2023 (2) TMI 491 - AT - Customs

Absolute Confiscation - redemption of goods denied on the ground of it being prohibited goods - Mosquito swatter/bat - imported goods are prohibited in nature since the DGFT notification (effect of the notification was, mosquito killer racket under HS code 85167920 and 85167990 in theimport policy was revised from free to prohibited) was issued on 26.04.2021 and the Bill of Lading date was also 26.04.2021 - HELD THAT - Both the Adjudicating authority and Ld. Commissioner (Appeals) are of the opinion that, prohibited goods cannot be redeemed which is contrary to the decision of the Hon ble Supreme Court relied upon by the consultant in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA 1996 (12) TMI 50 - SUPREME COURT , wherein it was held that Absolute confiscation should be an exception rather than a Rule. Without exploring any other alternative it has been held that goods are liable for confiscation. The case law relied upon by the Ld. Commissioner (Appeals) M/S. Pam Agro Industries 2021 (3) TMI 910 - GUJARAT HIGH COURT , has got no application in the present case. In that case ultra vires of the DGFT Notification restricting and amending the policy was under challenge. Besides the amount of MIP fixed for cashew nuts was in dispute which is not the case here. Hence the case law relied upon by the Ld.Commissioner (Appeals) is completely distinguishable from the present case. In the present case, the goods were ordered for shipment in 19.04.2021 and goods were shipped on 26.04.2021. So it is admitted that the items become prohibited since the declared value was much lower than Rs. 121/- per piece as per the DGFT notification dated 26.04.2021. In terms of the policy para- 1.05, as transitional arrangement in case of export and import that is permitted freely under FTP is subsequently subjected to any restriction or regulations, such export or import ordinarily be permitted, notwithstanding such restrictions or regulations, unless otherwise stipulated. This is subject to the condition that the shipment of export or import is made within the original validity period of an irrevocable commercial letter of credit, established before the date of imposition of such restrictions - Since the order for supply of the goods was not backed by any LC, no benefit of transitional arrangement can be extended. There are force in the submission of the Ld.Consultant that in the case of Har Govind Das K. Joshi Vs. Collector 1987 (1) TMI 107 - SUPREME COURT the Hon ble Supreme Court held that absolute confiscation of goods by Collector without question of redemption on payment of fine although having discretion but omitted to consider such a discretion available with him and remanded the matter to Collector for consideration of an exercise of discretion for imposition of Redemption fine. Besides, since the policy was amended when the shipment was in process their mala fide intention cannot be proved without any additional evidence to invoke penal clause under section 112 of the Customs Act 1962. In the meantime the consultant produced documents and photographs stating that, the goods are suffering huge demurrage and partly some imported items stuffed in the container are damaged which were required to be verified maintaining the principles of natural justice. The Appeals filed by the Appellants are allowed by way of remand to the Adjudicating authority for denovo consideration and to decide the case using the discretion in a prospective manner.

Summary

Issues Involved:
1. Prohibition of imported goods due to DGFT notification.
2. Absolute confiscation vs. redemption of goods.
3. Imposition of penalties under the Customs Act, 1962.
4. Application of judicial precedents and principles of natural justice.

Issue-wise Detailed Analysis:

1. Prohibition of Imported Goods Due to DGFT Notification:
The importers brought in mosquito swatters/bats from China at a unit price of USD 0.34 per piece. On 26.04.2021, the DGFT issued Notification No. 02/2015-20 amending the import policy to prohibit mosquito killer rackets under HS codes 85167920 and 85167990 if the CIF value was below Rs. 121/- per racket. The goods were shipped on the same date, making them prohibited under the new policy. The appellants argued that the goods were handed over to the shipping agent on 21.04.2021, before the notification date, and thus should not be subject to the prohibition.

2. Absolute Confiscation vs. Redemption of Goods:
The adjudicating authority and the Commissioner (Appeals) upheld the absolute confiscation of the goods under Section 111(d) of the Customs Act, 1962, citing the Supreme Court's decision in Raj Grow Impex LLP, which supported the confiscation of restricted goods. The appellants contended that absolute confiscation should be an exception rather than a rule, referencing several cases where redemption was allowed for prohibited goods. They emphasized that the goods should be redeemable upon payment of a fine, considering the circumstances of the shipment and the lack of mala fide intention.

3. Imposition of Penalties Under the Customs Act, 1962:
Penalties were imposed under Section 112(a)(i) of the Customs Act, 1962, for acts leading to the confiscation of goods. The appellants argued that since the goods were shipped before the notification and there was no mala fide intention, penalties should not be imposed. They cited cases where penalties were waived due to the absence of wilful disobedience of the law.

4. Application of Judicial Precedents and Principles of Natural Justice:
The appellants argued that the lower authorities did not consider their submissions or provide reasoning, violating the principles of natural justice. They referenced the Supreme Court's decisions in cases like Har Govind Das K. Joshi and Atul Automations Pvt. Ltd., which allowed redemption of prohibited goods. The Tribunal noted that the Commissioner (Appeals) relied on the Raj Grow Impex LLP case without considering the specific facts and circumstances of the present case, which differed significantly from the cited precedents.

Conclusion:
The Tribunal observed that both the adjudicating authority and the Commissioner (Appeals) failed to explore alternatives to absolute confiscation and did not adequately consider the appellants' submissions. The Tribunal highlighted the need for a balanced decision considering all relevant factors and the principles of natural justice. Consequently, the impugned orders were set aside, and the cases were remanded to the adjudicating authority for de novo consideration, emphasizing the use of discretion in a prospective manner.