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TMI Blog2019 (4) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... and of other goods is relevant only to the extent of the discretion in the adjudging officer to permit their redemption by payment of fine. Once there is a failure to pay the fine within the time stipulated, the consequence is the same whether the goods are prohibited goods or other goods . The transient nature of the confiscation ends and it becomes absolute . This is what is made clear by Section 126 of the Act. Sections 125 and 126 of the Act form one continuous scheme and are not to be read disjunctively. Once the vesting of the goods in the government is absolute, it would be inconsistent with the character of that vesting to contend that the Central Government can only recover through the sale of such goods the duty, penalty and interest and should return the excess to the owner/possessor of the goods. The question referred to this Bench is answered in the affirmative by holding that under Sections 125 read with Section 126 of the Act, where the redemption fine in lieu of confiscation is not paid within the time stipulated, the Central Government is entitled to retain the excess auction sale proceeds of the confiscated goods, after adjustment of the duty, penalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... February, 2012 in a single consignment and warehoused the said consignment in a public bonded warehouse by executing a Warehousing Bond under Section 59 of the Customs Act, 1962 ( Act ). 3. GIL imported 300 Power Tooth Brushes under B/E No. 6029833 dated 17th February, 2012 (hereafter B/E No. 2 ) and executed a warehousing bond in respect thereof under Section 59 of the Act. 4. The third consignment comprising (a) 76,800 units of Gillette Mach 3 Cartridges (b) 1,02,400 units of Gillette Mach 3 (c) 2,68,800 units of Gillette Mach 3 Cartridges (d) 30,720 units of Gillette Fusion Cartridges was imported by Bill of Entry No.6568999 (hereafter B/E No. 3 ) dated 17th April, 2012. This was warehoused in the public bonded warehouse for which a Warehousing Bond was executed by GIL under Section 59 of the Act. It is stated that a substantial portion of the said consignment was removed during the warehousing period. However, one portion thereof containing 7680 pieces remained in the warehouse. 5. A request was made by the Petitioner for extending the warehousing period under Section 61(1) of the Act in respect of the aforementioned B/Es. A personal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, 2015 has been placed on record. 11. Mr Satish Kumar, learned Senior Standing Counsel for the Department, states that the Department is yet to receive notice in the aforementioned appeal. Mr Jayant Mehta, learned counsel for the Petitioner, on the other hand states that he has no information as such on status of the appeal except to the extent that it is still pending before the CCA. 12. GIL states that in respect of the order passed with reference to B/E No. 1 it made payment of the duty, penalty, interest and redemption fine by a challan dated 15th April, 2014 with a delay of 74 days from the expiry of last date of payment. It is however contended that if the period is calculated from the date that GIL received a copy of the said order, the delay in making payment worked out to 25 days. 13. GIL states that in respect of the order passed with reference to B/E No. 2 it made payment of the duty, penalty, interest and redemption fine by a challan dated 12th May 2014 with a delay of 100 days, which if calculated from the date of receipt of the order worked out to 51 days. 14. On 25th July 2014, GIL addressed a letter to the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as B/E Nos. 1 and 2 are concerned even if an auction sale of the good imported thereunder has taken place, the amount recovered by the Department, in excess of the duty, interest, penalty and redemption fine will have to be handed over to the importer. In support of this submission reliance is placed by Mr. Mehta on the decision of the Division Bench of this Court in MMTC v. Surjit Singh Kanda 196 (2013) DLT 725 (DB). 20. As far as B/E No.3 is concerned, it is submitted by Mr. Mehta that there is a Circular No.711/4/2006 dated 14th February 2006 issued by the Central Board of Excise and Customs (CBEC) which mandates that where an appeal has been filed against an order of confiscation of goods and when such appeal is pending, the goods confiscated would cannot be sold by public auction or in any other manner unless notice is issued to the owner of the goods. Further a reference is made to the decision in Kailash Ribbon Factory Ltd. v. Commissioner of Customs Central Excise 2002 (143) ELT 60 (Del) which mandates that confiscated goods which are the subject matter of an appeal before the Tribunal or Court shall not be auctioned or disposed of without prior writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6th January, 2015 in SLP (C) No. 35999-36000 of 2013 by which leave was granted giving rise to the aforementioned appeals. By the said order and the interim relief granted earlier was directed to continue. 