“A person imported a consignment, paid duty assessed by the department (there is no self assessment in customs), clears the goods and then use the goods or sell it as per his business requirement. After sometime the department passes an order saying that the goods has been confiscated and offered him an option to redeem the goods on payment of redemption fine. He does not know what should he do with this option. Hence he requested the department to confiscate the goods absolutely.”
Jokes apart, the fundamental question, which arises here as to what extent law should be stretched. In the present context, this paper seek to examine that whether the goods which are not available for confiscation can be confiscated under Customs Act, 1962? This paper is an humble attempt to examine this question.
“To Confiscate” means to appropriate private property to public treasury. Thus after confiscation the goods becomes a property of the government and the government can deal with it as it wants. Through option of redemption fine, government offers to some person to take ownership of the goods. Redemption fine is not a penalty and it has no penal connotation. In Blue Dart Express v. Commissioner of Customs[1] the Tribunal observed that redemption fine in lieu of confiscation is not a fine as understood in criminal jurisprudence. Redemption fine is not a penalty in that sense. It is only an option to the person to pay an amount in lieu of confiscation. It contains no penal connotation.
Proceeding of confiscation is a proceeding against the goods, they are proceedings in rem. “In rem” literally means against the property, not against the person. A proceeding in rem is one taken directly against the property, and has for its object the disposition of the property, without reference to the title of individual claimants. Distinguishing the terms “in rem” and “in personam”, supreme Court held, in Vishawanathan v. Abdul Wajid[2] that a judgment in rem settles the destiny of the res itself and binds all persons claiming an interest in the property inconsistent with the judgment even though pronounced in their absence; a judgment in personam, although it may concern a res, merely determines the rights of the litigants inter se to the res.
The confiscation proceedings are “proceeding in rem”[3]. The department can proceed even if the offender is unknown. In CC v. Bhooramal[4] it was held that confiscation proceeding can be initiated even without ascertaining as to who is the real owner of goods. Thus the proceeding of confiscation is a proceeding against the goods and goods only- can the proceeding be sustained if the goods are not available for confiscation?
WHEN GOODS ARE NOT AVAILABLE, OPTION TO REDEEM CANT BE GIVEN- CONFISCATION NOT POSSIBLE:
In numerous cases, notably in Crafts Studio v. CCE[5], Hon’ble Tribunal held,
“The appellant also contends that since the goods had already been cleared they could not have been confiscated and redemption fine imposed on them. In support of this proposition, the appellant has relied on the decision of this Tribunal in the case of Prudential Pharmaceuticals Ltd. v. CC, Chennai [2001 (136) E.L.T. 1057 (T)]….. However, the appellant’s submission regarding imposition of redemption fine merits acceptance in view of the decision of this Tribunal in the case of Prudential Pharmaceuticals Ltd.
In Mahalaxmi International Export v. CC[6], the tribunal held that once the goods are cleared from customs, they cannot be confiscated and redemption fine cannot be imposed. It held in para 10,
“We find merit in the appellant’s submission with regard to imposition of redemption fine. In the present case, the goods are not available for confiscation. Nor had they been originally cleared against a bond. In such a case, the law does not permit imposition of redemption fine as held by us in the Ram Khazana Electronic & Ors. v. CC, AIR Cargo, Jaipur (Supra) [2003 (156) E.L.T. 122 (Tribunal)].
On this reasoning the tribunal held, in Sansui India v. CC[7], that when the goods are not seized and not available with the department for actual confiscation, such goods cannot be confiscated and question of giving option to importer to pay fine in lieu of confiscation does not arise. It held in para 4,
“Section 111 of the Customs Act describes the goods brought from a place outside India which shall be liable to confiscation for various actions or omissions. Section 125 of the Customs Act provides that whenever confiscation of goods is authorised by the Customs Act, the adjudicating authority may, in the case of prohibited goods, and shall, in the case of any other goods, give to the owner of the goods an option to pay fine in lieu of confiscation. In the present matters the goods imported by the Appellants were cleared out of Customs charge after assessment of Bills of Entry and payment of duty. It was only through investigation conducted subsequent to the release of goods, the Department came to know about the under-valuation. However, the goods released to the Appellants were never seized. Thus the goods though were liable to confiscation was never available with the Department for actual confiscation. If the goods are not available with the Department, the question of their confiscation and giving any option to the importer to pay fine in lieu of confiscation under Section 125 of the Customs Act does not arise. It is also not the case of the Revenue that the goods were seized and have been released to the Appellants provisionally. In view of these facts the Revenue cannot confiscate the goods and order the goods to be redeemed on payment of redemption fine.”
