Legal principle

Where imported goods are liable to confiscation for breach of an exemption-notification condition, duty is payable under section 125(2) in terms of the importer's undertaking, and the limitation of section 28 - and therefore interest under section 28AB - does not apply to such a demand.

Court decision

The Tribunal upheld the confiscation under section 111(o), the Rs. 2,50,00,000 redemption fine (less than 25% of the aircraft's market value), the duty demand in terms of the undertaking under section 125(2) following Jagdish Cancer and C.T. Scan Research Centre (holding section 28 limitation inapplicable), the non-levy of interest under section 28AB, and the penalties of Rs. 10 lakh each on the MD and CEO under section 112(b) and on the importer. It partly allowed only the importer's appeal (No. 540/2010), remanding to the Commissioner solely to recompute duty using the actual cost of transport and transit insurance instead of notional values under Rule 9(2); the appeals of Shri Lalani and Shri Soni (Nos. 541 and 542/2010) were dismissed.

Facts

M/s Mega Corporation Ltd. imported an aircraft in 2007 and cleared it duty-free under Notification No. 21/2002-Cus (S.No. 347B) subject to condition no. 104, which required MCA/DGCA approval for non-scheduled (charter) services and an undertaking to use the aircraft only for that purpose or pay duty on demand. After the NOC to operate lapsed on 22.9.2007 and further extension was refused, the importer flew the aircraft commercially on charter basis for over 100 hours (first commercial flight 29.12.2007) without a Non-Scheduled Operator Permit. Customs (Preventive) investigated, recorded statements under section 108, and issued an SCN dated 15.7.2009 (corrigendum 10.12.2009) proposing confiscation under sections 111(d)/(o), duty as per the undertaking, interest under section 28AB, and penalties under sections 112(a)/114A on the company and 112(b) on its MD and CEO; the importer had already deposited Rs. 2,36,82,303 under protest. The Commissioner confiscated the aircraft (value Rs. 11,29,92,819) under section 111(o) with a Rs. 2,50,00,000 redemption fine under section 125, confirmed duty of Rs. 2,86,96,309, declined interest under 28AB, and imposed penalties of Rs. 30 lakh on the company and Rs. 10 lakh each on the MD and CEO.

Key provisions

• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 112(b), Customs Act, 1962 — Penalty for improper importation of goods
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents