Customs Act | Owner Of Goods Liable To Pay Customs Duty Even After Confiscated Goods Are Redeemed Paying Fine : Supreme Court

In a notable ruling relating to the Customs Act of 1962, the Supreme Court on Tuesday (July 23) held that the importer would be liable to pay customs duty in addition to fines and other charges upon redeeming the confiscated goods.

The Court considered the following questions :

i) Whether there is a liability to pay customs duty when the confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 19621?

ii) Whether, the liability to pay such duty will include the liability to pay interest on delayed payment under Section 28AB of the Act?

Answering the questions, the bench comprising Justices PS Narasimha and Aravind Kumar held :

"We have held that the owner of goods has a liability to pay customs duty, even after confiscated goods are redeemed after payment of fine under Section 125 of the Act. Furthermore, when confiscation proceedings are initiated under Section 124 of the Act, the obligation to pay duty and other charges under Section 125 will arise only when the owner of goods exercises the option to pay fine for redemption of goods and the Department accepts it. Liability to pay customs duty in such confiscation proceedings under Section 125(2) is distinct from the assessment and determination of duty, which can rise only under Section 28. The duty liability arising under Section 125(2) must be assessed under Section 28. Thus, we answered the second question by holding that once Section 28 applies for determination of duty, interest on delayed payment of duty under Section 28AB follows.

The Court further stated :

“We can thus conclude the second principle that, when confiscation proceedings are initiated under Section 124 of the Act, the obligation to pay duty and other charges under Section 125(2) will arise only when the owner of goods exercises the option to pay fine for redemption of goods and the Department accepting it.”

To arrive at such findings, the judgment authored by Justice PS Narasimha referred to the case of Union of India v. M/s Security and Finance (P) Ltd reported in (1976) 1 SCC 166, wherein the court while interpreting the identical provisions of Sea Customs Act, 1878 upheld the decision of the department to levy duty upon redemption of the confiscation in addition to fine payable by the importer for redemption of the confiscated goods.

Importer Liable To Pay Interest on Delayed Payment of Duty

Further, the court held that the importer would also be liable to pay interest on delayed payment of duty upon redeeming the confiscated goods.

“We have held that Section 28 would come into operation for assessing and determining the duty and other charges payable with respect to goods redeemed under Section 125(2). Once Section 28 applies for determination of duty obligation arising under Section 125(2), the interest on delayed payment of duty arises under Section 28AB. The said provision obligates payment of interest in addition to the duty.”, the court observed.

In essence, the importer has to pay a fine and other charges for the redemption of the confiscated goods, and upon acceptance of the fine by the department, the importer needs to pay duty and an interest on the delayed payment of the duty.

In arriving at such conclusions, the Court distinguished its earlier judgment of Commr. of Customs (Import) v. Jagdish Cancer and Research Centre reported in (2001) 6 SCC 483 to note that it is not an authority for the proposition that when the liability to pay customs duty arises under Section 125(2), the calculation, determination or the assessment of such duty cannot be made under Section 28. 

Counsels For Appellant(s) Ms. Charanya Lakshmikumaran, (Arguing counsel) Ms. Apeksha Mehta, Adv. Ms. Neha Choudhary, Adv. Ms. Umang Motiyani, Adv. Ms. Jyoti Pal, Adv. Mr. Ayush Agrawal, Adv. Ms. Falguni Gupta, Adv. Mr. M. P. Devanath, AOR

Counsels For Respondent(s) Mr. N Venkataraman, A.S.G.(NP) Mr. V C Bharathi, (Arguing counsel) Ms. Amritha Chandramoulli, Adv. Mr. S A Haseeb, Adv. Mr. Kritagya Kait, Adv. Mr. Udai Khanna, Adv. Mr. Mukesh Kumar Maroria, AOR

Case Title: M/S NAVAYUGA ENGINEERING CO. LTD. Versus UNION OF INDIA & ANR.

Citation : 2024 LiveLaw (SC) 504

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