Kerala High Court
M/S. Sankar Shashtyabdapoorthi ... vs The Union Of India on 16 August, 2016
Author: A.M.Shaffique
Bench: A.M.Shaffique
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
TUESDAY, THE 16TH DAY OF AUGUST 2016/25TH SRAVANA, 1938
WP(C).No. 22571 of 2013 (V)
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PETITIONER(S)/PETITIONER :
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M/S. SANKAR SHASHTYABDAPOORTHI MEMORIAL HOSPITAL
S.N.TRUST MEDICAL MISSION, P.B.NO.32, KOLLAM,
REPRESENTED BY ITS SECRETARY, DR.JAYADEVAN.
BY ADVS.SRI.A.N.RAJAN BABU
SRI.P.GOPALAKRISHNAN (MVA)
SRI.A.R.EASWAR LAL
RESPONDENT(S)/RESPONDENTS :
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1. THE UNION OF INDIA,
REPRESENTED BY ITS SECRETARY, MINISTRY OF
ENVIRONMENTAL AND FINANCE, NEW DELHI-110 001.
2. THE CUSTOMS,
EXCISE AND SERVICE TAX, APPELLATE TRIBUNAL,
SOUTH ZONAL BRANCH, FKCCI-WTC BUILDING,
K.G.ROAD, BANGALORE-560 009.
3. THE COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS
ICE BHAVAN, PRESS CLUB ROAD,
THIRUVANANTHAPURAM-695 001.
4. THE ASSISTANT COMMISSIONER OF CUSTOMS
AIR CARGO COMPLEX, SHANMUGHAM,
THIRUVANANTHAPURAM-695 008.
5. THE SUPERINTENDENT OF CENTRAL EXCISE
CENTRAL EXCISE RANGE-1, VARINJAM TOWER, KOLLAM-1.
R1 BY SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL
R2-R5 BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL, SC
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD
ON 06-06-2016 THE COURT ON 16-08-2016, DELIVERED THE
FOLLOWING:
msv/
WP(C).No. 22571 of 2013 (V)
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APPENDIX
PETITIONER(S)' EXHIBITS
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P1 : COPY OF THE ORDER IN ORIGINAL NO.28/03/CUS. DTD.15.10.2003
ISSUED BY THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS ICE
BHAVAN, PRESS CLUB ROAD, THIRUVANANTHAPURAM.
P2 : COPY OF THE COMMON ORDER IN APPEAL NO.19/2004 AND OTHERS
DTD.21.3.2007 PASSED BY THE 3RD RESPONDENT.
P3 : COPY OF THE DEMAND NOTICE DTD.4.7.2007 ISSUED BY THE
5TH RESPONDENT TO THE PETITIONER.
P4 : COPY OF THE DEMAND NOTICE DTD.16.7.2007 TO THE PETITIONER
REQUESTING TO REMIT THE AMOUNT UNDER EXTS.P1 AND P2.
P5 : COPY OF THE LETTER C.NO.VII/50/39/2007/ARR.CELL
DTD.2.11.2010 ISSUED BY THE 3RD RESPONDENT.
P6 : COPY OF THE NOTICE NO.SNTMM/CUSAT/2010 DTD.4.11.2010 SENT
BY THE SECRETARY OF THE PETITIONER TO THE OFFICE OF
3RD RESPONDENT.
P7 : COPY OF THE ORDER IN APPEAL NO.C/411/2004 DTD.8.3.2013
PASSED BY THE 1ST RESPONDENT FORWARDED TO THE PETITIONER.
P8 : COPY OF THE LETTER C.NO.VIII/23/29/2001/ACC/662
DTD.26.8.2013 ISSUED BY THE 4TH RESPONDENT TO THE
PETITIONER.
RESPONDENT(S)' EXHIBITS:
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EXT.R1(a): TRUE COPY OF JUDGMENT DTD.4.10.2010 IN
WP(C) NO.26025/2007.
//TRUE COPY//
P.S.TO JUDGE
Msv/
A.M.SHAFFIQUE, J
* * * * * * * * * * * *
W.P.C.No.22571 of 2013
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Dated this the 16th day of August 2016
J U D G M E N T
This writ petition is filed by a Hospital which is run by Sree Narayana Trust Medical Mission challenging Ext.P8 and seeking for a declaration that the respondents 2 to 6 have no authority to demand and recover Rs.16 lakhs towards redemption fine and Rs.33,84,757/- towards payment of duty as demanded in Exts.P7 and P8.
