Custom, Excise & Service Tax Tribunal
New Delhi vs Lci Helicopters Eight Ltd on 16 February, 2023
1
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO. III
Customs Appeal No. 51584 of 2019
(Arising out of Spot A. O. No.09/2018-19 dated 30.03.2019 passed by the
Commissioner of Customs (Export), New Delhi).
Commissioner of Customs Appellant
ACC Export Commissionerate, New Custom House
New Delhi-110037.
VERSUS
M/s LCI Helicopters Eight Ltd., Respondent
48, Sector-4, Chandigarh-160001.
APPEARANCE:
Sh. M. K. Chawda, Authorised Representative for the appellant Sh. Nitin Sarin, Advocate for the respondent Sh. Syed Tamjeed Ahmad, Advocate appointed as Amicus Curiae CORAM:
HON„BLE SH. P. V. SUBBA RAO, MEMBER (TECHNICAL) HON‟BLE MS. BINU TAMTA, MEMBER (JUDICIAL) FINAL ORDER NO. 50195/2023 DATE OF HEARING/DECISION: 16.02.2023 P. V. Subba Rao:
Revenue filed this appeal to assail the Spot Assessment Order No. 09/2018-19 dated 30.03.2019 passed by the Commissioner of Customs (Export), New Delhi whereby he confiscated the two helicopters belonging to the respondent valued at Rs. 26,83,00,679.90 each for attempting to export by filing shipping bills dated 23.03.2019 and 28.03.2019 using the dummy IEC code. The respondent, based in USA, owns the two helicopters which it leased to a company in India which operated them. The respondent then wanted to take them back to USA but it was not a regular exporter or importer and hence had no Importer-exporter 2 code (IEC) from DGFT. It sought permission from the Deputy Commissioner to export them using dummy IEC. It did not receive any letter permitting it to export the helicopters using dummy IEC.
2. The respondent filed the two shipping bills with dummy IEC as it had no IEC in its name. It waived the requirement of show cause notice and the Commissioner issued the impugned Spot Assessment Order. He found that the attempted export was in contravention of para 2.05 of Section (II) of Foreign Trade Policy and Section 7 of the Foreign Trade (Development and Regulation) Act, 1992 as the helicopters could not have been exported without obtaining IEC from the DGFT. Consequently, he found that the helicopters were liable to confiscation under Section 113(d) of the Customs Act,1962 which reads as follows:-
"SECTION 113. Confiscation of goods attempted to be improperly exported, etc. -The following export goods shall be liable to confiscation:
(a)....
(b)....
(c)....
(d) any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force."
3. As the attempted export was in contravention of Foreign Trade Policy read with the Foreign Trade (Development & Regulation) Act, 1992, the Commissioner found that the goods were liable to confiscation under section 113 (d) of the Customs Act. However, he noted that the violation was only of technical nature and therefore confiscated the goods but allowed them to be redeemed on payment of redemption fine of Rs. 1,00,000/- under Section 125(1) of the 3 Customs Act. He also imposed penalty of Rs. 50,000/- under Section 114 of the Customs Act, 1962.
4. Revenue is aggrieved by this order on account of low amount of redemption fine and penalty imposed on the respondent in the impugned order. It is the submission of Revenue that violation of the Foreign Trade Policy and attempting to export without IEC cannot be called a technical violation and the fine and penalty imposed are extremely low compared to the value of the goods. The redemption fine, according to the Revenue, should have been at least 10% of the value and penalty should have been 5% of the value of the goods.
5. We have heard the learned Authorised Representative for the Revenue and Learned Counsel for the respondent as also Sh. Syed Tamjeed Ahmad, Advocate was appointed as amicus curiae in this case by the Tribunal in order dated 14.11.2019. Learned amicus curiae submitted his report dated 13.12.2019. The question to be answered is whether the alleged violation, which resulted in confiscation of the goods, is a technical violation or substantial violation calling for enhancement of fine and penalty. It needs to be pointed out that the respondent has not contested the adjudication order and has paid the fine and penalty imposed and exported the helicopters.
6. We find that the only allegation against the respondent is that it attempted to export helicopters without obtaining an IEC from the DGFT as required under the Foreign Trade Policy. We find that the Foreign Trade Policy is framed under the Foreign Trade (Development and Regulation) Act, 1992 and with respect to its 4 interpretation DGFT and Ministry of Commerce are the final Authority. There is no allegation of violation of any other law. Learned Counsel for the respondent placed on record the clarification by way of office memorandum dated 15.10.2019 issued by the DGFT, which states as follows:-
"The undersigned is directed to refer to OM No. 7.12.2019-IPP dated 05.08.2019 on the subject cited above.
