RETENTION OF GOODS AFTER PAYMENT OF REDEMPTION FINE AND PENALTY UNDER CUSTOMS ACT, 1962

[DR.MARIAPPAN GOVINDARAJAN]

Confiscation of imported goods

Section 111 of the Customs Act, 1962 provides the list of goods brought from a place outside India liable to confiscation.  For the purposes of this article we may see some goods that are liable to confiscation-

• 111(d) -  any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;
• 111(i) - any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof;
• 111(l) - any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;
• 111(m) - any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54;
• 111(o) - any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer.

Penalty for improper importation of goods

Section 112 provides penalty for improper importation of goods.  Section 112 provides that any person-

• who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or
• who acquires possession of or is in any way concerned in carrying, removing, depositing, harboring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable, -

1. in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or Rs.5000/-, whichever is the greater;
2. in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding 10% of the duty sought to be evaded or Rs.5000/-, whichever is higher;
3. in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or Rs.5000/-, whichever is the greater;
4. in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or Rs.5000/-, whichever is the highest;
5.  in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or Rs.5000/-, whichever is the highest.

Redemption fine

Section 125 of the Customs Act provides that whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit.  Where   the redemption fine is not paid within a period of 120 days from the date of option given there under, such option shall become void, unless an appeal against such order is pending.

Issue

As discussed above there are provisions under Customs Act for confiscation of goods, imposing penalty for improper importation of goods.  There are provisions for payment of redemption fine in lieu of confiscation.  To avoid confiscation redemption fine may be paid.  If the redemption fine is paid after confiscation the Department is liable to return the confiscated goods the assessee.  The same cannot be retained by the Department at any cost. 

In AJAY KUMAR GUPTA VERSUS COMMISSIONER OF CUSTOMS & ANR. - 2023 (5) TMI 207 - DELHI HIGH COURT, the petitioner was employed in the United Arab Emirates.  He came to New Delhi on 06.08.2021.  In the airport the petitioner was detained.  The Authorities found that he was in possession of two wrist watches valued to the tune of Rs.39,61,100/-.  The petitioner was arrested and later released on bail.  The said watches were detained and seized on 07.08.2021. 

The matter was adjudicated by the Additional Commissioner of Customs, IGT Airport by an order dated 28.12.2021.  In the said order ‘free allowance’ was denied to the petitioner for various omissions and commissions and also he did not declare the seized goods at Red channel before the Customs Officer.  Thus he violated the provisions of section 77 of the Customs Act.  The said watches were recovered from the baggage of the petitioner and seized under sections 111(d), 111(i), 111(j), 111(m) and 111(o) of the Customs Act.  The Adjudicating Authority, in his order, gave an option to redeem the confiscated goods on payment of redemption fee of Rs.5,94,165/- under Section 125 of the Customs Act and also allowed the same to re-export to Dubai only.  If the petitioner accepted the offer of redemption he shall not dispute the identity and valuation of the seized goods.  The offer of redemption shall cease after 180 days from the date of receipt of the order. 

The Adjudicating Authority also imposed penalty of Rs.5,94,165/- under Sections 112(a), 112 (b) and 114AA of the Customs Act.  Further penalty of Rs.7,92,220/- was imposed for various acts of omission and commission of the co-noticee, the employer of the petitioner.

The petitioner, immediately on receipt of the order deposited the penalty Rs.5,94,165/- and also redemption fine.  The co-noticee also deposited the penalty on imposed on him.  Despite the payment of penalty and redemption fine the seized goods were not released by the Department.

The petitioner filed a writ petition before the High Court against the order of Adjudicating Authority.  In the meantime the petitioner, co-noticee and the revenue filed appeals before the Commissioner of Customs (Appeals).  The High Court disposed the writ petition filed by the petitioner.  The High Court observed that, prima facie, there is no reason for the Department to hold the goods in question without releasing the same.  The High Court directed the Department to have the appeal listed before the Appellate Authority and to seek appropriate orders.  Failing to do the same the goods were to be released to the petitioner.

The appeals were heard by the Commissioner of Customs (Appeals) and disposed of by an order dated 28.06.2022.  The appeals were partly allowed.  The value of the goods was re-determined at Rs.10,12.100/-.  On the basis of revaluation the redemption fine was reduced to Rs.1,00,000/- from Rs.5,94,165/-.  The penalty imposed under Section 112 and section 114A was also reduced to Rs.1,00,000/-.  The penalty imposed on co-noticee was set aside by Commissioner of Customs (Appeals).

Despite the appeal order the Department has not released the goods to the petitioner.  The Department preferred a revision petition before the Revisional Authorities.  The said petition is pending.  The Department contended that since the Revision petition was pending before the Revisional Authority there is no question of returning the seized goods to the petitioner and the co-noticee.  The Revenue could not able to point out any provisions in the Customs Act which entitles the Revenue to retain the goods after the concerned party has paid the redemption fine and the penalty imposed on them under the provisions of Customs Act.  The High Court held the merely because the Revenue seeks to challenge the order passed by the Appellate Authority is no ground for no compliance of the order of the Court.  The High Court directed the Revenue to hand over the goods in question to the petitioner within a period of two working days since the Court did not find justification in withholding the goods.  The High Court further held that if the Revenue succeeds in the Revision petition it would be entitled to take such steps in accordance with the law.