Customs - Redemption Fine - Duty is payable even if confiscated goods are not redeemed - If benefit is given to another assessee illegally, Court cannot perpetuate illegality: Bombay High Court

By TIOL News Service

MUMBAI, JULY 20, 2009:THE High Court had admitted the appeals with the following questions;

“(a) Whether in the facts and circumstances of the case, it was open to CESTAT to hold that whether or not the confiscated Hospital Equipments are redeemed by the Appellant, they would be required to pay the Customs duty payable on confiscated Hospital Equipment?

(b) Whether in the facts and circumstances of the case while passing a common order, it was open to CESTAT to hold that one of the parties viz. Harkisandas Hospital before it is not required to pay the duty on the confiscated goods if not redeemed but the present Appellant would be liable to pay the duty on the confiscated goods whether or not the same are redeemed?”

The present appeal is against the order dated 11.6.2008 passed by CESTAT, which disposed of amongst others, appeal bearing No. C/676/02/Mum filed against the order dated 30.3.2002 of the Commissioner of Customs (Airport), respondent herein. It was submitted on behalf of the appellant before CESTAT that once the imported goods are confiscated under section 125 of the Customs Act, 1962, and the option to release them is not exercised, no duty is payable. It was also a grievance of the appellant, that, in the case of Harkishandas Hospital, in its appeal bearing No. C/1468/02 the tribunal upheld that no duty is payable in similar circumstances.

The appellant herein had imported hospital equipments covered by the Notification No. 64 of 1988 dated 1.3.1994 without payment of duty. It was the contention on behalf of the revenue that respondents has not complied with the conditions of the notification and consequently the duty which was earlier exempted was payable. Considering the questions framed, factually the issue that there was violation of conditions of import is not in dispute.

The main question therefore, is in a case where imported goods are confiscated, and goods are not redeemed by paying fine, were the appellants bound to pay duty.

The High Court observed that the issue really stands concluded considering the Coordinate Bench Judgments of this Court in Commissioner of Customs Vs . Wockhardt Hospital and Heart Institute , reported in 2006-TIOL-115-HC-MUM- CUS and the judgment in Bombay Hospital Trust Versus Commissioner of Customs (ACC) Mumbai 2006-TIOL-170-HC-MUM- CUS

Apart from that, the legislature has made it clear that even if the goods are released on payment of fine, such person is also liable to pay duty and charges thereon. The fine payable to get possession of the goods under section 125 is distinct and different from the duty of goods which are to be imported or exported. It is the nature of recompense to the state for goods which are vested in it and on sale would have realized the value of the goods and from that to recover the duty which is unpaid as also fine.

The other contention which has been raised is that in similar situation, the tribunal exempted payment of duty in the case of Harkishandas Hospital .

The High Court observed, “Even assuming that the tribunal has acted arbitrarily in the case of Harkishandas Hospital that by itself is no ground for the appellant to contend that they should also be exempted from the payment of duty. The exemption and or remission is only as provided under the Act. If not provided under the Act, neither A.O. nor the tribunal or courts can exercise the jurisdiction of waiving the payment of duty. If what the appellant says is correct, at the highest it is for the respondents to prefer an appeal against that order in case of Harkishandas Hospital . At any rate if the order is illegal, this court cannot perpetuate the illegality. We may add a note of caution that we are not aware of the facts in the case of Harkishandas .”

The Court passed the following order :

Question (a) is answered in the affirmative against the assessee and in favour of the Revenue.

In so far as question (b) is concerned, in the absence of Harkishandas Hospital being a party to this proceedings , the said question is left unanswered.

(See 2009-TIOL-353-HC-MUM-CUS in 'Customs')