THE LANGUAGE OF THE DIVINE IS SILENCE

[jayaprakash gopinathan]

 This paper is a case study of the judgment of the Hon’ble High Court of Madras in a writ petition filed by Shri. Umar Syed against Commissioner of Customs (Airport), Chennai {2019 (11) TMI 968 - MADRAS HIGH COURT} for refund of the sales proceeds of gold/gold ornaments confiscated and allowed redemption for re export. The gold/gold ornaments could not be redeemed due to its disposal (sale) by Customs authorities within two months from the date of issue of the order. When goods are seized alleging illegal importation and confiscated, the title of the goods rest with the Central Government, says Section 126 of the Customs Act, 1962. If the proper officer (adjudicating authority) allowed  redemption of the goods for re export on payment of fine, the order need not specify anything about the duty payable on the goods imported since the same is allowed to be re exported for which no duty is payable. But when such goods are sold for home consumption, the rule of law mandates payment of applicable duty and same is liable to be recovered from the sale proceeds.

After reading the case law, certain doubts arose in mind and I persuaded myself to ignore it being a practicing lawyer. But the master’s voice echoed:

“People who want to rise above a well cooked meal and a well tailored garment, are out of their spiritual minds.”

 The factual matrix of the case, as from the case law published, is that the gold/gold jewellery   [ the quantity or value- cif or market- is not specified] were seized when the petitioner arrived at Hyderabad Airport from Dubai. On adjudication, as per O-I-O dated 15.02.2019, the gold/gold ornaments were allowed to be redeemed on payment of a fine of ₹ 70, 00,000/- and penalty of ₹ 20, 00,000/- and the order attained finality when the writ petition was filed. The cause of action for the writ petition was that   when the petitioner approached the customs authorities for redemption of the gold/gold ornaments seized and confiscated, a communication dated 22.4.2019 informed that the seized gold were sold for ₹ 2,48,21,820/-. Thus the redemption option stands foreclosed.

It appears to be quite intriguing to note that the seized gold were disposed off before the expiry of the appeal/ Review period prescribed under the Customs Act, 1962. It is equally intriguing to understand how for smuggling case detected at Hyderabad Airport, Commissioner of Customs (Airport) Chennai becomes the respondent and the Hon’ble High Court of Madras attains writ jurisdiction. Whether the Air port of arrival printed as “Hyderabad” is a typographical error and the petitioner actually arrived at “Chennai” Airport cannot be ascertained for lack of detailed factual narration of events in the order cited.

Be as it may, this paper only try to highlight certain issues that emerges from the available facts such as non issuance of a notice for disposal of the confiscated gold/gold ornaments especially before the expiry of the appeal period and disposal of the gold/gold ornaments with lightening speed, lack of a review order by the competent authority against allowing redemption of more than 6 Kg of gold/gold ornaments confiscated when the golden rule usually adopted by the original adjudicating authorities is absolute confiscation even for  gold ornaments worn in person alleging non declaration for smaller quantities. Further the sale proceeds are allowed to be refunded after deducting only the penalty imposed.

 It is no more resintegra that when goods imported are sold by Customs or other authorities for home consumption, its sale proceeds includes applicable customs duty. When the title of the goods is vested with the Central Government due to lack of any appellate order setting aside confiscation of the goods, the sale proceeds can be refunded to the person from whom the goods were seized and confiscated only after  deduction of the redemption fine imposed along with duty payable and penalty imposed.

The cited case did not discuss any of the above issues but relied on a judgment of the Hon’ble Court in writ petition number 32340 of 2016 in the following words: “There is no disputation or disagreement before this Court as between both the Learned Counsel that the instant case stands covered by the earlier order and there is no disagreement that earlier order made by a Hon’ble single Judge has been given a legal quietus. It has not only been given legal quietus, but has been acted upon and refund after deducting penalty has also been given to the writ petitioner therein pursuant to the earlier order”. The cited writ petition number is 32340 of 2016. http://www.judis.nic.in informs that the writ petition W.P.No.32340 of 2016 and WMP.No.28052 of 2016 was decided on 30.11.2016. However, the case law refers in the cited decision is about W.M.P. 5088 decided on 2.3.2017 in W.P.No.32340. No such order is forthcoming on search.

W.P.No.32340 of 2016 and WMP.No.28052 of 2016 was filed by one Shri Mohammed Omar Shaik for execution of the order of the Commissioner (Appeals) allowing redemption of gold. . Para 3 of the said decision explains the facts of that case.