2. In this regard, it is stated that the matter has been examined and it is decided that IDERA holders re-exporting the aircraft under Rule 32A of Aircraft Rules, 1937 may be exempted from having IEC as the aircrafts are not actually exported from India."
7. It is his submission that there was no violation of law at all in view of the clarification by the DGFT. Learned amicus curiae assisting the court in this matter has also submitted that after the clarification has been issued by the DGFT, nothing survives in this case as the alleged violation is no longer so. The submissions by the learned counsel and learned amicus curiae deserve to be accepted. In view of the clarification issued by the DGFT, we find that there was no violation of the Foreign Trade Policy at all.
8. Learned Authorised Representative for the Revenue submits that this clarification was issued subsequent to the attempted export and can only have prospective effect and cannot be applied to the exports in question. This submission cannot be accepted. In our view, the clarification by the DGFT does not say that it shall apply only prospectively and not retrospectively. At any rate, even it is considered to be only prospective, exporting the aircrafts or helicopters prior to the issue of this clarification in alleged violation of the Foreign Trade Policy can only be termed as technical violation 5 in the factual matrix of this case because, the respondent did not attempt to sneakily smuggle out the helicopters. He had given a letter to the Deputy Commissioner of Customs seeking permission to export using a dummy IEC and has not received this permission. As it was not a regular exporter, it did not have an IEC. It approached the Ministry of Civil Aviation seeking their help and intervention. The Ministry of Civil Aviation, in turn, wrote to the Ministry of Finance and the Ministry of Commerce. Thus, we find that the respondent was knocking on doors trying to find a legal way of exporting the helicopters. Since it was based in USA and had no interest or plans of importing to or exporting from India, it had not obtained an IEC. The ultimate clarification received by the DGFT also states that in such cases, the IEC may not be insisted upon. Considering all these aspects, even if it is considered that there was any violation in the attempted export, it is at best, a technical violation.
9. It also needs to be pointed out that Section 113 renders some goods attempted to be exported „liable to confiscation‟ and does not say that they „shall be confiscated‟. The Concise Oxford Dictionary explains the meaning of „liable‟ as follows:
„liable. Adj. 1. Responsible by law; legally answerable. >(liable to)subject by law to.
2. (liable to something) likely to do something.
3. (liable to) likely to experience (something undesirable): areas liable to flooding.‟ Black‟s law dictionary explains the meaning of the word „liable‟ as follows:
„1. Bound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution.
2. Exposed or subject to a given contingency, risk, or casualty, which is more or less probable.‟ 6
10. From the above, it is evident that the word „liable‟ has two meanings. The first is that one responsible by law or legally answerable, i.e., it denotes the legal duty of someone liable which is not relevant to Section 113. The second meaning is that someone or something is liable to, i.e., likely to or be exposed to. It suggests a likelihood of something happening. Section 113 states "the following goods attempted to be exported are liable to confiscation" and lists various types of goods under different clauses. This only means that such goods which fall under one of the clauses under this section are likely to be confiscated and can be confiscated. The section cannot be read to mean that such goods shall be confiscated.
11. The reason for this is simple. On confiscation, the property of the goods will vest in the Central Government and the individual or entity is deprived of its property which is a very serious punishment. The Adjudicating Authority has to, in the first place, decide if the goods attempted to be exported fell under one of the clauses of section 113. If they do not, this section does not apply at all. If the goods fall under one of the clauses under section 113, the goods will be liable to confiscation but the adjudicating authority must use his discretion to decide whether or not to confiscate them. Even if the adjudicating authority finds that the goods fall under one of the clauses of section 113, he does not find the offence serious enough to warrant the punishment of confiscation, he does not have to confiscate them. Considering the nature of the contraventions and the aggravating and extenuating factors, the adjudicating authority can decide to confiscate or not confiscate the goods. 7
12. The expression „liable to confiscation‟ was examined in Jain Exports Pvt. Ltd. vs. UOI1 by the Full Bench of Delhi High Court with respect to section 112 of the Customs Act, 1962 which is pari materia with Section 113. The relevant paragraphs are as follows:
108. We have so far seen how the Collector‟s order is vitiated due to arbitrariness in the implementation of the policy and for other reasons. Let us look at the final operative order now. The Collector has confiscated the goods but released them on fine of Rs. 5 crores. Imposition of confiscation and penalty is a quasi judicial function. Therefore, the order confiscating the goods should be a reasoned order. But the impugned order is not a speaking order. While imposing the fine of Rs. 5 crores the Collector has held that the petitioner had "deliberately flouted" the provisions of law.
