Legal principle

When the owner of confiscated goods redeems them on payment of fine under Section 125(1), the liability to duty arising under Section 125(2) must be assessed and determined under Section 28, and interest on delayed payment under Section 28AB automatically follows.

Court decision

The Supreme Court upheld the High Court's judgment in Writ Petition Lodging No. 1387 of 2009 dated 29.08.2009 and disposed of the appeal, deciding in favour of the Department. It held that the owner of goods is liable to pay customs duty even after confiscated goods are redeemed on payment of fine under Section 125; that the obligation to pay duty and other charges under Section 125 arises only when the owner exercises the option to pay fine for redemption and the Department accepts it; that the duty liability arising under Section 125(2) must be assessed under Section 28; and that once Section 28 applies, interest on delayed payment under Section 28AB follows. It further clarified that Jagdish Cancer is not an authority for the proposition that duty arising under Section 125(2) cannot be assessed under Section 28.

Facts

Between 30.11.2003 and 18.04.2007, M/s Navayuga Engineering Co. Ltd. imported self-propelled hydraulic piling rigs availing exemption from customs duty under a notification dated 01.03.2002, on condition that the rigs be used exclusively for construction of roads, bridges etc. for NHAI and PWD. After investigations revealed violation of the import conditions, the appellant deposited Rs.16,29,22,282/- as duty and Rs.1,84,39,696/- as interest even before a show-cause notice dated 23.01.2008 was issued, proposing confiscation under Section 111(o) of goods valued at Rs.48.55 crores involving duty of Rs.17,37,57,039/-, interest under Section 28AB and penalties under Sections 112(a), (b) and 114A. The appellant approached the Settlement Commission under Section 127B, which upheld the duty liability but waived fine and penalty and, following the Jagdish Cancer case, held that Section 28 (and hence Section 28AB) does not apply in confiscation proceedings, directing refund of the interest deposited. The Customs Department's writ petitions were allowed by the High Court, which held that duty must be assessed under Section 28 and interest under Section 28AB is payable, remanding the matter to the Settlement Commission. The appellant then filed Civil Appeal No. 1024 of 2014 before the Supreme Court.

Key provisions

• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc
• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods
• Section 28(1), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc