Allowed

Poona Health Services Private Limited Pune v. the Commissioner of Custom , Mumbai

Bombay HC25 Jun 2009CUAPP/53/2009

Case brief

AI extract

What is this about?

The High Court held that under Section 125 of the Customs Act, confiscation of goods does not exempt the owner from paying duty even if they do not pay the fine to redeem the goods. The court distinguished this from Section 23 regarding abandoned goods.

What did the court decide?

Quashed the CESTAT's order exempting duty and held the appellant liable to pay the assessed customs duty.

Poona Health Services Private Limited Pune Vs the… — Customs and Excise | Bombay HC (2009)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CUSTOM APPEAL NO. 53 OF 2009

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Poona Health Services, Private Limited, a company incorporated under the provision of the Companies Act, 1956 having office at 16, Shivaji Nagar, Pune 411 005.

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... Appellant

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Versus

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The Commissioner of Custom, (Airport), Air Cargo Complex, Sahar, Andheri (E), Mumai 400 099.

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... Respondent

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Mr. Manoj Sanklecha with Mr. S.P. Bharti for the Appellants.

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Mr. R.V. Desai, Sr. Counsel with Mr. Rohit B. Pardeshi for Respondent.

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CORAM : FERDINO I. REBELLO & J.H. BHATIA,JJ. DATED : JUNE 25, 2009.

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ORAL JUDGMENT : (Per Ferdino I. Rebello,J.):

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Admit on the following questions :

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“(a) Whether in the facts and circumstances of the case,

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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?

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(b) Whether in the facts and circumstances of the

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case while passing a common order, it was open to CESTAT to hold that one of the parties viz.

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Harkisandas Hospital before it is not required to pay

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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?”

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We may now set out the relevant facts to dispose of the issues which arise in this appeal. The present appeal is against the judgment and 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.

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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

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paying fine, were the appellants bound to pay duty. Learned counsel for that purpose placed reliance on section 125 of the Customs Act.

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Section 125 reads as under :

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“125. Option to pay fine in lieu of confiscation – (1) Whenever confiscation of any goods is authorised 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

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thinks fit;

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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.

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(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.”

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We may also reproduce Section 126.

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“126. On confiscation, property to vest in Central

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Government – (1) Where any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government.”

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A perusal of section 125 would show that in case of importation and exportation of prohibited goods the A.O. in lieu of confiscation may give as option to the person claiming the goods to pay fine and redeem the goods and in case of other goods shall give the owner an option to pay, in lieu of confiscation such a fine as the officer thinks fit. Sub section (2) clarifies that if any fine is imposed in lieu of confiscation under sub section (1), the person referred to in sub section (1) in addition is also liable to any duty and charges payable in respect of such goods. Relying on these two provisions, it is sought to be contended that it is only in a case where fine is imposed that in addition the person is liable to pay duty and charges. If the goods are not released by payment of fine, the question of payment of duty and charges does not arise. As an illustration, the learned counsel had drawn our attention to Section 23 where it is provided that where the importer gives up title to the goods, then no duty is payable on the goods imported.

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To understand the argument let us look at the scheme of the Act. Section 12 sets out that customs duty shall be levied at such rates as specified under the Customs Tariff Act or any other law for the time being in force for the goods

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imported into or exported from India. Under Section 13, in the case where the goods the pilfered after unloading and before the proper officer has made an order for clearance for home consumption or deposit in a warehouse, the importer shall not be liable to pay the duty leviable on such goods except where such goods are restored to the importer after pilferage. Section 14 provides for valuation of goods.. Section 16 provides the date for determination of rate of duty and tariff valuation of export goods. Section 17 provides for assessment of duty. Section 25 provides for for power to grant exemption from duty. Section 23 provides for remission of duty on lost, destroyed or abandoned goods. Section 25 provides for grant of exemption from duty. Section 26 is the provision for refund of export duty in certain cases and section 27 is the provision for refund of duty. In the event duty is not paid on time, then there are various provisions for payment of interest on delayed payment.

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Chapter XIV of the Customs Act, deals with confiscation of goods and conveniences and imposition of penalties. Section 111 provides for confiscation of improperly imported goods and section 125 confers power to impose fine in lieu of confiscation.

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Then there are provisions of imposition of penalty under sections 112 and 113, 114, 114A, 114AA and 116 and other provisions.

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The Act therefore, provides for imposition of duty as also the circumstances in which the duty can be waived or not payable or refunded. Similarly in the matter of confiscation provisions are made for adjudication as also in the matter of imposition of penalties. It would thus be clear that the Customs Act itself provides for payment of duty, fine in lieu of confiscation and also penalty. These are mutually

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exclusive. Duty is defined under section 2(15). The duty therefore is different from fine and penalty. Duty means the duty of customs leviable under the Act.. The penalty is payable when the person commits breach of the provisions of the Act and or the rules. The fine is in the nature of recompense to the State where instead of the goods vesting in the State in terms of section 126 the law itself provides that the person entitled to the goods liable for confiscation can be given an option to take the goods on payment of fine.