In Shivalaya Spinning v. CC[8], the Tribunal declared clearly,
“In so far as redemption fine is concerned we agree with the contention of the ld. Counsel based on the decisions of the Apex Court cited by him that when the goods are not available for confiscation, redemption fine cannot be imposed. Hence, the order imposing redemption fine is set aside.”
ONLY IMPORTED GOODS CAN BE CONFISCATED, GOODS CLEARED FOR HOME CONSUMPTION ARE NOT IMPORTED GOODS:
Section 111 of the Customs Act say, “Confiscation of improperly imported goods”. Thus Section 111 of the Customs Act is applicable only to the imported goods. Section 2(25) of the Customs Act defines “imported goods” as,
[youtube]http://www.youtube.com/watch?v=3MOUcetzK-g[/youtube]
“imported goods means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.”
This confiscation can be assailed on this ground also. Under customs Act, only imported goods can be confiscated. As per the definition of “imported goods” under Section 2(25) of the Customs Act, goods cleared for home consumption does not remain imported goods. In Bussa Oversea v. C L Mahar[9] Division Bench of the Mumbai High Court held that once goods are cleared for home consumption from customs, they cease to be imported goods and hence they are not liable to confiscation. It explained in para 7,
“The first submission of the learned counsel is that the goods imported under 45 consignments were cleared for home consumption on the petitioners executing ITC bonds as required under sub-section (1) of Section 143 of the Act. The learned counsel urged that once the goods are cleared for home consumption, then the goods covered by the consignments cease to be imported goods in accordance with the definition of expression ‘imported goods’ under Section 2 of the Act and consequently such goods are not liable for confiscation. There is considerable merit in the submission of the learned counsel. The goods lose its character of imported goods on being granted clearance for home consumption and thereafter the power to confiscate can be exercised only in cases where the order of clearance is revised and cancelled. Shri Chagla then submitted that the proceedings for imposition of penalty under Section 112 are not permissible if the goods cannot be confiscated under Section 111 of the Act. The submission is not correct. Section 112 deals with the levy of penalty for improper importation of goods and Section 112(a) provides that any person who in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, is liable to a penalty. The power to impose penalty can be exercised not only when the goods are available for confiscation but when such goods are liable to confiscation. The expression ‘liable to confiscation’ clearly indicates that the power to impose penalty can be exercised even if the goods are not available for confiscation. It is possible that the goods may be cleared for home consumption without the Customs Authorities being aware that the clearance is sought by suppressing the relevant facts or by producing documents which are hot genuine. The mere fact that the importers secured such clearance and disposed of the goods and thereafter goods are not available for confiscation cannot divest the Customs Authorities of the powers to levy penalty under Section 112 of the Act. Shri Chagla relied upon the decision of Calcutta High Court reported in 2000 (123) E.L.T. 330 (Cal.) = 1976 Tax. L.R. 1567 (Thomas Duff and Co. (India) Ltd. v. Collector of Customs and others). The Calcutta High Court took the view in a case of export where a show-cause notice was issued as to why penal action should not be taken, that once the goods were exported and/or not available for confiscation, then the Customs Authority had no jurisdiction to initiate the proceedings by issuance of show-cause notice for levy of penalty. It is not possible to share the view taken by the Calcutta High Court. The power to levy penalty is not dependant upon availability of the goods imported or exported. The power to levy penalty arises because the importer or exporter has done or omitted an act in relation to goods and which renders such goods liable for confiscation. The power, in our judgment, to levy penalty is available once the Customs Authorities come to the conclusion that the goods imported or exported were liable to confiscation because of act or omission on the part of the importer or exporter as the case may be. The power is not dependant upon the availability of the goods. It is therefore not possible to accede to the submission of Shri Chagla that as the goods covered by 45 consignments were not available for confiscation under Section 111 of the Act, the Customs Department could not have commenced proceedings under Section 112 of the Act for levy of penalty.”
This judgment has been affirmed by the Hon’ble Supreme Court[10]. Thus it has been authoritatively decided that once the goods are cleared for home consumption, the goods cease to be imported goods and hence these goods cannot be confiscated under Section 111 of the Customs Act, however penalty can be imposed under section 112 for improper imports.
