2018 (8) TMI 1409 - HC - Customs

Redemption fine and duty imposed on seized vehicle - Porsche Carrera car - mis-declaration of model, description of the goods and resultant diminution of value on which duty was levied - Importer of vehicle - bonafide purchaser. Whether Customs Duty and redemption fine can be demanded from the person in ownership and custody of the imported goods? - n what circumstances can a person other than the actual importer be liable to pay Customs Duty and Redemption Fine on goods imported in violation of Customs Law? - Can the imported goods be subject matter of a charge for payment of Customs Duty and Interest due thereon irrespective of whether or not the ownership in these goods have been transferred to a person other than the original importer? Held that - In the present case, the redemption fine was imposed at ₹ 6,00,000/- and short levy of duty was collected at ₹ 17,92,847/-. The subsequent bona fide purchaser may not have any liability to duty. However, by confiscation, the State gets the authority to recover the entire market value of the goods, which would definitely be more than the duty. If redemption is not made then the person from whose possession the goods are seized merely looses the property in goods and there could be no further levy of duty on the bona fide purchaser. The Department, despite such confiscation could proceed for recovery of duty too, but only from the importer. Section 125 comes into play only after there is a confiscation effected by the Commissioner, which gives an option to the owner or the person from whom the goods were seized to apply for redemption. In applying for redemption, the owner or person from whom the goods were seized would have to pay the redemption fine as imposed by the Commissioner under Section 125(1) - The option being a choice of the person, there cannot be any contention raised against payment of short levy of duty, which is a necessary consequence of redemption under Section 125 of the Act. The customs duty and redemption fine can be demanded from the person in ownership and custody of the imported goods on an option exercised for redemption, despite there being no liability to duty on any person other than the importer - the imported goods on there being a short levy of duty along with interest, would be liable for confiscation. Appeal allowed - decided in favor of Revenue.

Summary

Issues Involved:

1. Whether Customs Duty and redemption fine can be demanded from the person in ownership and custody of the imported goods.
2. Circumstances under which a person other than the actual importer can be liable to pay Customs Duty and Redemption Fine on goods imported in violation of Customs Law.
3. Whether imported goods can be subject to a charge for payment of Customs Duty and Interest due thereon irrespective of ownership transfer.
4. Whether the Tribunal's decision that the respondent is not liable for payment of differential duty and redemption fine is correct and sustainable in law.

Issue-wise Detailed Analysis:

1. Demand of Customs Duty and Redemption Fine from the Person in Ownership and Custody:

The court examined whether customs duty and redemption fine could be demanded from the person in ownership and custody of the imported goods. The Tribunal had previously found that the respondent, being a bona fide purchaser, was not liable for duty or redemption fine. However, the court disagreed, stating that under Section 125 of the Customs Act, 1962, the owner or the person in possession of the goods can be required to pay both the redemption fine and the short-levy of duty if they opt for redemption. This conclusion was reached despite acknowledging that the respondent was not the importer.

2. Liability of a Person Other than the Actual Importer:

The court noted that the liability to pay customs duty and redemption fine typically rests with the importer. However, in cases of misdeclaration or violation of import conditions, the goods become "prohibited goods" under Section 2(33) of the Act, and the State can confiscate them. If the subsequent owner opts to redeem the goods, they must pay the redemption fine and any short-levy of duty, as per Section 125. The court emphasized that this is a consequence of the redemption option exercised by the owner, not a direct liability to duty.

3. Charge for Payment of Customs Duty and Interest on Imported Goods:

The court clarified that confiscated goods can be sold by the government to recover their market value, which may exceed the duty amount. If the goods are redeemed, the owner must pay the redemption fine and the short-levy of duty. The court reiterated that any remaining duty or interest must be recovered from the original importer, not the subsequent purchaser. This distinction underscores that the duty liability does not transfer automatically with ownership.

4. Tribunal's Decision on Liability for Differential Duty and Redemption Fine:

The court found the Tribunal's decision to exempt the respondent from paying the differential duty and redemption fine to be unsustainable. The Tribunal had relied on precedents that the court found inapplicable due to differing factual circumstances. The court highlighted that the redemption fine and duty were a consequence of the respondent's choice to redeem the confiscated goods, thus affirming the Revenue's position. The court also noted that the Tribunal failed to consider the entire order of the Mumbai Bench in VXL India Ltd., which would have upheld the redemption fine if imposed.

Conclusion:

The court allowed the Customs Appeal, answering the questions of law in favor of the Revenue. It clarified that while a subsequent bona fide purchaser may not have a direct liability to pay customs duty, they must pay the redemption fine and any short-levy of duty if they opt to redeem confiscated goods. The court emphasized that the duty and redemption fine are consequences of the redemption option, not a direct liability transferred with ownership. The Tribunal's decision was overturned, and the appeal was allowed with each party bearing their respective costs.