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It is in this context that we may examine the contention as urged on behalf of the assessee. In our opinion, the issue really stands concluded considering the Coordinate Bench Judgments of this Court in Commissioner of Customs Vs. Wockhardt Hosptail and Heart Institute, reported in 2006(200) ELT 15 and the judgment in Bombay Hospital Trust Versus Commissioner of Customs (Acc) Mumbai 2006 (201) E.L.T. 555 (Bom) which follow the earlier Division Bench Judgment in the case of Wockhardt Hospital and Heart Institute.

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Learned counsel for the Petitioner however sought to place reliance on section 23 of the Customs Act which we have adverted to earlier to contend that if the owner of imported goods relinquishes his title to the goods, he shall not be liable to pay the duty thereon. Section 23 reads as under :

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“23. Remission of duty on lost, destroyed or abandoned goods – (1) Without prejudice to the provisions of section 13, where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Comissi0ner of Customs that any imported

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goods have been lost (otherwise than as a result of pilferage) or destroyed, at any time before clearance for home consumption, the Assistant Commissioner of Customs or Deputy Commissioner of Customs, shall remit the duty on such goods.

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(2) The owner of any imported goods may, at any time

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before an order for clearance of goods for home consumption under section 47 or an order for permitting the deposit of goods in a warehouse under section 60 has been made, relinquish his title to the goods and thereupon he shall not be liable to pay the duty thereon;

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Provided that the owner of any such imported goods shall not be allowed to relinquish his title to such goods regarding which an offence appears to have been committed under this Act or any other law for the time being in force.”

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This is a specific provision providing that the owner of the goods before clearance of the goods for home consumption under section 47 or an order for permitting the deposit of goods in a warehouse under section 60 has been made, can relinquish his title to the goods and where upon the duty is not payable. It is therefore, clear that in special category of cases the Act itself has provided where the duty is not payable. The distinction between Section 23 and Section 125 becomes

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very apparent when one looks at the language of the section itself. Under Section 23, the person who imports the goods, surrenders his title in the goods. In other words duty is leviable on a a person who imports the goods where such a person is not available, the legislature has provided that in such event no duty is payable. By surrendering title in the goods, the person importing the goods or the owner of the goods ceases to have a right to claim the goods. The order of confiscation is passed in respect of the person who has claimed to import or export the goods. In other words, claims title or right in the property. The fine is payable by the person who seeks redemption of the goods. If the goods are not redeemed then they vest in the State. The person however, who had imported the goods does not cease to have liability for payment of duty. As he continues to be the person who had imported the goods and claims title of the goods. The two sections therefore, operates in two different situations and are mutually exclusive. Section 23 therefore, cannot be considered for the purpose of interpreting section 111.

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Apart from that as earlier noted in section 125(2), 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. Can therefore, section 23 and section 125(2) be read in the manner to contend that once the goods are confiscated and fine is not paid pursuant to which they vests in the State, no duty is payable. In our opinion, if this argument is accepted, it will be destructive of the provisions of the schemes of the Act itself. Section 111 confers the power to confiscate and applies only when the goods are improperly imported and or the other provisions satisfied. Whereas section 12 and 17 are in respect of the goods which are dutiable. Even in

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respect of those goods, there may be improper importation. 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.

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Our attention was also invited to the judgment of the Supreme Court in the case of Mohan Meakin Ltd. Versus Commissioner of Central Excise, Kochi, 2000 (115) E.L.T. 3 (S.C.). In our opinion, that judgment would be of no assistance as the issue there was entirely different. Admittedly there on proceedings for adjudication being conducted, the goods in question were released on payment of redemption fine. The Revenue even after that sought to initiate the proceedings for so called difference in value of imported goods from the ultimate bona fide purchaser for value. It is in that context that the court held that it is obligatory on the part of the adjudication authority to find out the market value of the goods imported and collect all duty and charges payable before releasing the goods. In our opinion, this authority is of no assistance for considering the issue as raised herein.

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In these circumstances, in our opinion, considering the language of sections earlier considered, we are of the considered view that there is no ambiguity in the language of the sections. No interpretation is possible, different from the view which we have taken, which is that even in a case where the goods are confiscated and fine is not paid, the duty is payable as assessed.

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The only other contention which has been raised is that in similar situation,

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the learned tribunal exempted payment of duty in the case of Harkishandas Hospital. That party is not before us in this appeal nor has an appeal being filed before us. 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 (supra).

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11. Considering the above, the following order :

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

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of the Revenue.

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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. Appeal disposed of accordingly.

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(J.H. BHATIA,J.) (FERDINO I. REBELLO,J.)

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Poona Health Services Private Limited Pune v. the Commissioner of Custom , Mumbai

Case brief

What is this about?

What did the court decide?

Poona Health Services Private Limited Pune v. the Commissioner of Custom , Mumbai

Case brief

What is this about?

What did the court decide?

What the court decided

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