Customs, Excise and Service Tax Appellate Tribunal, Chennai: In an appeal filed by the Scania Commercial Vehicles India Pvt. Ltd.-Appellant against the order dated 02-03-2023 passed by the Commissioner of Customs (Appeals — II), Chennai (‘the Appellate Authority’), Ajit Kumar, Member (Technical) stated that once the goods were imported in contravention to the Customs Act, 1962 (‘the Customs Act’), they were liable for confiscation. In case, the goods were ‘prohibited goods’, it was within the discretion of the Proper Officer to confiscate the goods or to allow it to be redeemed on payment of a fine. Releasing prohibited goods without imposing a fine was not a valid option. In the present case, after the appellant informed that they were unable to fulfil the conditions of Environmental Protection Rules, 1986 (‘EPR, 1986’), it was incumbent to confiscate the imported prohibited goods. Once the goods were confiscated, the title of the goods was held by government and to get back the possession of the goods, redemption fine was needed to be paid.
The Tribunal opined that a penalty was the result of a breach of statutory duty. While a fine was imposed on the redemption of offending goods imported in breach of law, a penalty was levied on a person responsible for the breach of statutory duty. Thus, the Tribunal did not find any ground for interference in the present case and dismissed the present appeal.
Background
Appellant had an automobile manufacturing facility at Narasapura, Karnataka and was specialized in manufacture of truck, bus, automobile engines etc. The appellant filed Bills of Entry (‘BE’) for import of eight diesel engines and one industrial engines for home consumption and deposited customs duty of Rs. 36,59,136. The imported engines were found not to be supported by Type Approval Certificate and the Certificate of Conformity of Production as prescribed under the EPR, 1986.
Since, the appellant could not furnish the certificates from the supplier, they amended the BE from home consumption to warehousing as per Section 49 of the Customs Act and requested for re-export of the diesel engines. Further, due to their inability to produce the requisite certificates and comply with the mandatory provisions of import, the appellant requested the matter to be adjudicated. After due process of law, the adjudicating authority confiscated eight diesel engines and one industrial engine imported on 4-12-2021 and allowed redemption of the said goods on payment of Rs.8 lakhs for re-export as requested within a period of sixty days. The adjudicating authority also imposed penalty of Rs. 3 lakhs on the appellant.
The appellants paid the redemption fine and penalty under protest as they were incurring heavy demurrage charges. The appellants filed an appeal before the Appellate Authority who vide the impugned order rejected the appeal and allowed thirty days’ time for re-exporting the goods. Hence, the appeal was filed before this Tribunal.
Analysis, Law, and Decision
Issue 1: When the goods were re-exported, the question of confiscation of goods under Section 111(d) of the Customs Act, 1962 did not arise.
The Tribunal stated that the goods become liable to confiscation if the importer or the exporter contravenes any provisions of the CA Act or any other Act for the time being in force. In the present case, the goods were imported in contravention of the EPR, 1986, hence, they were prohibited goods. The Court referred to Union of India v. Raj Grow Impex LLP, (2021) 18 SC 601 and stated that due to a distinction made between ‘prohibited goods’ and ‘other goods’ under Section 125(1) of the Customs Act, there was no compulsion to allow redemption of prohibited goods.
Confiscation of offending goods under section 111(d) was an action precedent to allow the same to be redeemed under section 125 of the Customs Act. The permission for export of prohibited goods that were confiscated and redeemed, was an administrative order and it came into operation only after the importer gets back title to the confiscated goods on paying the redemption fine. The Tribunal stated that the permission for re-export was bundled and passed in a quasi-judicial order relating to the confiscation and redemption of goods was only for administrative convenience. Further, it provided certainty to the action the importer was permitted to take post redemption of the goods. It also made it easier for the importer, who did not have to file a fresh application for export post redemption of the goods and await an uncertain outcome.
Thus, the Tribunal stated that it was clear that an order permitting re-export of goods was sequentially a separate process which would come into play only after the importer redeems the confiscated goods. Simply because the decision was bundled along with a quasi-judicial order, it would not change the sequence of events. Therefore, confiscation of goods under Section 111(d) of the Customs Act was must before the administrative permission for the export of the said goods was given at the administrative discretion of the Proper officer.
Issue 2: No redemption fine was imposable on the goods that were re-exported.
The Tribunal stated that once the goods were imported in contravention to the Customs Act, they were liable for confiscation. In case the goods were ‘prohibited goods’, it was within the discretion of the Proper Officer to confiscate the goods or to allow it to be redeemed on payment of a fine. Releasing prohibited goods without imposing a fine was not a valid option. In the present case, after the appellant informed the Proper Officer that they were unable to fulfil the conditions of EPR 1986, it was incumbent on the Officer to confiscate the imported prohibited goods. Once the goods were confiscated, the title of the goods was held by government and to get back the possession of the goods, redemption fine as decided by the Proper Officer was needed to be paid.
The Tribunal stated that to allow the redemption of prohibited goods was part of the Proper Officer’s discretionary jurisdiction. No court had laid down the law that prohibited goods, imported without authorization, were to be released for re-export without payment of redemption fine. Such a stance would encourage importers smuggling / making improper import of goods, to take a chance with the law and if caught request for re-export of the offending goods without a fine.
The Tribunal stated that if the offending goods were cleared for home consumption, fine was to be imposed and if the importer requested for its export, no fine could be imposed. The position was legally untenable and discriminatory. The offence did not get cured by the intended destination of the goods. Confiscated goods could be redeemed either for home consumption / warehousing or for export only on payment of a fine. Thus, the Tribunal stated that the impugned order was legal and proper and no interference in the discretion exercised by the Proper Officer was called for.
Issue 3: No penalty under Section 112(a) cannot be imposed when goods are re-exported.
The Tribunal opined that a penalty was the result of a breach of statutory duty. The main object behind the imposition of penalty was deterrence. Re-export of the goods did not cure the breach of statutory duty already committed. While a fine was imposed on the redemption of offending goods imported in breach of law, a penalty was levied on a person responsible for the breach of statutory duty. No interference should be made by an appellate body, in the discretionary order passed by a lower authority, just because another view might be possible, except on grounds of mala fides or extreme arbitrariness. Thus, the Tribunal did not find any ground for interference in the present case and dismissed the present appeal.
[Scania Commercial Vehicles India (P) Ltd. v. Commr. of Customs, 2024 SCC OnLine CESTAT 587, Order dated 07-06-2024]
Advocates who appeared in this case :
For the Appellant: S. Ganesh Aravindh, Advocate;
For the Respondent– M. Selvakumar, AC (AR).