Neither the law nor the peculiar facts of this case are even attempted to be discussed before taking an extreme step of confiscation and imposition of an excessively heavy penalty. Proviso to Section 125 lays down that the fine in lieu of confiscation shall not exceed the market price of the goods confiscated, less, in case of the imported goods, the duty chargeable thereon. The Collector did not even investigate what was the market price of the goods imposed. This is a clear failure of the statutory duty by the Collector. The Collector also overlooked that the confiscation and penalty are penal provisions of the Statute. Such provisions are to be strictly construed and exercised with judicial discretion. The language of the Section is "such goods shall be liable to confiscation". The language is not "such goods shall be confiscated". Two things are indicated by this difference. The first is that principal of absolute liability is not applicable, in case of liability to confiscation. Secondly, whether the goods should be confiscated or not is a matter of discretion of the Collector. So also what penalty he should impose is also a matter of discretion. The proper legal approach is illustrated by the following cases:
109. In Shah Rikhabdas Bharwanlal v. The Collector of Customs. (1961) (II) M.L.J. 443, identical facts situation was present. The goods of the appellants were confiscated while some other merchant for the same offences were let off with a warning. Rajmanner C.J., speaking for the Division Bench of Madras High Court, held: "It should not be overlooked that here we have the case of deprivation of property because confiscation is just that. It is idle to say that it is not, because on payment of a fine which is equal to the value of the goods, the importer can take delivery of the goods. It only means that the appellants having been deprived of their goods are given an offer to purchase such goods" (Page 4). The learned Chief Justice further observed "the language (of old Section 167 of the Sea Customs Act) does necessarily imply that there is a discretion because the language is not „such goods shall be confiscated‟. On the other hand the language is „such goods shall be liable to be confiscated‟. The Collector of Customs while enacting under Section 167 is obviously acting as a quasi judicial Tribunal, such discretion must be exercised judicially and not arbitrarily. The Collector must decide in each particular case if there were circumstances which would call for the drastic publishment of confiscation. If there was a case in which discretion should have been exercised in favour of the importer, this was such a case............The collector does not appear to have dealt with case as if he was vested with judicial discretion because he has not given any reason why the drastic punishment of confiscation should have been imposed on the appellants whereas two other similar merchants who had committed the same offence had been let off 1 1987 (29) E.L.T. 753 (Del.) 8 with a warning. (Page 448) On these findings the High Court set aside, the order of confiscation
13. On appeal, the Supreme Court upheld this judgment through a detailed order in Jain Exports (P) Ltd. vs. UOI 2 although the Supreme Court did not discuss the expression „liability to confiscation‟ in its judgment.
14. The Madras High Court examined the scope of the expression „liable to confiscation‟ which was used in the predecessor law, Sea Customs Act, 1878 in SHARIKABDOSS BHAVARLAL Versus COLLECTOR OF CUSTOMS, MYSORE3 and held that the expression does not mean that the goods should be confiscated. Relevant paragraphs of this judgment are as follows:
15. It should not be overlooked that here we have the case of deprivation of property because confiscation is just that. It is idle to say that it is not, because on payment of a fine which is equal to the value of the goods. the importer can take delivery of the goods. It only means that the appellants having been deprived of their goods, are given an offer to purchase such goods. Keeping this in mind we shall refer to the penal provision under which the Collector of Customs purported to act. Section 167 of the Sea Customs Act mentioned the offences which shall be punishable to the extent mentioned in the third column of the same with reference to such offences. Item 8 of the schedule in so far as it is material runs thus :
Offences Section of Sea Penalties
Customs Act to
which offence has
reference
(1) (2) (3)
If any goods the 18 & 19 Such goods shall be
importation or liable to
exportation of which is confiscation.
for the time being
prohibited or restricted Any person
.......... be imported or concerned in any
exported from India such offence shall
contrary to such be liable to a
prohibition. penalty not
exceeding three
times the value of
the goods, or not
exceeding one
thousand rupees.
2
1992 (61) E.L.T. 173 (S.C.)
