2024 (12) TMI 1471 - AT - Customs

Recovery of redemption fine from an unpaid seller, for re-exporting the goods, without any contravention having been committed by them under the Act of 1962 - excessive and arbitrary fine imposed - recovery of the penalty amount from the unpaid seller - HELD THAT - It is an admitted fact that the unpaid seller s application dated 16.08.2021 for re-export of goods was accepted by the adjudicating authority as he was considered as the owner of goods. Irrespective of the above, it is not disputed by the department as well that the importer M/s. Agricas LLP vide letter dated 30.08.2021 had abandoned the goods and gave their no objection to the unpaid seller to seek reexport of the goods from the Customs department. It is clear from the observations of the original authority that the unpaid seller s application for re-export has been allowed by him and the said fact has been accepted by the department, which is evident that no appeal against such order has been filed by the department. The said fact has not been disputed by the learned AR for Revenue as well. The payment of redemption fine and penalty were made under protest and as such, the right of the appellants to file the present appeal cannot be disputed or questioned by the department. Imposition of redemption fine - HELD THAT - The issue regarding imposition of redemption fine on re-exportation of the goods is settled by the judgement of Hon ble Supreme Court in the case of Siemens Ltd Vs. Collector of Customs 1999 (8) TMI 84 - SUPREME COURT , wherein the imposition of redemption fine by the department was set aside, holding that in case of re-exportation of goods, neither the redemption fine nor the duty is required to be paid and accordingly, ordered for refunding the redemption fine paid by the importer-appellants therein - the Hon ble Supreme Court have dealt with the issue relating to the same notification and similar set of facts, as involved in the present appeal. However, the only difference being that while we appreciate the submissions of the appellants that the said findings are importer specific, it cannot be lost sight of the fact that the redemption fine has been imposed on redeeming the offending goods under Section 125 of the Act of 1962. Section 125 of Act of 1962 provides discretion to an adjudicating authority to levy a redemption fine keeping the facts of each case in mind. It is expected of the adjudicating authority to use the said discretion judiciously by levying appropriate fine in deserving cases like the one under consideration. Thus, considering the overall facts and circumstances of the case in hand, the quantum of redemption fine can be reduced in the interest of justice. Therefore, the impugned order is modified, to the extent of reducing the redemption fine to Rs. 5,00,000/-. Conclusion - The unpaid seller has not contravened any provisions of the Act of 1962, which have rendered the goods liable for confiscation. The quantum of Redemption fine reduced to Rs. 5,00,000/-. The penalty is upheld. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

• Can redemption fine be recovered from an unpaid seller for re-exporting goods, without any contravention having been committed by them under the Customs Act, 1962?
• Is redemption fine imposable in the circumstances of the present case, and if so, is the fine imposed excessive and arbitrary?
• Is the Customs department justified in recovering the penalty amount from the unpaid seller, on whom the same was not imposed under the provisions of the Customs Act, 1962?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Redemption Fine Recovery from Unpaid Seller

• Relevant Legal Framework and Precedents: The Customs Act, 1962, particularly Sections 111(d), 112(a), and 125, governs the confiscation and imposition of fines. The Supreme Court's decision in the case of Raj Grow Impex LLP provided guidance on re-exportation of prohibited goods with redemption fine.
• Court's Interpretation and Reasoning: The Tribunal noted that the unpaid seller, represented by the appellants, had not contravened any provisions of the Act of 1962. The goods were considered prohibited due to import policy changes, not due to any action by the unpaid seller.
• Key Evidence and Findings: The unpaid seller was recognized as the owner of the goods due to non-payment by the importer. The department had not disputed the unpaid seller's right to re-export.
• Application of Law to Facts: The Tribunal applied the Supreme Court's decision, which allowed re-export on payment of redemption fine, but considered the unique position of the unpaid seller.
• Treatment of Competing Arguments: The Tribunal acknowledged the department's stance but emphasized that the unpaid seller had not committed any contravention.
• Conclusions: The Tribunal concluded that the imposition of a Rs. 3 crore redemption fine was excessive and arbitrary, reducing it to Rs. 5 lakh.

Issue 2: Imposition of Redemption Fine

• Relevant Legal Framework and Precedents: The Tribunal referred to the Siemens Ltd. case, which established that redemption fine is not required for re-exportation.
• Court's Interpretation and Reasoning: The Tribunal acknowledged the Supreme Court's specific direction in Raj Grow Impex LLP, which required redemption fine for re-exportation.
• Key Evidence and Findings: The Tribunal noted that the unpaid seller had incurred substantial expenses and had not benefited from the import.
• Application of Law to Facts: The Tribunal balanced the Supreme Court's directive with the unpaid seller's situation, leading to a reduction in the fine.
• Treatment of Competing Arguments: The Tribunal considered the department's argument for the fine but found it excessive given the circumstances.
• Conclusions: The Tribunal reduced the redemption fine to Rs. 5 lakh, considering the unpaid seller's lack of contravention and financial burden.

Issue 3: Recovery of Penalty from Unpaid Seller

• Relevant Legal Framework and Precedents: Section 112(a) of the Customs Act, 1962, deals with penalties for improper importation.
• Court's Interpretation and Reasoning: The Tribunal found that the penalty was imposed on the importer, not the unpaid seller, and was paid under protest by the latter.
• Key Evidence and Findings: The Tribunal noted the absence of any contravention by the unpaid seller.
• Application of Law to Facts: The Tribunal recognized the unpaid seller's right to seek a refund through appropriate channels.
• Treatment of Competing Arguments: The Tribunal acknowledged the department's position but highlighted the lack of legal basis for recovering the penalty from the unpaid seller.
• Conclusions: The Tribunal granted the unpaid seller liberty to seek a refund from the appropriate forum.

3. SIGNIFICANT HOLDINGS

• Verbatim Quotes of Crucial Legal Reasoning: "The unpaid seller has not contravened any provisions of the Act of 1962, which have rendered the goods liable for confiscation."
• Core Principles Established: Redemption fines should be proportionate and consider the specific circumstances of the case. Penalties should not be recovered from parties not responsible for contraventions.
• Final Determinations on Each Issue: The redemption fine on the unpaid seller was reduced to Rs. 5 lakh. The penalty recovery from the unpaid seller was deemed unjustified, allowing them to seek a refund through appropriate channels.