Voluntarily Acceptance Of A Higher Value Exempts Importer From Liability Of Confiscation And Redemption Fine: Reiterates CESTAT Mumbai

The Single Bench of member Dr. Suvendu Kumar Pati (Judicial Member) held that it cannot be said that an importer has made a tie or contract for payment of a higher value, so as to make him liable for violation of "Civil Obligations" for the purpose of imposing penalty under the Customs Act.

The appellant M/s Neno Crystal, an importer, filed a bill of entry for clearance of specified goods. On examination by an Expert, at the instance of the Customs Official, the value of the item was found to be much more than what was declared.

The adjudicating authority held that the goods were liable for confiscation under the Customs Act, 1962. The authority also re-determined the value of the goods under Rule 5 of the Customs Valuation Rules, 2007, allowed redemption of imported goods against payment of fine and imposed penalty on the proprietor of the appellant firm. Against this order, the appellant filed an appeal before the Commissioner of Customs (Appeals).

The Commissioner of Customs (Appeals) held that there was no deliberate undervaluation or misdeclaration by the appellant to avoid customs duty and there was no evidence that the importer/appellant had submitted false invoice. The Commissioner had ruled that since the allegations of revenue department regarding under-valuation were not backed by material evidence, re-determination of value could be considered as voluntarily statement of the importer under Section 108 of the Customs Act, 1962. However, the Commissioner had confirmed the confiscation order by holding that establishment of mens rea is not essential for imposing penalty for breach of "Civil Obligations".

The Commissioner had, however, reduced the fine and penalty amount substantially by holding that it should be commensurate with the offence committed by the appellant and not be harsh or excessively disproportionate.

The appellant M/s Neno Crystal filed an appeal against the order of the Commissioner of Customs (Appeals) before the CESTAT, challenging the legality of confirmation of the fine and penalty.

The appellant submitted before the CESTAT that imposition of redemption fine had no legal basis. The appellant contended that in view of the decision of the Madras High Court in the case of Commissioner of Customs (Sea), Chennai-I versus M.R. Associates (2013), confiscation and penal provision invoked by the Commissioner (Appeals) cannot be sustained since the enhancement of the value of imported goods was based on a voluntary statement under Section 108 of the Customs Act, 1962.

The revenue department submitted that mens rea is not a precondition for imposing penalty for breach of "Civil Obligations" and the fine was imposed on the appellant to wipe- out the margin of profit. The revenue department contended that the Commissioner (Appeals) had rightly confirmed the fine and penalty while reducing its quantum, so as to make it commensurate to the offence committed by the appellant.

The CESTAT held that as per the law laid down by the Madras High Court in Commissioner of Customs (Sea), Chennai-I versus M.R. Associates (2013), penal provisions under Customs Act cannot be invoked if enhancement of value of goods is based on a voluntary statement of the appellant/importer concerning acceptance of the value of goods, and nor can confiscation of goods be made in lieu of redemption fine.

The CESTAT ruled that the term "Civil Obligations" means performance of certain action under the obligation of law which gives a right to the other person of enforcing its performance in case of violation.

The CESTAT observed that the appellant had filed a Bill of Entry on the basis of the description of the item mentioned in the import document by the supplier. The appellant had agreed to pay duty on the enhanced value after the imported item was found to be of a different size.

The CESTAT held that it cannot be said that the appellant had made a tie or contract for payment of a higher value, so as to make him liable for violation of "Civil Obligations" for the purpose of imposing penalty on him under the Customs Act. The CESTAT added that voluntarily acceptance of higher value and willingness to pay the customs duty at the enhanced rate would exempt the appellant from liability of confiscation and redemption fine under the Customs Act.

The CESTAT thus allowed the appeal of the appellant and set aside the order passed by the Commissioner of Customs (Appeals) with respect to confirmation of the reduced penalty and redemption fine under the Customs Act.

Case Title: M/s Neno Crystal versus Commissioner of Customs (Import), Mumbai

Dated: 06.04.2022 (CESTAT Mumbai)

Representative for the Appellant: N.D. George, Advocate

Representative for the Respondent: Bhushan Kamble, Assistant Commissioner, Authorised Representative for the Respondent

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