This view was followed by the tribunal in case of Southern Enterprises v. CC[11], wherein it held in para 6,
“Revenue cannot confiscate the goods which have already been cleared for home consumption as they ceased to be imported goods as defined in Section 2 of the Customs Act and as held by the Bombay High Court in the case of Bussa Overseas & Properties P. Ltd. (cited supra). The same view has been expressed by the Tribunal in the case of Kishandas & Sons; Sources India Impex P. Ltd. and in the case of Leela Dhar Maheswari v. CCE.”
NATIONAL TREATMENT OF IMPORTED GOODS:
This view is also in consonance with WTO agreement (Article III of the GATT) on national treatment of imported goods that once the imported goods passes customs barrier, there must not be any discrimination between imported goods and goods locally produced. Thus when the goods are cleared for home consumption, the cleared goods merges with the local goods and they must not be differentiated from the locally produced goods.
GOODS RELEASED PROVISIONALLY OR ON BOND:
In a series of judgments the Apex Court and Tribunal have held that when the goods are released provisionally or under Bond, the goods can be confiscated and redemption fine can be imposed. In Weston Components v. CC[12], the Supreme Court held that,
“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.”
The view is supported by various other judgments of the Apex Court, notably East India Commercial Company v. CC[13], Jeevraj v. CC[14] and Harbans Lal v. CCE[15].
In Atlas Casting & Metal v. CC[16], the Tribunal held that when the goods has been released on bond, the bond can be enforced and the goods can be confiscated.
However, it is humbly submitted that the above view is not correct. It is clear from the definition of Section 2(25) that once the goods are cleared for home consumption, they are not imported goods. “Clearance” includes “provisional clearance”. As per section 2(2) of the Customs Act, the term assessment includes provisional assessment. In view of this definition even when the goods are provisionally cleared for home consumption, the goods has been cleared for home consumption and the goods cease to be imported goods.
Even on the basis of the provision of “option to redeem” under Section 125 of the Customs Act, such option can only be given if the possession of the goods are with the department. Once the goods are provisionally cleared, the possession is not with the department and a option to redeem cannot be given. Thus even on this logic, goods cannot be confiscated once it is provisionally released.
I am sure the judiciary will consider these grounds as and when suitable opportunity comes.
ARMS OF LAW MUST NOT BE OVERSTRECHED:
Every law is an infraction of human liberty[17]. Thus it is necessary that the law must not be extended from their natural meaning unless until there is clear and unambiguous mandate of the legislature. Overstretching laws almost always make bad laws.
Despite these binding judgments and clear provisions of law on confiscation, the department keeps on confiscating goods not available for confiscation and cleared for home consumption, and keeps on fighting infructuous litigation. Such vexatious litigation do not affect rich and powerful but greatly affect small importers. Aptly said,
The net of law is spread so wide,
No sinner from its sweep may hide.
Its meshes are so fine and strong,
They take in every child of wrong.
O wondrous web of mystery!
Big fish alone escape from thee!
(Views expressed are personal views of author.)
(RAJESH KUMAR)
[1] 1999 (111) ELT 102
[2] AIR 1963 SC 1, on page 15
[3] S Indrasanrai Ltd. v. CC 1983 (13) ELT 1305 (SC)
[4] 1983 (13) ELT 1546 (SC)
[5] 2004 (163) ELT 109
[6] 2004 (169) ELT 68
[7] 2005 (180) ELT 483
[8] 2002 (146) ELT 610
[9] 2004 (163) ELT 304
[10] 2004 (163) ELT A 160
[11] 2005 (186) ELT 324
[12] 2000 (115) ELT 278 (SC)
[13] 1983 (13) ELT 1342 (SC)
[14] 1997 (94) ELT 459 (SC)
[15] 1993 (67) ELT 20 (SC)
[16] 2005 (186) ELT 575
[17] Jeremy Bentham
Article Source: sooperarticles.com/law-articles/confiscation-goods-cleared-home-consumption-53393.html
About Author:
I am also into writing on these laws & other areas of law, and many of my papers has been published in journals, like Excise Law Times, Service Tax Review, The Hindu, Economic & Political Weekly, Combat Law, Legal News & Views etc. I am a regular columnist on News & Reviews. custom.excise@yahoo.comAuthor: Rajesh Kumar, Advocate