3.  The said appeal was filed by the petitioner, challenging the order in original passed by the 2nd respondent dated 11.09.2015 in and by which the 2nd respondent ordered absolute confiscation of two numbers of Tola Gold Bars totally weighing 233 gms. and imposed penalty of ₹ 60,000/-. In the appeal before the Commissioner of Customs (Appeals-I), the order of confiscation was set aside with an option of redemption of the same for home consumption on payment of redemption fine of ₹ 1,80,000/-. The order imposing penalty of ₹ 60,000/- was not interfered with by the Commissioner of Customs (Appeals-I). Therefore, the petitioner seeks for implementation

After hearing the Hon’ble Court ordered to release the gold subject to decision of the revisional authority as follows:-

(a) The petitioner shall pay the redemption fine of ₹ 1,80,000/- (Rupees One Lakh Eighty Thousand Only), the penalty of ₹ 60,000/- (Rupees Sixty Thousand Only) and the duty of the goods that may be determined by the respondents;

(b) Apart from that, the petitioner shall furnish a bank guarantee for a sum of ₹ 75,000/- and keep the bank guarantee alive till the disposal of the revision petition by the Revisional Authority (Central Government); and

(c) It is made clear that this direction is issued subject to the outcome of the revision petition filed by the Government. The Hon’ble Court issued a direction to get the case decided under Revision within 30 days.

 Since the order in W.M.P. 5088 decided on 2.3.2017 in W.P.No.32340 is not perceptible, it is not known whether the earlier order in WMP.No.28052 in W.P.No.32340 of 2016 is modified by setting aside the Redemption fine and direction to pay duty.  There appears to be no reason to believe that the direction to pay the duty on the gold confiscated and ordered to be released on payment of fine that may be determined by the respondents ought to have modified since the gold is to be consumed in India.

Further the apex court in  UNION OF INDIA AND ORS Vs M/s ASSOCIATED CONTAINER TERMINAL LTD { 2020 (2) TMI 705 - SUPREME COURT}  held that the value of sale proceeds of goods imported when sold by Customs authorities should be the value for determining duty. The Apex Court   disposed of the case with directions to ascertain the customs duty keeping in mind the dispensation indicated in the enabling provisions of the Customs Act, 1962 and Chapter 21 of CBEC Manual read with Circular 71/2001-Cus dated 28th November, 2011 and adjust the same as per the priority specified in Section 150(2) of the Customs Act – 1962.

Circular No. 71/2001-Cus., dated 28-11-2001- Auction of unclaimed/ uncleared goods at Customs Houses - Determination of duty - Clarifications

F. No. 446/17/2001-Cus. IV

Government of India

Ministry of Finance (Department of Revenue)

Central Board of Excise & Customs, New Delhi

Subject :    Payment of Customs duty by custodians in respect of auctioned goods - reg.

A reference was received from the Container Corporation of India (CONCOR) stating that there is a divergence of practice in Custom Houses with regard to apportionment of sale proceeds from disposal/sale of unclaimed/uncleared goods under section 150 of the Customs Act, 1962. It was reported that some Custom Houses determine the Customs duty payable on auctioned goods after deducting the sales expenses from the sale proceeds of the goods whereas other Custom Houses are determining duty on the basis of sale proceeds without allowing any deduction.

The matter has been examined. 

2. It is clarified that -

 (a)       the Customs duty shall be determined by backward calculation considering the sale proceeds of unclaimed/uncleared goods as the cum-duty price. For calculation of duty, total sale proceeds without allowing any deduction towards sales expenses or any other charge is to be taken as cum duty price.

 (b)       After determination of the Customs duty, sale proceeds of unclaimed/uncleared goods is to be appropriated in the manner as provided in section 150(2) of the Customs Act, 1962.

These instructions may be 3. brought to the notice of all concerned by way of issuance of suitable Public Notice/Standing Order.

Difficulties, if any, in implementation of 4. these instruction, may be brought to the notice of the Board. Kindly acknowledge receipt of this Circular.

As per the ratio of the Apex Court’s decision, the sale proceeds have to be computed as cum duty value and accordingly duty liability is to be determined. Further when imported goods are confiscated, the title of the goods are shifted to the Government of India and it can be redeemed by the importer only on payment of redemption fine unless such confiscation is set aside by    any appellate or revisional authority.  Para 6 of the order of the  Hon’ble High Court of Madras informs that the order dated 15,2,2019 of the original authority has attained finality or in other words , has been given legal quietus.

Here in the case under reference:

1. the sale proceeds amount to ₹ 2, 48,21,820/-
2.  the applicable rate of duty for baggage goods is 36.05%,
3.  the assessable value, as per circular cited works out to ₹ 2, 48,21,820/136.05*100= 1,82,44,631/-.
4.  Customs duty payable on redemption = ₹ 65, 77,190/-.
5. The redemption fine imposed by the original authority, which attained finality as stated in the cited case law, is ₹ 70, 00,000/-,
6. Penalty payable is ₹ 20, 00,000/-.
7. Therefore the total amount  payable to the Central Government is ₹ 1,55,77,190/-
8.  Balance amount available for refund is ₹ 92, 44,630/- only.

 The ratio of the decision in W.P.No.32340 cited as a precedent reiterates it. Apex Court’s case cited also reaffirms this.

An order allowing re- export of goods confiscated on payment of fine  if foreclosed due to premature sale of the confiscated goods, the applicable duty as per law is also payable in addition to the redemption fine, if confiscation is not set aside by an appellate or revisional authority.  In this case, a whopping amount of     ₹ 1, 35, 77,190/- is likely to have gone with the wind, if appropriate appellate remedies are not sought for by the Customs authorities.  The divine language is silence,  the above writings is a silent prayer for the nation.