Clarification on Customs Duty Payment in Confiscation Proceedings

In a significant judgment by the Supreme Court of India, a clarification has been provided regarding the payment of customs duty in confiscation proceedings. The case delves into the distinct procedures and liabilities under Section 125(2) and Section 28 for duty payment after the redemption of confiscated goods. This ruling has far-reaching implications for stakeholders involved in customs-related matters.

Issue

The third question that fell for consideration in the case is determining the true and correct ratio of the decision in the Jagdish Cancer case.
The issue at hand revolves around the liability of the owner of goods to pay customs duty even after redeemed confiscated goods upon payment of a fine under Section 125 of the Act.

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Analysis

Confiscation proceedings under Section 124 lead to obligation to pay duty and charges under Section 125 only upon owner exercising the option to pay fine for redemption of goods.
Confiscated goods, exempt from duty, have duty liability only upon redemption via Section 125 option.
Department can separately demand duty in absence of Section 125 option exercise.
Confiscated goods are not subjected to duty until redemption via payment under Section 125.
Owners of goods must pay duty and charges upon exercising Section 125 option.
Judicial interpretation led to addition of subsection (2) to Section 125 confirming duty liability after exercising redemption option.
Owner’s duty to pay customs duty post-redemption of confiscated goods under Section 125 noted.
Department’s defense using Section 125(2) applicability for imposing fine, duty, and charges after confiscation.
Confusion arises due to Deputy Collector’s lack of distinction between powers and liabilities.
Duty payment liability arises under Section 125(2) after exercising redemption option.
Distinct procedures for recovery of duty as per Section 28 when duties are not paid due to specific reasons.
Section 28 applicable for duty determination after redemption of confiscated goods under Section 125.
Interest liability under Section 28AB follows when duty is determined under Section 28 post-redemption.
Liability to pay customs duty arises under Section 125 distinct from duty assessment under Section 28.
Jagdish Cancer case not applicable to duty payment liability under Section 28 post-redemption.
Distinct procedures and authorities for confiscation fines under Section 183 and duty under Section 28.
Section 125 of the Customs Act allows for the option to pay a fine in lieu of confiscation of goods.
The court ruled that when an order for confiscation of imported goods is passed, the person must be given the option to pay a fine instead.
Payment of customs duty arises under Section 125(2) and not under Sections 12 or 28.
The judgment clarifies that a notice under Section 28 is not necessary for the payment of duty in such cases.
Section 125(2) states that if a fine in lieu of confiscation is imposed, the owner of the goods is also liable to pay any duty and charges applicable to those goods.
The court confirmed that Section 183 proceedings only authorize a fine and not customs duty imposition.
The ruling in Fortis Hospital Ltd. v. Commr. of Customs, Import further supports this understanding.
A 1976 decision in Union of India v. M/s Security and Finance (P) Ltd. clarified the imposition and collection of duties in confiscation proceedings under the Sea Customs Act, 1878.
In a case of goods confiscated for being imported without a proper license, the importer had the option to redeem the goods under Section 183 but not to pay additional duty as held by the court.
The distinctiveness and independence of fine payment under Section 125 and redemption under Section 183 were emphasized by the court.
In the Fortis Hospital case, the owner of confiscated goods did not choose to exercise the option under Section 125.
Section 28 applies for assessing and determining duty and charges payable for goods redeemed under Section 125(2).
Interest on delayed payment of duty arises under Section 28AB, in addition to the duty.
Liability to pay duty and charges under Section 28AB is in addition to any fine imposed.