24. Consequently, as far as B/E Nos. 1 and 2 are concerned, the Court permits the Department to encash the DD deposited by the auction purchaser, release the goods imported thereunder to the auction purchaser and issue the requisite sale confirmation. This is subject to the Department abiding by the further directions that may be issued by the Court at the time of disposal of this petition. It is made clear that GIL would have no right to seek the return of the aforementioned goods that are handed over to the auction purchaser. The question whether the Department is required to pay GIL the amount recovered in excess of the duty, interest, penalty and redemption fine will be considered, and appropriate directions issued in that regard, by the Larger Bench while disposing of the petition. 25. As far as B/E No.3 is concerned, the appeal preferred by GIL against the Order-in-Original dated 30th December 2014 is stated to be pending before the CCA. In term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods , the word vest would mean a limited vesting for the purposes of realisation of duty, interest and fine. This interpretation is stated to be supported by the language of Section 150 of the Act. 7. The legislative intent that was apparent on a reading of Sections 125, 126 and 150 of the Act was not to enable the government to profit from the confiscation of goods improperly imported. The only purpose of the confiscation was to recover the duty, penalty and interest and nothing more. It is accordingly submitted that the decision of the DB in MMTC v. Surjit Singh Kanda (supra) was correctly decided and did not require reconsideration. Reference is also made to several other decisions, which would be discussed hereafter. Stand of the Respondents 8. The stand of the Respondents, as submitted by Mr. Sameer Jain, learned counsel appearing on their behalf, is that since Section 121 provides for confiscation of the entire sale proceeds of smuggled goods, an interpretation that restricts the scope of Section 126 of the Act and permits the use of the sale proceeds of the smuggled goods to only adjustment of duty, penalty and interest would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 111 provides for confiscation of improperly imported goods. Section 110 of the Act authorizes the proper officer to seize such goods that are liable for confiscation under this Act . Section 115 of the Act provides for confiscation of conveyance. Section 115 (2) states that any conveyance or animal used as means of transport in the smuggling of any goods or in the carriage of any smuggled goods, shall be liable to confiscation. The proviso thereto provides for the owner of such conveyance 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 . The Explanation thereto defines market price to mean market price at the date when the goods are seized . 13. There are several other provisions of the Act that deal with confiscation. Under Section 118 of the Act, the package in which the goods that are liable for confiscation are found, is also liable to be confiscated. The goods that are used for concealing smuggled goods are liable for confiscation under Section 119 of the Act. Under Section 120 of the Act, the smuggled goods m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless and appeal against such order is pending. 126. On confiscation, property to vest in Central Government. (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government. (2) The officer adjudging confiscation shall take and hold possession of the confiscated goods. 16. Section 150 of the Act deals with the procedure for sale of goods which are not confiscated and how those sale proceeds should be applied. Section 150 of the Act reads as under: 150. Procedure for sale of goods and application of sale proceeds. (1) Where any goods not being confiscated goods are to be sold under any provisions of this Act, they shall, after notice to the owner thereof, be s old by public auction or by tender or with the consent of the owner in any other manner. (2) The proceeds of any such sale shall be applied (a) firstly to the payment of the expenses of the sale, (b) next to the payment of the freight a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 75,90,977/- was issued against Mr. Kanda, his firms and the guarantor Mr. T. Shah Singh. It was directed that in case they did not make the payment of the above amount, it would be recovered by auction/sale of hypothecated assets, the mortgaged properties and other personal properties. 17.5 With no payment forthcoming under the recovery certificate, the immovable property, plant and machinery was sold by the Recovery Officer of the DRT in favour of M/s Panna Jewellery. The DRT formulated the question who has the first charge of lien over the right over the hypothecated stock of gold and jewellery as well as the plant and machinery between the Applicant, i.e., Indian Bank and the Respondent Nos. 3 and 4 i.e. MMTC and the Customs Department. The DRT held that MMTC had the first charge over the gold while Indian Bank had the first charge as far as the plant and machinery was concerned. 17.6 MMTC, Indian Bank and the Customs Department filed separate appeals before the DRAT, which held that the claim of Indian Bank had precedence over the claims made by the MMTC and the Customs Department. In other words, it was held that the Indian Bank had the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, when the Petitioner has come forward to pay the redemption fine prior to the public auction, but beyond the deadline, it would be unfair for the Customs Department to be permitted to appropriate the entire auction sale proceeds permitting it to be profited from the lapse of the Petitioner. The interest of the Department is completely protected since it had recovered the entire duty, interest and penalty amounts. As far as the Petitioner was concerned, nothing more was to be payable beyond those amounts to the Customs Department. It is submitted that it is only logical and fair that the excess amount, after adjustment of duty, interest and penalty, should be returned by the Customs Department to the Petitioner. 