2001 (5) TMI 486 - AT - Customs

Issues Involved:
1. Demand of customs duty and penalties.
2. Legality of the import and possession of seized Laser Discs (LDs) and Digital Video Discs (DVDs).
3. Applicability of Section 123 of the Customs Act.
4. Voluntariness of customs duty payment.
5. Justification for redemption fine and penalties.
6. Correct classification of the seized goods under the Import Trade Control (ITC) heading.

Issue-wise Detailed Analysis:

1. Demand of Customs Duty and Penalties:
The Commissioner of Customs demanded Rs. 12,33,994/- as customs duty from M/s. Concept Entertainment India (Pvt.) Ltd. (CET) and imposed a penalty of Rs. 5 lakh on them. Additionally, penalties of Rs. 3 lakh and Rs. 6 lakh were imposed on the directors, Shri Sunil Khera and Shri Sanjay Gupta, respectively. A redemption fine of Rs. 7 lakh was also levied on the seized goods worth Rs. 35,09,800/-. The goods, consisting of foreign-made LDs and DVDs, were seized due to the lack of customs paying documents and purchase receipts.

2. Legality of the Import and Possession of Seized LDs and DVDs:
The seized LDs and DVDs were alleged to be smuggled into India in violation of Section 11 of the Customs Act, 1962, making them liable for confiscation under Section 111(d) of the Act. The appellants argued that the import of these discs was free and that the burden of proof of smuggling lay with the Department. However, the adjudicating authority held that the goods were restricted items for import and had been smuggled without authority, as there was no evidence of their legal import and lawful possession.

3. Applicability of Section 123 of the Customs Act:
The appellants contended that Section 123, which shifts the burden of proof to the person in possession of notified goods, was not applicable to the goods in question. The Department argued that the goods were restricted consumer goods and required a proper import license. The Tribunal agreed with the Department, noting that the goods were in commercial quantities, openly displayed for business purposes, and lacked documentation for legal import and lawful possession.

4. Voluntariness of Customs Duty Payment:
The appellants claimed that the payment of customs duty was not voluntary. However, the Tribunal found that the appellants had voluntarily paid the customs duty before the issuance of the show cause notice and had cooperated with the Customs authorities during the investigation. The Tribunal noted that the appellants' argument against the voluntary nature of the payment was an afterthought.

5. Justification for Redemption Fine and Penalties:
The Tribunal considered the appellants' cooperation and voluntary payment of customs duty. While confirming the demand for customs duty, the Tribunal reduced the redemption fine from Rs. 7 lakh to Rs. 1 lakh and set aside the penalties of Rs. 5 lakh, Rs. 3 lakh, and Rs. 6 lakh imposed on M/s. CET, Shri Sunil Khera, and Shri Sanjay Gupta, respectively.

6. Correct Classification of the Seized Goods under the ITC Heading:
The appellants argued that the seized goods fell under ITC (HS) Classification No. 85243900, which allowed free import of discs for laser reading systems. The Department countered that the correct classification was under Heading No. 85249909.90, which included restricted consumer goods like pre-recorded LDs and DVDs. The Tribunal agreed with the Department, stating that the discs for viewing films/movies could not be considered as discs for laser reading systems and were thus restricted for import.

Conclusion:
The Tribunal upheld the demand for customs duty but reduced the redemption fine and set aside the penalties imposed on the directors. The appeal of Shri Sunil Khera and Shri Sanjay Gupta was allowed, while the appeal of M/s. CET was partly allowed. The goods were ordered to be released upon payment of the reduced redemption fine.

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