2020 (3) TMI 860 - HC - Customs

Imposition of redemption fine in lieu of confiscation of conveyance - Interpretation of statute - section 115(2) of The Customs Act, 1962 - seizure and confiscation of Diesel Oil - illegal import or not - HELD THAT - The proviso to sub-section (2) of section 115, categorically provides that where any conveyance is used for the carriage of goods or passengers for hire the owner of any conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine not exceeding the market price of the goods which are sought to be smuggled or the smuggled goods, as the case may be. Clearly, therefore, the redemption fine which can be imposed in lieu of the confiscation of the conveyance should not exceed the market price of the goods which are sought to be smuggled or smuggled goods . The adjudicating authority having found that the respondent had illegally imported/smuggled 150 MT of diesel oil valued at ₹ 75,00,000/- into the tug MV Al- Vard, with an intention to use the same for plying inside the sea without payment of duty thereon, confiscated the goods. The adjudicating authority also imposed customs duty amounting to ₹ 12,71,406/-. Further, the adjudicating authority found that tug MV Al-Vard valued at ₹ 6,75,00,000/- was found utilized in illegal import of diesel oil and ordered confiscation of the tug MV Al-Vard under sub-section (2) of section 115 of the Act of 1962. Having observed thus, the adjudicating authority in the operative portion, ordered confiscation of tug MV Al-Vard having assessable value of ₹ 6,75,00,000/- and imposed redemption fine of ₹ 1,75,00,000/- in lieu of confiscation under the proviso to sub-section (2) of section 115 of the Act of 1962 on the respondent - it is not now open to the appellant to contend that the proviso to sub-section (2) of section 115 is applicable only in the cases where conveyance is used for the carriage of goods or passengers for hire for smuggling of the goods and since the tug was not hired the proviso to subsection (2) of section 115 of the Act of 1962 is not at all applicable to the facts of the present case. The Tribunal, having regard to the proviso to sub-section (2) of section 115 of the Act of 1962, has observed that the maximum fine on the conveyance can be an amount not exceeding the market price of the goods which are sought to be smuggled or the smuggled goods, as the case may be, and held that the maximum redemption fine which can be imposed cannot be more than ₹ 51,82,850/- - Thus, the Tribunal, on a correct interpretation of the proviso to sub-section (2) of section 115 of the Act of 1962 has held that the maximum fine on the conveyance cannot exceed the value of goods sought to be smuggled or the smuggled goods. The view taken by the Tribunal do not suffer from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law, warranting interference - appeal dismissed.

Summary

Issues Involved:
1. Interpretation and application of Section 115(2) of the Customs Act, 1962.
2. Appropriateness of the redemption fine imposed on the tug MV Al-Vard.
3. Applicability of the proviso to Section 115(2) in the context of the case.

Detailed Analysis:

1. Interpretation and Application of Section 115(2) of the Customs Act, 1962:
The primary issue was whether the Tribunal erred in interpreting and applying the provisions of Section 115(2) of the Customs Act, 1962. The court examined the language of Section 115, which deals with the confiscation of conveyances used in smuggling. Sub-section (2) states that any conveyance used in smuggling is liable to confiscation unless the owner proves ignorance of such use. The proviso to this sub-section allows the owner to pay a fine not exceeding the market price of the smuggled goods instead of confiscation if the conveyance is used for hire. The Tribunal interpreted this proviso to mean that the maximum fine should not exceed the market price of the smuggled goods, which was ?51,82,850 in this case. The court upheld this interpretation, stating that the Tribunal correctly applied the law by reducing the fine to ?8 Lakhs.

2. Appropriateness of the Redemption Fine Imposed on the Tug MV Al-Vard:
The adjudicating authority initially imposed a redemption fine of ?1.75 Crores on the tug MV Al-Vard, valued at ?6.75 Crores. However, the Tribunal reduced this fine to ?8 Lakhs, considering the market value of the smuggled goods and the principles laid down by the Supreme Court in Jain Exports Pvt. Ltd. The court noted that the Tribunal's decision was based on a correct interpretation of the proviso to Section 115(2) and the totality of circumstances, including the benefit derived by the respondent from the illegal import. The court found no legal infirmity in the Tribunal's decision to reduce the fine, as it was consistent with the statutory provisions and judicial precedents.

3. Applicability of the Proviso to Section 115(2) in the Context of the Case:
The appellant argued that the proviso to Section 115(2) only applies when the conveyance is used for hire, which was not the case here since the respondent owned the tug. However, the court pointed out that the adjudicating authority had already applied the proviso by imposing a redemption fine in lieu of confiscation, and this decision was not challenged by the appellant. Therefore, the appellant could not now argue that the proviso was inapplicable. The court also referred to the Supreme Court's judgment in Deputy Commissioner, Dakshina Kannada District vs. Rudolph Fernandes, which supported the Tribunal's interpretation that the fine should not exceed the market price of the smuggled goods.

Conclusion:
The court concluded that the Tribunal correctly interpreted and applied the proviso to Section 115(2) of the Customs Act, 1962, and appropriately reduced the redemption fine on the tug MV Al-Vard. The appeal was dismissed as it did not raise any substantial question of law warranting interference. The civil application for stay was also disposed of in light of the appeal's dismissal.