2. The short facts involved in the writ petition would disclose that the petitioner hospital imported an Echo Cardiography system in 1990. The equipment was valued at Rs.24,65,451/-. Petitioner availed of the benefit of customs duty exemption as per Notification No.64/1988 dated 01/03/1988. Later, a show cause notice came to be issued after 9 years, calling upon the petitioner to show cause as to why the equipment imported by it should not be confiscated and why a penalty should not be imposed on the petitioner under Section 114A of the Customs Act, 1962 (hereinafter referred to as 'the Act') alleging that there is non-compliance of the conditions W.P.C.No.22571/2013 2 stipulated in the Notification No.64/1988. Petitioner submitted objections. However, the 3rd respondent, while rejecting the contentions of the petitioner, ordered confiscation of the equipment under Section 111(o) of the Customs Act, 1962. However, the petitioner was given an option to pay a redemption fine of Rs.16 lakhs in lieu of confiscation. The petitioner was also imposed a penalty of Rs.6,50,000/- under Section 112(a) of the Customs Act, 1962. Ext.P1 is the said order. Petitioner preferred an appeal which came to be rejected, pursuant to which a demand had been made as per Exts.P3 and P4. Petitioner, challenging the same, filed W.P.C.No.26025/2007, which came to be dismissed.
3. In the meantime, the 3rd respondent filed Customs Appeal No.411/2004 against Ext.P1 order on the ground that the amount of customs duty payable was not specified. It is stated that the petitioner paid Rs.6,50,000/-, as per the directions issued in Ext.P1 penalty order. Later, the appeal filed by the Customs was disposed on 01/03/2013 holding that the petitioner is liable to pay the duty leviable on the goods. Ext.P7 is the said order. A W.P.C.No.22571/2013 3 demand had been made pursuant to Ext.P7, which is Ext.P8.
4. According to the petitioner, during the pendency of the writ petition, Rs.6,50,000/- was deposited by him. While admitting the writ petition, this Court stayed realization of the duty and redemption fine on condition of the petitioner depositing 1/3rd of the amount demanded. Petitioner deposited Rs.16 lakhs in compliance with the direction dated 10/09/2013. The main contention urged by the petitioner is that when the equipment imported by the petitioner is confiscated and when the petitioner has not chosen the option to redeem the equipment, there is no reason to impose a further obligation to pay duty. The contention is that under Sec.125 of the Act, the authority can pass only alternative orders. Either confiscation with penalty under Section 111(o) and 112(a) of the Customs Act or confiscation under Section 111(o) with an option to pay fine with payment of duty in respect of goods in lieu of confiscation. The contention is that there is no provision enabling the authorities to pass an order of confiscation along with an order of penalty, payment of fine and duty. It is stated that the petitioner has paid the entire penalty W.P.C.No.22571/2013 4 under Section 112 and the petitioner is not liable to pay duty under Section 125(2) as they are not availing option for redemption. It is stated that when an order of confiscation has been passed under Section 126, the goods vests with the Central Government and therefore the imposition of customs duty and redemption fine is bad in law.
5. Counter affidavit is filed on behalf of the respondents. In the Counter affidavit, they supported the stand taken by the authorities. It is stated that the Commissioner of Central Excise, Cochin, as per order dated 30/08/2011 ordered confiscation of the equipment under Section 111(o) with an option to the petitioner to pay redemption fine of Rs.16 lakhs in lieu of confiscation. A penalty of Rs.2,50,000/- was also imposed under Section 112(a) of the Customs Act. Petitioner preferred an appeal before the CEGAT, Bangalore. The Tribunal remitted the matter back for fresh consideration. The matter was considered on merits by the Commissioner of Central excise and Customs, Thiruvananthapuram and Ext.P1 order was passed ordering confiscation under Section 111(o) with an option to the petitioner W.P.C.No.22571/2013 5 to pay Rs.16 lakhs as redemption fine in lieu of confiscation. The adjudicating authority had also imposed penalty of Rs.6,50,000/- and the petitioner as well as the Department preferred appeals. Petitioner's appeal was dismissed as per Ext.P2 final order. The appeal filed by the Department was allowed to the extent the adjudicating authority did not specify the amount of customs duty payable and accordingly Ext.P7 order was passed ordering that the petitioner is liable to pay customs duty on the goods in terms of Sec.125(2) of the Act. It is further submitted that the petitioner had an option to avail statutory remedy under Section 130E of the Act and having failed to do so, the Tribunal's order cannot be challenged in the present writ petition.
