Imposing Redemption Fine Equal To Value Of Goods Is Harsh; CESTAT Directs Reduction

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), while reducing the quantum of the redemption fine, held that imposing a redemption fine equal to the value of goods is harsh.

The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that the total unbranded goods were valued at Rs. 1,65,49,893/-, and a redemption fine of the same value was imposed by the Commissioner in the impugned order. He also confiscated 2880 pairs of reading glasses and sun goggles valued at Rs. 11,42,993 and allowed them to be redeemed on payment of a redemption fine of an equal amount. In other words, the amount of the redemption fine imposed by the Commissioner in the order is equal to the value of the goods themselves.

The appellant or assessee filed a bill of entry to clear goods for import through their customs broker. The goods were imported from M/s Pride International Company Ltd., China, and came stuffed in a container. Acting on intelligence that the importer had mis-declared the goods as well as their quantity in the Bill of Entry, officers of the Special Investigation and Intelligence Branch examined the goods on June 4, 2015, under a panchnama and drew samples for inquiry. They also seized the goods on the belief that they were liable for confiscation under Section 111 of the Customs Act, 1962.

While the goods that were declared were ladies purses, ladies hand purses, sunglasses, optical boxes, and empty boxes (all unbranded), on examination, the goods were found to have different international brand names or logos affixed, embossed, or imprinted on them, such as Louis Vuitton, Gucci, Tommy Hilfiger, Emporio Armani, Mont Blanc, Channel, Dolce Gabana, Ray Ban, Porsche design, etc. The nature of the goods found was also different in some cases from what was declared in the bill of entry.

The Commissioner confiscated them absolutely, as the appellant had explicitly abandoned the goods. He rejected the value of the remaining goods under Rule 12 of the Valuation Rules and re-determined their value under Rule 9 of the Valuation Rules. The goods that were initially seized were provisionally released at the direction of the High Court against the bond and bank guarantee. Since the goods were misdeclared, the Commissioner held that they were liable for confiscation under sections 111(l) and (m). He, however, allowed the appellant to redeem them on payment of a redemption fine of Rs. 11,42,993/-. Since the goods were held liable for confiscation, the penalty was found to be imposable under Section 112(a), read with Sections 114A and 114AA.

The assessee contended that the Commissioner did not properly consider the show cause notice as he had not dealt with the question of rejection of the declared value under Rule 12 of the Valuation Rules. He had also not dealt with how Rule 9 of the Customs Valuation Rules is applicable in the present case without going through the remaining rules.

The department argued that the entire bond value was confiscated since all the goods (counterfeit as well as non-counterfeit) were liable for confiscation, and an appropriate redemption fine has been imposed as per law. The redemption fine was determined as per Section 125.

The tribunal upheld the confiscation of the other goods under sections 111(l) and 111(m), but the redemption fine was reduced.

Counsel For Appellant: Priyadarshi Manish

Counsel For Respondent: Rakesh Kumar

Case Title: M/S Daya Enterprises Versus The Commissioner Of Customs (Export) Icd, Tughlakabad, New Delhi

Case No.: CUSTOMS APPEAL NO. 51056 OF 2019

Click Here To Read The Order