The Madras High Court has held that where an importer knowingly uses false or incorrect declarations or documents in relation to import, penalty under Section 114AA of the Customs Act is attracted, and such liability is not excluded merely because the goods are permitted to be re-exported on payment of redemption fine. Confiscation, redemption fine, duty liability, appropriation of duty paid, and penalty under the Customs Act operate in distinct fields and may co-exist where the statutory conditions are met.
The Bench further laid down that, in light of Section 125(2), redemption of confiscated goods on payment of fine does not wipe out the owner’s liability to pay duty and other charges; therefore, the CESTAT was wrong in treating re-export as a basis to set aside appropriation of duty and penalty under Section 114AA.
The Division Bench comprising Dr. Justice G. Jayachandran and Justice Shamim Ahmed recorded that this was a case of import of a foreign vehicle by mis-declaring its description, value and place of origin so as to gain concessional customs duty under Notification No. 12/2012 dated 17.03.2012. The Bench reproduced Section 46(4) and Section 46(4A) of the Customs Act and emphasized that the importer presenting a bill of entry must ensure the accuracy and completeness of the information furnished, the authenticity and validity of supporting documents, and compliance with restrictions or prohibitions under law.
The Bench also reproduced Section 125 and Section 114AA. It noted that Section 114AA applies where a person knowingly or intentionally makes, signs, uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular in any transaction for the purposes of the Act.
The Bench held that the provisions relating to genuine imports and those dealing with misdeclaration and illegal imports cannot be mixed so as to dilute the rigour of the penal provisions. It observed that confiscation, fine in lieu of confiscation, duty liability, and penalties for wrongful import are separate statutory consequences.
Further, the Bench expressly held that where the importer opts to redeem goods and also seeks re-export, that choice does not entitle the importer to question penalty under Section 114AA or forfeiture/appropriation of duty. It observed that forfeiture and penalty for availing concessional duty on improper goods are separate and independent from redemption fine and re-export.
Referring to Section 125(2), the Bench held that once the option to redeem confiscated goods is exercised, the owner is liable, in addition to fine, to pay duty and other charges. It therefore rejected the Tribunal’s view that re-export or redemption fine would displace duty liability or penal consequences. The Bench found that the CESTAT had ignored Sections 114AA and 112A/112(a) and had misread the show cause notice in holding that there was no specific averment of falsification sufficient to attract Section 114AA.
Hence, the Bench concluded that the CESTAT’s order was perverse and contrary to law, and warned that accepting the Tribunal’s proposition would allow illegal importers to pay a small redemption fine and re-export without suffering penalty or customs duty for attempted violation of the Act.
Briefly, the respondent had imported a 2016 model Cadillac Escalade SUV Luxury Collection, declaring it as a 10-seater/right-hand-drive vehicle, with seller stated as M/s Auto Group International (Pvt) Ltd., Sri Lanka, and country of origin declared as Australia. Investigation by DRI found that the vehicle had originally been sold in Canada, and had been imported after alteration of seating capacity from 8 to 10 seats to intentionally classify it under a tariff heading attracting lesser customs duty.
The Department also found that the importer had produced documents including a letter from the Sri Lankan entity claiming conversion in Sri Lanka as per ADR compliance and a fabricated letter purporting to be from the Government of Australia, in support of the import. The vehicle was seized and the partner of the importer admitted that the seating capacity had been increased to avail duty concession.
The discrepancies noted by the Department included: country of origin declared before Sri Lankan Customs as USA but before Indian Customs as Australia; classification before Sri Lankan Customs as CTH 8703 but differently declared before Indian Customs; left-hand drive in Sri Lankan records but right-hand drive in Indian records; and FOB value of USD 1,03,548.66 as against CIF value of USD 83,000 declared in India.
The adjudicating authority rejected the declared description, re-determined the vehicle as an 8-seater, rejected Australia as country of origin and held the origin to be USA, re-determined value, ordered confiscation under Sections 111(d) and 111(m), imposed penalty under Sections 112(a) and 114AA, appropriated Rs. 57.40 lakhs paid towards duty, imposed penalty on the partner, and allowed redemption/re-export on payment of fine under Section 125.
On appeal, the Commissioner (Appeals) upheld the findings that the country of origin and value had been mis-declared and that seating capacity had been altered from 8 to 10 seats with motive to evade customs duty. However, the CESTAT held that the show cause notice did not contain specific charges directly implicating the importer in having themselves caused falsification of documents, and therefore set aside the penalty under Section 114AA and the appropriation of the duty amount, while not interfering with the option of re-export.
Appearances:
Rajnish, for Appellant
Sathish Sundar, for Respondent