6. The contention that the writ petition is not maintainable on account of availability of an alternate remedy, though can be appreciated, having regard to the fact that the petitioner had only raised a legal issue and this Court had already admitted the writ petition as early as on 10/09/2014, it may not be appropriate for this Court to send the matter for adjudication to the appellate Tribunal and that apart, existence of an alternate W.P.C.No.22571/2013 6 remedy, by itself, is not a bar for this Court not to entertain the writ petition. Petitioner had only raised a legal issue in the matter. As already indicted, the main contention urged is that in Exts.P7 and P8, the respondents have demanded payment of duty of Rs.33,84,757/- along with redemption fine of Rs.16 lakhs and penalty. Contention is that when the equipment is confiscated and the petitioner has not chosen the option to redeem the equipment, there cannot be any liability to pay duty as contemplated under Section 125(2) of the Customs Act.
7. Section 125 of the Customs Act reads as under:
"125. Option to pay fine in lieu of confiscation.- (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit:
Provided that, without prejudice to the provisions of the proviso to sub-section (2) of section W.P.C.No.22571/2013 7 115, such fine shall not exceed the market price of the goods confiscted, less in the case of imported goods the duty chargeable thereon.
(2) Where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges, payable in respect of such goods."
8. Section 125(1) permits the owner or person in possession an option to pay in lieu of confiscation such fine as the officer thinks fit. Sub Section (2) indicates that where any fine in lieu of confiscation is imposed under sub Section (1), the owner of such goods shall, in addition, be liable to any duty and charges payable in respect of the goods. Under Section 126 of the Act, the goods that are confiscated vests in the Central Government. According to the petitioner, he had already remitted the penalty as imposed under Section 112. In terms of Sec.112 of the Act, a person is liable to pay penalty, if he does or omits to do any act or omission which would render such goods liable to confiscation under Section 111 of the Act. No doubt, by not complying with the conditions of exemption, the goods in question became liable W.P.C.No.22571/2013 8 to be confiscated and therefore the petitioner had become liable to penalty as well as confiscation of goods.
9. This is an instance where orders are passed confiscating the goods as provided under the Statute. In other words, the question is very simple. If the goods are confiscated by the Government, under Chapter XIV, whether the owner of the goods or the person in possession at the time of seizure, will have any obligation to pay the customs duty and other charges. Section 111 only indicates that certain item of goods on certain eventualities can be confiscated. Section 112 makes a person liable to pay penalty for committing any act or omission which render the goods liable to confiscation under Section 111. Sections 113 and 114 relates to confiscation and penalty for improperly exporting goods. Sec.114-A relates to penalty for short levy and non-levy of duty. Sec.114-AA relates to penalty for use of false and incorrect material. Sec.115 relates to confiscation of conveyances. Sec.116 relates to penalty for not accounting for goods and Sec.117 relates to penalties for contravention of provisions for which no express penalty is W.P.C.No.22571/2013 9 provided under the Act. Sec.118 relates to confiscation of packages and their contents. Sections 119, 120 and 121 relates to confiscation of goods used for concealing smuggled goods, confiscation of smuggled goods and confiscation of sale proceeds of smuggled goods. Section 122 relates to the adjudication of confiscation and penalties. Section 122A is the adjudication procedure to be adopted. Section 124 indicates that no order confiscating any goods or imposing any penalty shall be made unless a notice is given in writing stating the grounds on which it is proposed to confiscate the goods or to impose a penalty. Section 125 is the special procedure by which an option is given to the owner or the person from whom the possession or custody is taken, to redeem the goods in lieu of confiscation. In the case on hand, there is an exercise of jurisdiction under Section 125 of the Act and therefore, sub Section (2) of Section 125 clearly applies. The words in sub section (2) are "where any fine in lieu of confiscation of goods is imposed under sub Section (1)". The meaning is very clear that when such a fine has been imposed in lieu of confiscation, the owner of the goods or the person referred W.P.C.No.22571/2013 10 in sub Section (1), shall be liable to pay any duty and charges. Perusal of Ext.P7 oder would show that such an option was given to the petitioner or rather the order clearly indicated payment of a fine in lieu of confiscation. Therefore, there is nothing wrong in passing an order directing the petitioner to pay duty and other charges. However, the question is, when the owner of the goods or the person from whom the goods are seized does not intend to pay the fine in lieu of confiscation, whether he should be made liable to pay any duty and charges. In fact, there is no clarity in this matter. Sec.126 reads as under:
"126. On Confiscation, property to vest in Central Government. (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government.
(2) The officer adjudging confiscation shall take and hold possession of the confiscated goods."
Sec.127 further indicates that an award of confiscation or penalty by an officer of customs shall not prevent the infliction of any punishment to which the person affected thereby is liable under the provisions of Chapter XIV of the Act or under any other law. A perusal of the provisions of Chapter XIV would indicate that W.P.C.No.22571/2013 11 there is no specific provision to impose duty, if the goods are confiscated. The liability to pay customs duty arises only when fine is imposed in lieu of confiscation. Though such an order can be passed, if the petitioner does not pay fine in lieu of confiscation, the remedy of the respondent is only to confiscate the goods. In such an event, there is no provision to recover the customs duty and other charges.
