By TIOL News Service

MUMBAI, APR 05, 2017: REVENUE has filed appeals against the order passed by the Commissioner of Customs (Import), Air Cargo Complex, Mumbai in the matter of alleged non-inclusion of advance royalties paid to overseas supplier, a related person, and suppression of this fact at the time of import.

The AA revised the AV and confirmed differential duty demand; goods that were available were confiscated u/s 111 and allowed to be redeemed on payment of fine; one 'ADSL access concentrator' and eight 'ADSL modules', being not available, was not confiscated . Penalties were also imposed u/s 112 of the Customs Act, 1962.

It is the contention of Revenue that the goods that were not confiscated should have been and redemption fine quantified thereon. Reliance is placed on the decisions in Venus Enterprises - 2005-TIOL-1658-CESTAT-MAD and Vibhuti Exports - 2005-TIOL-1053-CESTAT-DEL Furthermore, Revenue view is that the adjudicating authority, having confirmed duty liability u/s 28 of Customs Act, 1962, should have invoked the penal provisions u/s 114A of Customs Act, 1962.

The Bench observed -

+ Doubtlessly, offending goods must be held liable to confiscation as a pre-requisite for penalty to be imposed under section 112 of Customs Act, 1962. In the present instance, except for those that were unavailable, goods have been confiscated and penalty imposed on importers as well as on ShriNitin B Patel. Even if the goods that were not available were to be confiscated, it would not matter a whit to the quantum of penalty that has been imposed in the impugned order, nor is there any contention in the appeal that the quantum of penalty under section 112 should be enhanced. Obviously, Revenue is concerned that the redemption fine that, if collected from importers of goods that are not available, would swell the coffers of the State.

+ Distinction between holding the goods liable to confiscation and confiscation; one or the other is sufficient pre-requisite for imposition of penalty under section 112 of Customs Act, 1962 but crystallizing a redemption fine is a consequence only of confiscation proper. Hence, the wild dream of the reviewing authority who directed this appeal shall remain a mere figment chimera in the absence of goods to make good the pledge to redeem.

+ The contention that unavailable goods should not only be confiscated but also subject to redemption has no legal support and must fail.

On the issue of failure to impose penalty under section 114A, the Bench reproduced the provisions of the said section 114A of the Customs Act, 1962 and observed that the Revenue had in its appeal shown that the extracted provision of section 114Areads thus -

'Where the duty has been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful statement or suppression of fact the person who is liable to pay duty or interest, as the case may be, as determined under section 112 shall also be liable to pay penalty equal to duty so determined.'

Apparently miffed with the incorrect 'reproduction' of the provision, the Bench came down heavily on the Revenue and penned the following lines in its order -

++ It would appear that a skillful grafting has been attempted with intent to deceive the Tribunal or that a matter of the sleight, for reasons best known to such persons, has inveigled the review committee into raising this ground incorrectly.

++ In either situation, it does not do credit to the integrity or the expertise of officials who constituted this particular Review Committee.

++ In the most polite terms; it can only be described as a matter of shame and it is expected the Central Board of Excise & Customs take steps to ensure that the incompetence and ineptitude is reflected in their records and that other officers are impressed upon the need to guard against such demonstrated deceit .

In the context of imposition of penalty u/s 114A, the Tribunal further observed -

+ Confiscation is a proceeding that follows the determination of goods having offended specific provisions of the Customs Act, 1962. With such confiscation, and consequent redemption, the offending goods lose that pejorative qualification and are regularized.

+ When goods are subject to confiscation for mis-declaration of value, the offence of mis-declaration and its attendant tentacles get erased. Payment of duty is, thereby, on goods that are no longer offending and, hence, cannot be imposed with another penalty under section 114A.

+ With the mandatory nature of section 114A in the circumstances enumerated therein, the imposition of penalty under section 112 would compromise recourse to section 114A. In the present instance, only one of the penalties could have been imposed and the adjudicating authority has, by adopting section 112, regularized the offence of mis-declaration to foreclose imposition of penalty under section 114A.

The Single Member Bench concluded thus -

++ Even if I was inclined to consider that penalty under section 114A is mandatory and, by setting aside the penalty on the importers under section 112, remand the matter back to original authority to determine the imposition of penalty afresh, the deceit that was attempted to be perpetrated by the Review Committee forbids from doing so. That is the only recourse to send a salutary lesson to reviewing authorities.

The appeals of Revenue were rejected.

In passing: Quite possibly, this is not the last that we hear of this case…

(See 2017-TIOL-1129-CESTAT-MUM)