Imposition of Redemption Fine at time assumes debate under certain circumstances. Accordingly, whether imposition of Redemption Fine is justified when the Imported Goods are Cleared under the Conditions of Notifications such as Advance Authorization(DEEC) and EPCG etc. needs a critical analysis at its best.
The question requires fresh look as in some of the cases, it is contested by the importers/exporters that since the imported goods had already been cleared and in the custody of importer therefore, invocation of Section 125 of the Act is not justified.
In limine, before discussing the matter at hand in detail, a re-look of the concerned section is required; Section 125 broadly deals with imposition of redemption fine in lieu of confiscation.
Section 125 of the Customs Act reads as under :
“125. Option to pay fine in lieu of confiscation. – (1) Whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit :
Provided that, without prejudice to the provisions of the proviso to sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
(2) Where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges, payable in respect of such goods.”
Confiscation of Goods is sine qua non for Imposing Fine
It may be seen from the bare reading of the aforesaid section that under Section 125(1) of the Act, option is given to the importer/exporter whose goods are confiscated, to pay the fine in lieu of confiscation and redemption of the confiscated goods permitted. Prior to confiscation, keeping in view the principal of Natural Justice, show cause notice is issued under the provision of Section 124 of the Customs Act, 1962. It is cogent that for initiating the action of redemption, confiscation is condition precedent. In other words, without resorting to confiscation, no case is made out for imposition of redemption fine. However, in cases of Section 28, it is found that redemption fine is not imposable, as goods are not available for confiscation , as found to be cleared in the past. This section deals with the cases of past clearance. Here, proceedings is restricted to liability to confiscation so that penal liability can be fastened . Section 28 is only machinery section for recovery of duty , means demand can be made through it. It also takes help of section 111 which deals confiscation of improperly imported goods etc. Without being improperly imported , there would be no occasion for confiscation of goods , therefore for application of Section 28, aid of concerned sub section such as 111(l) and (m) is taken . Operation of Section 28 , would be not be fruitful , if it does not aided by Section 111 as without invoking section 111, no case would be made for imposing penal provisions under section 112 or 114A of the Customs Act. But not by any stretch of imagination , it calls for application of Section 125.
Redemption Fine Subject to Bond/BG
Further, availability of goods by way of seizure/detention and subsequent provisional release thereof by execution of Bond/BG or undertaking attracts the provisions of Section 125 and in the absence of any bond, imposition of redemption fine becomes otiose and hence non-maintainable and non-sustainable action in the eye of law. What follows from the above that availability of the goods is sin qua non for attracting the provisions of section 125. This is the reason when seized /detained goods are released unconditionally , in the event of failure to issue Notice either in the six months or within extended period under Section 124 , no fine can be imposed .It is settled position of law that failure to issue Show Cause Notice under period of limitation result in non- imposition of redemption fine(RF). To stay away from such situation, there is always tearing hurry or urgency to issue SCN under Section 124 under period of limitation. In those cases wherein no Bond/BG/undertaking is available, no question arises for imposition of RF. However, proceeding of confiscation and penalty will continue. Therefore, in case of seizure/detention, it is advisable to have Bond/BG before provisional release of the goods.
Import Clearance under Bond/BG under Section 143 of the Customs
Coming to particular issue at hand, which is subject matter of this discussion. .
The particular issue at hand relates to clearance of imported goods under some export promotion schemes such as EPCG, Advance Authorization etc under Bond executed under section 143 of the Customs Act. Here goods are cleared from customs under the conditions of Bond on payment of NIL duty or concessional rate of duty. Exemption from duty is subject to fulfillment of certain conditions enumerated in Bond, therefore any non-observance will be tantamount to not meeting the obligations, which was fastened upon the importer/exporter by the mandate of conditions of Notification and Bond and he requires to discharge the liability effectively by complying with conditions of Bond. Any non-compliance will render the import at first instance invalid and even goods being in custody of importer suppose hospital equipment, will give contingent ownership to importer. Thus title of the goods is imperfect and same would become perfect subject to fulfillment of certain conditions, which is post importation conditions. Therefore, any non-compliance of conditions of Bond will render the import invalid and attract redemption fine. Therefore such cleared goods under export promotion schemes although in custody and fold of importer in view of imperfect title, would still have the ownership of the Department. In view of the above, it will attract provisions of Section 125 due to clearance under and non-compliance of provisions of Bond thereof.
Case Laws on Imposition of Redemption Fine
The same was view was held in the case of CC, Amritsar v. Raja Impex [2008 (229) E.L.T. 185 (P & H)], wherein Punjab and Haryana High Court held that Section 125 of Customs Act, 1962 is applicable only in those cases where goods have been cleared subject to furnishing undertaking/bond etc.
Hon’ble Supreme Court in the case of Weston Components Ltd. v. CC, New Delhi – 2000 (115) E.L.T. 278 (S.C.) (supra) has observed following;
It is contended by the learned Counsel for the appellant that redemption fine could not be imposed because the goods were no longer in the custody of the respondent-authority. It is an admitted fact that the goods were released to the appellant on an application made by it and on the appellant executing a bond. Under these circumstances, if subsequently it is found that the import was not valid or that there was any other irregularity which would entitle the customs authorities to confiscate the said goods, then the mere fact that the goods were released on the bond being executed, would not take away the power of the customs authorities to levy redemption fine. If the contention of the importer is accepted , then in no case of import clearance of goods under export promotion , the Department would be disentitle to impose fine. Under export promotion schemes goods are cleared under Nil rate of duty or concessional rate of duty to serve some public interest not to favour any particular importer . The doctrine that “No man can take advantage of his own wrong” also works in the favour of department.
Strict Construction of Exemption Notification
Further , it is also a settled law that an exemption notification has to be strictly construed and no extended meaning can be given to exempted item to enlarge the scope of exemption notification. The onus is on assessee to prove his eligibility for exemption. This view was held in Grasim Industries Ltd v State of Madhya Pradesh 1990 AIR SCW 4189= AIR 2000 SC66=1999(8) SCC 547. The conditions for taking benefit have to be strictly interpreted. When the wording of the notification are clear, then the plain language of the notification must be given effect. It is as settled law that to avail benefit of notification, the party must strictly comply with conditions of notifications. In view of this onus lies on the shoulder of assessee to strictly comply with the conditions of bond.
Section 28 and Import Clearance Under EPCG and DEEC
Further, situation under section 28 and clearance under EPCG and DEEC cannot be treated on same footing. Section 28 speaks of cases wherein there is non-levy/ non-paid /short levy/short paid of duty due to imperfect assessment. In other words Section 28 deals with escape of duty inadvertently or deliberately and due to incorrect assessment, whereas in the case of clearance under EPCG and DEEC under Section 143 of the Customs Act, assessment is correct and perfect and exemption from whole or part of duty is conditional and till the fulfillment of conditions of Bond and no question of escape of duty in such cases but it can be said duty is eclipsed till the observance of conditions of bond. Therefore , by the aid of bond custody of goods is still with the Department and considered to never with the importer . Hence in cases of Section 28 , redemption fine is not imposed , whereas in the case of any offence under EPCG or DEEC, starting point of offence is date of detection and fine under Section 125(1) is very well imposable.
In view of the above , Section 125(1) is attracted for the import clearance of goods under EPCG or DEEC.
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