10. In some what a similar situation, the Apex Court in Fortis Hospital Ltd. v. Commr. of Customs, [(2015) 12 SCC 715], while considering section 125 of the Customs Act held as under:
"It may be seen from the bare reading of the aforesaid section that under Section 125(1) of the Act, option is given to the importer whose goods are confiscated, to pay the fine in lieu of confiscation and redeem the confiscated goods. Before this action is taken, show-cause notice is to be issued under the provision of Section 124 of the said Act. This provision pertains to confiscation of goods and provides procedural safeguards inasmuch as there cannot be any order of confiscating any goods or imposing any penalty on any person without complying with W.P.C.No.22571/2013 12 the procedure contained in Section 124. Section 124 mandates issuance of the show-cause notice before passing any such order and contemplates two actions: first, relating to confiscating of the goods and second, pertaining to imposition of penalty. Pertinently, this action does not deal with payment of import duty at all.
10. It is not in dispute that show-cause notice in the instant case was issued under Section 124 of the Act. Once such a show-cause notice was issued and as can be seen from the proposed action which was contemplated in this provision (as has been taken note of above), it was also confined to confiscation of the imported machinery and imposition of penalty. Nothing was stated about the payment of duty. However, in spite of the fact that the show-cause notice was limited to confiscation of the goods and imposition of penalty, the final order which was passed included the direction to pay the customs duty as well. It is clear that when such an action was not contemplated, which even otherwise could not be done while exercising the powers under Section 124 of the Act, in the final order there could not have been direction to pay the duty.
W.P.C.No.22571/2013 13
11. Notwithstanding the aforesaid position, as pointed out above, the Department is taking shelter under the provisions of sub-section (2) of Section 125 of the Act. However, on a plain reading of the said provision, we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods. Only when this contingency is met, the duty becomes payable. In the present case, admittedly, such an option was not exercised and the confiscated machinery was not redeemed by the Institute. As a matter of fact, thus, no fine has been paid."
12. Mr K. Radhakrishnan, learned Senior Counsel appearing for the Department, argued that even if an option was not exercised, the moment it was stated in the order of the Commissioner that fine is being "imposed", sub-section (2) would get attracted. We do not agree with the aforesaid submission of Mr Radhakrishnan. The order confiscating the goods has already been reproduced above. Insofar as the payment of fine is concerned, only option was given (and that was only course of action which could be visualised under Section 125). The order W.P.C.No.22571/2013 14 categorically states that "the importer `may' redeem the confiscated goods on payment of fine of Rs 1,00,000 (Rupees one lakh only)".
13. Indubitably, unless an option is exercised, fine does not become payable. Sub-section (2) of Section 125 uses the expression "imposed" by stating "where any fine in lieu of confiscation of goods is imposed". In Black's Law Dictionary (10th Edn.), the word "impose" is defined as "to levy or exact (a tax or duty)". Thus, it has to be a levy or exact which is become payable and has to be paid. Likewise, the word "impose" is defined by Oxford English Dictionary, as relevant for the purpose of the present case, as "Lay or inflict (a tax, duty, charge, obligation, etc.) (on or upon), esp. forcibly; compel compliance with; force (oneself) on or upon the attention, etc. of".
14. In view of the above, we cannot agree with the submission of Mr Radhakrishnan that fine been "imposed" in the present case. The stipulation contained in the adjudicating order was only contingent in nature which contingency would have arisen only on exercising the option by the importer to pay fine in lieu of confiscation and to redeem the goods."
W.P.C.No.22571/2013 15
11. Ext.P4 is the letter dated 16/07/2007 issued by the Deputy Commissioner of Customs to the petitioner calling upon them to remit Rs.16 lakhs as redemption fine and Rs.3 lakhs being the balance of penalty. This is followed by letter dated 02/11/2010 by which petitioner was called upon to pay Rs.16 lakhs. Petitioner, by Ext.P6 letter dated 04/11/2010, informed the Superintendent (Arrears Cell) that the equipment could be confiscated as the petitioner is not availing the option of payment of redemption fine. Ext.P7 is the order passed in the appeal by which the Appellate Tribunal directed payment of customs duty, which is not permissible under law, as held by the Apex Court in Fortis Hospital Ltd. (supra).
In the result, this writ petition is allowed and Ext.P7 and P8 are quashed.
(sd/-) (A.M.SHAFFIQUE, JUDGE) jsr