3
2000 (125) E.L.T. 65 (Mad.)
9
The third column says that if an offence under Item 8 is committed, the goods concerned ''shall be liable to confiscation". The learned Government Pleader had to concede that the Customs Authorities have got the discretion either to confiscate or not in a particular case. In this very case reference has been made to two other cases in which in spite of an offence having been committed, the party in each case has been let off with a warning, and without the goods being confiscated. The language does necessarily imply that there is a discretion because the language is not "such goods shall be confiscated". On the other hand the language is "such goods shall be liable to confiscation". The Collector of Customs when acting under Section 167 obviously acting in a quasi-judicial capacity. When discretion is vested in such a quasi-judicial tribunal, such discretion must be exercised judicially and not arbitrarily. The Collector must decide in each particular case if there were circumstances which would call for the drastic punishment of confiscation. If there was a case in which discretion should have been exercised in favour of the importer, this was such a case. The appellants had placed the order and the goods had arrived when admittedly the practice prevailing both with the merchants and with the Custom authorities permitted goods of the category which the appellants imported under a licence such as the appellants held. The Collector does not appear to have dealt with the case as if he was vested with judicial discretion because he has not given any reason why the drastic punishment of confiscation should have been imposed on the appellants whereas two other similar merchants who had committed the same offence had been let off with a warning.
16. Therefore on both the grounds, namely, that there was an error apparent on the face of the record, and that the Collector as a quasi- judicial tribunal had not exercised his discretion judicially, the order of the Collector should be quashed. We allow the appeal and the writ petition and quash the impugned order of the Collector dated 10th March, 1958. No order as to costs.
15. Thus, the settled legal position is that „liable to confiscation‟ does not mean „shall be confiscated‟ and the adjudicating authority or the assessing officer has to exercise his/her discretion and decide
(a) if the goods fall under section 113 (or section 112 in case of imported goods); and (b) if they fall under section 113 (or 112, as the case may be), decide whether or not to confiscate them. It is NOT NECESSARY for the adjudicating authority to confiscate all the export goods which fall under section 113 or all imported goods which fall under section 112.
16. In this case, the Commissioner found that there was only a technical violation which rendered the goods liable to confiscation under section 113. If that be so, he had the complete discretion to have not even confiscated the goods. However, he decided to confiscate the goods and this confiscation is not under challenge. 10
17. If the adjudicating authority confiscates the goods and if the goods are not prohibited goods, he has to allow them to be redeemed on payment of fine under section 125. Even if they are prohibited goods, he may still allow the goods to be redeemed on payment of redemption fine. There is no formula to determine the quantum of redemption fine nor is there a minimum fine but the fine cannot exceed the market value of the goods. The quantum of fine must be determined based on the facts and circumstances of the case.
18. Thus, the adjudicating authority has to determine first if the goods fall under section 113 and if so, decide if they should be confiscated or not and after confiscation, if they are allowed to be redeemed on fine, he has to decide what should be the fine with the only condition that it cannot exceed the value of the goods.
19. In this case, considering that it was only a technical offence, the Commissioner imposed a redemption fine of Rs. 1,00,000/- only. We do not find that the department has made out a case to seek enhancement of redemption fine. In our considered view, this calls for no interference. In fact, the Commissioner could have, on finding that the goods were liable for confiscation but only for a technical offence, decided not to confiscate them at all.
20. Similarly, any person will be „liable to penalty‟ under section 114 for actions and omissions which rendered the goods „liable to confiscation‟ under section 113. Again the law is the person is „liable to penalty‟ and not that a penalty shall be imposed on the person. So, it is open for the adjudicating authority to impose penalty under 11 section 114 or not. If he decides to impose the penalty, he cannot exceed the maximum prescribed.
21. In this case, considering the facts of the case, the Commissioner imposed a penalty of Rs. 50,000/- only. Revenue‟s case is that the penalty is too low and hence needs to be increased. We find that the penalty imposed is only on account of the perceived technical offence‟ and the Commissioner did not have to impose any penalty at all. However, he imposed a penalty of Rs. 50,000/- only which, in our considered view calls for no enhancement.
22. Accordingly, the appeal filed by the Revenue is rejected and the impugned order is upheld. We express our thanks to Sh. Syed Tamjeed Ahmad, for assisting us as Amicus Curiae.
(Dictated and pronounced in open Court).
(P. V. Subba Rao) Member (Technical) (Binu Tamta) Member (Judicial) Pant