2014 (5) TMI 21 - HC - Customs

Smuggling of goods Confiscation of goods - Notice of demand of duty - Section 28 or 125 - Whether noticee is not a person chargeable with duty u/s 28 of the Customs Act, 1962 though it had been proved that the noticee was actually dealing with such smuggled goods - Held that - Section 28 applies to a case where the goods are imported by an importer and pays duty in accordance with law - If such duty is not paid, then a notice of demand of duty u/s 28 on the person chargeable to duty lies - Section 125(2) also authorizes such competent authority to demand any duty payable on such goods which is payable in respect of such goods under the Act - Therefore, the notice to be issued for payment of duty u/s 28 and u/s 125(2) is not identical - They fall into completely different areas - In the case of a notice demanding duty u/s 125(2) firstly the goods should have been confiscated and the duty demandable is in addition to the fine payable u/s 125(1) in respect of confiscated goods - Therefore, the material on record discloses that the assessee is not the person who imported the goods - He is not the owner of the goods - He was only a dealer of the smuggled goods and therefore, there is no obligation cast on him to pay duty and therefore, the notice issued u/s 28 to the assessee is unsustainable as he is not the person who is chargeable to duty under the Act. Insofar as application of Section 125(2) is concerned, admittedly, no goods are seized - Once the goods are not seized, consequently, there is no confiscation and in the absence of a confiscation, payment of duty chargeable from the person who is the owner or from whose possession does not arise - Hence, Tribunal was justified in upholding the order passed by the Adjudicating Authority who has held that no duty is leviable against the assessee as he is neither the importer nor the owner of the goods or was in possession of any goods - Accordingly, Decided against the revenue.

Summary

Issues Involved:

1. Whether the CESTAT is right in holding the noticee not to be a person chargeable with duty under Section 28 of the Customs Act, 1962, despite evidence of dealing with smuggled goods.
2. Whether the CESTAT is right in holding that Section 125 of the Customs Act applies only when the seized goods are confiscated, contrary to the position settled by the Supreme Court.

Issue-Wise Detailed Analysis:

1. Chargeability of Duty under Section 28 of the Customs Act, 1962:

The primary issue revolves around whether the noticee, who was found dealing with smuggled goods, can be considered a person chargeable with duty under Section 28 of the Customs Act, 1962. The investigation revealed that the assessee received smuggled computer parts from Nepal via courier from Calcutta and supplied them without using banking channels. Despite establishing that the assessee dealt in smuggled goods, no smuggled goods were seized from him. The Commissioner of Customs dropped the demand for duty, citing a lack of evidence that the assessee imported the goods. The Tribunal upheld this, stating that under Section 28, duty can only be demanded from the importer, as defined in Section 2(26) of the Act. The Tribunal clarified that the duty is chargeable from the importer who has not paid the duty, and in this case, the assessee was not the importer. Therefore, the demand for duty on the assessee was unsustainable.

2. Application of Section 125 of the Customs Act:

The second issue concerns whether Section 125 of the Customs Act applies only when the seized goods are confiscated. The revenue argued that duty is demandable from the owner of the goods under Section 125(2). However, the Tribunal held that Section 125(2) applies when smuggled goods are seized and confiscated, and an option is given to the person from whom the goods were seized or the owner to pay a fine in lieu of confiscation. In this case, no goods were seized, and thus, no confiscation occurred. Consequently, the demand for duty under Section 125(2) was not applicable. The Tribunal and the Adjudicating Authority concluded that since the assessee was neither the importer nor the owner of the goods, and no goods were seized from him, no duty could be levied against him.

Conclusion:

The High Court upheld the Tribunal's decision, answering the substantial questions of law in favor of the assessee and against the revenue. The court emphasized that the notice issued under Section 28 was unsustainable as the assessee was not the person chargeable to duty under the Act. Additionally, the application of Section 125(2) was not justified as no goods were seized or confiscated. The appeal was dismissed, confirming that no duty was leviable against the assessee.