Legal principle

Physical non-availability of goods is no bar to confiscation under Section 111 or redemption fine under Section 125, but the fine must be commensurate with the duty benefit actually accrued, and a Section 114AA penalty requires proof of a knowing or intentional false declaration.

Court decision

The Tribunal held the appellants entitled to drawback under Section 74 and directed the Revenue to recompute differential duty and interest after allowing the drawback benefit and crediting duty already paid. It upheld confiscation and the power to levy redemption fine despite physical non-availability of the goods, but held the 10%-of-value fine excessive, to be calibrated to the 5% duty benefit actually accrued; it directed that the Section 114A penalty equal the recomputed differential duty. It set aside the Section 114AA penalties on both appellants for want of the required knowledge/intent, and upheld Umesh Kale's liability under Section 112(a)(ii) while reducing his penalty to Rs. 1 lakh. Appeal No. 1 was partly allowed by way of remand; Appeal No. 2 was partly allowed.

Facts

M/s Van Oord India Pvt Ltd imported two old and used tugs, 'Coaster Rambler' and 'Coaster Voyager', with consumables on re-export basis for an ONGC dredging project at Hazira Port, claiming concessional duty and IGST under Notification No. 72/2017-Cus dated 16.08.2017; the tugs were re-exported in December 2018 after completion of the contract. On an SCN dated 04.09.2023, the Principal Commissioner, Customs-Ahmedabad, disallowed the notification benefit on the view that tugs are not 'Machinery, Equipment or Tools', confirmed duty of Rs. 6,82,50,033 under Section 28(4) with interest under Section 28AA, imposed a Rs. 6.5 crore redemption fine in lieu of confiscation under Section 111(o), an equal penalty under Section 114AA and Rs. 5 lakh under Section 114A on the company, and Rs. 5 lakh each under Sections 112(a)(ii) and 114AA on its Logistics Executive, Umesh Kale. Both appealed to CESTAT, Ahmedabad.

Key provisions

• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 112(a)(ii), Customs Act, 1962 — Penalty for improper importation of goods
• Section 74(2), Customs Act, 1962 — Drawback allowable on re-export of duty-paid goods
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 3(7), Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty