CESTAT Rules, Assessee Liable To Pay Redemption Fine For Seized Goods Missing From Their Custody
Pranav B Prem
The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member), held that an assessee is liable to pay redemption fine in respect of goods that were seized but went missing while in their custody under a supardaginama arrangement. The Tribunal ruled that the liability for confiscation of goods does not cease simply because the goods were lost, pilfered, or diverted while in the custody of the assessee.
Also Read: Penalty Under Customs Act Not Sustainable Without Confiscation of Goods: CESTAT Delhi
Background
The Directorate of Revenue Intelligence (DRI) received intelligence inputs suggesting that M/s Akay Cones Pvt. Ltd. and M/s Intrade Impex Pvt. Ltd., both controlled by Shri H.M. Prabhakar, were engaged in large-scale evasion of customs duty. The investigation revealed that the respondents were importing fabrics from manufacturers based in the USA and Belgium at a value of USD 3 to 3.5 per meter but were declaring the import price as merely USD 1 per meter by routing the invoices through traders based in Singapore and Thailand, thus significantly under-invoicing the goods. Following the investigation, the DRI seized large quantities of fabrics from the godowns of the respondents. Subsequently, under the orders of the High Court, these seized goods were handed over to the respondents for safe custody under a supardaginama arrangement.
When a joint inspection was conducted by the department and the respondents pursuant to the High Court’s direction, it was discovered that out of 2,366 rolls of fabric originally seized and handed over to M/s Akay Cones Pvt. Ltd., only 683 rolls remained; the rest had gone missing while in the custody of the respondents.
Findings of the Commissioner and the Tribunal's Observation
The Commissioner, while adjudicating the case, confiscated only the 683 rolls that were physically available during the inspection and imposed redemption fine in lieu of confiscation. However, no redemption fine or confiscation order was passed with respect to the missing 1,683 rolls, citing that the goods were no longer available for confiscation.
Challenging this part of the order, the Revenue approached CESTAT, arguing that once the goods are seized and their liability for confiscation is established, the fact that they subsequently went missing while in the custody of the assessee does not absolve them of the consequences under the Customs Act, 1962.
The Tribunal agreed with the Revenue’s contention and held that the Commissioner’s reasoning was legally unsound. It noted that the goods had been properly seized and were liable for confiscation under Section 111(d) of the Customs Act. The mere fact that the goods were later lost or diverted while in the custody of the respondents did not extinguish their liability for confiscation.
The Tribunal further noted that when goods are seized and handed over for safe custody, the responsibility to ensure their availability for adjudication lies with the custodian—in this case, the assessee. If the goods are lost due to negligence, diversion, or any other reason attributable to the assessee, they remain liable for redemption fine as if the goods were available and confiscated.
Referring to Section 125 of the Customs Act, the Tribunal pointed out that the provision mandates payment of redemption fine in lieu of confiscation. Even though the goods were not physically available for confiscation during adjudication, the liability for redemption fine remained intact.
The Bench observed: “Had the goods been not diverted or lost through negligence while in the custody of respondents they would have been confiscated and they would have been vested in the Central Government. In our considered view, since the goods were lost by the respondents, they need to pay a redemption fine in lieu of the goods.”
Verdict
In view of the above findings, the Tribunal allowed both appeals filed by the Revenue and set aside the order of the Commissioner to the extent it failed to confiscate and impose redemption fine on the missing 1,683 rolls of fabric. The matter was remanded back to the Commissioner to determine the quantum of redemption fine and penalty applicable to the respondents. Accordingly, the appeals were disposed of by directing the Commissioner to pass appropriate orders regarding redemption fine and penalty in respect of the missing goods.
Appearance
Present for the Appellant : Shri Nagendra Yadav, Authorised Representative
Present for the Respondent: None
Cause Title: Commissioner Of Customs (Preventive)-New Delhi V. M/S Akay Cones Pvt. Ltd.
Case No: Customs Appeal No. 130 of 2008
Coram: Hon'ble Dr. Rachna Gupta [Member (Judicial)], Hon'ble Mr. P.V. Subba Rao [Member ( Technical)]
[Read/Download order]