19. The crucial line in the judgment in MMTC v Surjit Singh Kanda (supra) is about the Customs Department not being able to appropriate the said goods forever , even when the penalty, duty and other charges are paid by the importer . The said judgment proceeds on the basis that once the Customs Department recovers the entire customs duty, penalty and interest, it cannot claim any further amount. In the said case, however, the question of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lligible, rational criteria. The objective of Section 150 of the Act is for the government not to recover more than the duty, penalty and interest. This explains the requirement under Section 150 (2) for the balance, if any after adjusting the sums spelt out in clauses (a) to (e) thereunder, to be paid to the owner of the goods. 23. The submission of Mr Mehta for the Petitioner that the same treatment should be accorded to goods that have vested in the central government under Section 126 of the Act overlooks the obvious distinction in the two situations. Under Sections 125 and 126 of the Act, there is no restriction on the use of the auction proceeds following the absolute vesting of the confiscated property with the government. The importer/owner/possessor of the goods loses control over the property thereafter. It logically follows that the government is free to retain the excess sale proceeds after adjusting the duty, interest, penalty, warehousing charges and any other dues. 24. It is trite that the rule of strict interpretation would apply to taxation statutes and there is no equity in tax. In Bharat Sanchar Nigam Limited v. ACIT Manu/ID/046 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency. The Court could not add words to statutes or read words into it which are not there, especially when the literal reading produces intelligible results. Reference may be made to Dadi Jaganath Dham v. Jammullu Ramulu AIR [2001] (SC) 2699 at 2703. Any presumption to the contrary in the absence of any ambiguity would be contrary to the settled legal position as the legislature as far as possible is presumed to know what it intends to stay. Supreme Court decisions 25. There are a large number of decisions that explain what happens when a property vests in the government. In Shewpujanrai Indrasanrai Ltd v. The Collector of Customs AIR 1958 SC 845 , it was recognized that the property vests absolutely in the government once a confiscation order was made. It was held that all other rights of any other person in the said property stands extinguished. In Fruit Vegetable Merchants Union v. Delhi Improvement Trust AIR 1954 SC 344, the word vest was held to be a word of variable import. The scheme of the relevant sections had to be read and construed for meaning purpose and rationale manner. It was held that a property must vest in title or may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deal with one more judgment relied upon by Mr Mehta in Shabir Ahmed Abdul Rehman v Union of India 2009 (235) ELT402 (Bom). In that case, the Petitioner on his arriving from Muscat on 17th April, 1997 was apprehended at the Bombay Airport. He was carrying 41 gold bars valued at ₹ 18,88,337/- (international market value) and ₹ 23,16,500/- (local market value) concealed in a pouch. The gold bars were seized from the Petitioner on the belief that they were liable to be confiscated. After an SCN was issued only 3rd July, 1997, by an order dated 11th November, 1997, the said gold was liable to be confiscated. A penalty of ₹ 3 lakhs was imposed. 27.2 The Petitioner then filed an appeal in which the gold was directed to be reshipped subject to the payment of fine ₹ 6 lakh and the personal penalty was reduced from ₹ 3 lakh to ₹ 1 lakh. Both the Department and the Petitioner filed revision application before the Government of India. 27.3 The Joint Secretary to the Government of India by the order dated 21st September, 1998 held that the Petitioner was entitled to redeem the confiscated gold subject to payment of duty and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The only principle decided was that during the pendency of the appeal confiscated goods could not have been auctioned without the prior permission of the appellate court . The entire value of the confiscated goods was directed to be returned to the Petitioner. The context in the present case is different. This decision too, is therefore, not of any assistance to the Petitioner. Conclusions 30. To summarise the conclusions: (a) Once there is a failure to pay the redemption fine in lieu of confiscation as determined under Section 125 of the Act, within the time stipulated, the consequence of the confiscation becoming absolute and the confiscated goods vesting absolutely in the central government inevitably has to follow in terms of Section 126 of the Act. The consequence is the same whether the goods are prohibited goods or other goods . (b) Sections 125 and 126 of the Act form one continuous scheme and are not to be read disjunctively. Once the vesting of the goods in the government is absolute, it would be inconsistent with the character of that vesting to contend that the Central Government can only recover th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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