procedural lapses in notifying authorities do not automatically invalidate customs actions. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Confiscation and Redemption Fine The legal framework for confiscation and redemption fines involves Sections 111(j) and 125 of the Customs Act, 1962. The court examined whether the goods could be confiscated when they were not physically available for seizure. The Tribunal referenced the decision in Jewel Tech India Pvt. Ltd. and other precedents, which established that goods not available for seizure cannot be subject to confiscation or redemption fines. The Tribunal concluded that the confiscation and fine lacked a legal basis since the goods were not seized or provisionally released under bond. Demand for Customs Duties and Interest The demand for customs duties was based on alleged shortages of saffron, calculated using assumptions from balance sheet figures rather than actual stock verification. The Tribunal found this method flawed, as it relied on presumptions rather than physical stock records. The Tribunal held that the demand for duties and interest was not sustainable due to the lack of concrete evidence supporting the alleged shortages. Penalties under Sections 114A and 112(b)(ii) The penalties were challenged on the grounds that they were based on incorrect assumptions about stock shortages. The Tribunal found no justification for penalties equivalent to the duty demanded, as the shortages were not proven. However, a token penalty under Section 117 was deemed appropriate for the failure to maintain proper stock records. Method of Stock Verification The Tribunal criticized the method of determining shortages based on balance sheet values rather than actual stock records. It emphasized the need for stock verification to be based on physical records and actual stock, rather than assumptions and reverse calculations. The Tribunal found that both the department and the appellants engaged in speculative calculations, which were not legally tenable. Jurisdiction and Authority of Customs Officers The appellants contested the authority of customs officers to conduct stock verification without prior notification to the Development Commissioner. However, the Tribunal upheld the officers' actions, noting that procedural lapses did not invalidate the findings of the stock verification. SIGNIFICANT HOLDINGS The Tribunal established several core principles:
The Tribunal's final determinations were:
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