The appeal by the Commissioner of Customs and Central Excise, NOIDA arises from an order of the Customs, Excise and Service Tax Appellate Tribunal1 dated 16 May 2014. In the appeal which was filed by the department against an order of the Commissioner (Appeals), the Tribunal declined to interfere with a direction by which the goods were permitted to be redeemed for home consumption on payment of a redemption fine of Rs. 8 lacs, deleting a condition of re-export which was imposed by the Adjudicating Officer.
The assessee initially filed a writ petition under Article 226 of the Constitution, seeking enforcement of the order passed by the Tribunal. When the petition came up, the Court was informed on 10 July 2014 that the revenue intended to file an appeal against the order of the Tribunal. The appeal having been filed, both the appeal and the writ petition have been heard together. Since the writ petition seeks to enforce the order of the Tribunal which has been questioned by the Revenue in appeal, it would be convenient to deal with the appeal in the first instance.
Though, several questions of law have been formulated by the revenue, the following question has been pressed at the hearing:-
"3. Whether the Tribunal has committed an error of law in accepting and upholding the clearance for home consumption allowed by the Commissioner (Appeal) of goods otherwise prohibited for clearance for home consumption in absence of valid BIS certificate with reference to the Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order, 20092, read with 2.2 of the Foreign Trade Policy and General Note 2A of the import policy regarding mandatory compliance with regard to BIS certification as per Schedule III to the import policy."
The assessee filed a Bill of Entry on 5 June 2013 for the clearance of goods which were declared as "New Passenger Car Radial Tyres of mixed sizes" under a Bill of Lading dated 12 May 2013. The goods were valued at USD 72375.00 (CF) and were imported from M/S Hussain & Lucky General Trading LLC, Dubai, UAE. The total assessable value was declared to be Rs.40.87 lacs with duty payable of Rs.11.79 lacs. The goods were governed by the Pneumatic Tyres and Tubes for Automotive Vehicles (Quality Control) Order, 2009 read with the CBEC Circulars/Instructions dated 29 November 2011 and 15 December 2011 and a clarification of 12 July 2013. Paragraph 3 of the 2009 Order provides as follows:-
"Prohibition regarding manufacture, sale, distribution etc:- (1) No person shall by himself or through any person on his behalf, manufacture, import, store for sale, sell or distribute Pneumatic Tyres which do not conform to the Specified Standard and which do not bear the Standard Mark of the Bureau on obtaining Certification marks license;
The Additional Commissioner in his order dated 17 July 2013 noted that the first check examination report found that a certificate of the Bureau of Indian Standards3 was available only in respect of a consignment of Nexon brand tyres but that was valid only until 30 December 2012. No BIS certificate was available in respect of the tyres of other brands. The Additional Commissioner also noted that on scrutiny of the import documents, it was found that no invoice of the manufacturer or evidence for the purchase of tyres from Nexon or from any other manufacturing company had been submitted. The importer was found to be a trader and not the Original Equipment Manufacturer (OEM) or an entity authorised for the fitment of tyres on vehicles. On these facts, the Additional Commissioner ordered confiscation of the goods under Section 111 (d) of the Customs Act, 19624. However, an option was furnished under Section 125(1) of the Customs Act for the payment of a redemption fine of Rs. 8 lacs in lieu of confiscation and for the re-export of the goods. A penalty of Rs.5 lacs was also imposed.
The assessee carried the matter in appeal to the Commissioner (Appeals). The Commissioner (Appeals) held that the assessee was not entitled to the benefit of a conditional exemption from the requirement of a BIS certification which applied only to Pneumatic tyres not manufactured domestically and imported by OEMs or manufacturers for selling in the market through their authorised dealers. The assessee relied upon three letters of certain dealers. The Commissioner (Appeals), however, held that the assessee had not submitted valid documents to prove that it had been authorised by the OEM to import for the purpose of selling in the market in order to avail of the exemption. However, the Commissioner (Appeals) held that it was harsh on the part of the Additional Commissioner to impose a redemption fine of Rs.8 lacs with a condition of re-export. Finding that the assessee was entitled to redemption on payment of an appropriate redemption fine, the condition of re-export was deleted.
This order was challenged by the revenue in an appeal before the CESTAT. The Tribunal by its order dated 16 May 2014 has confirmed the order of the Commissioner (Appeals).
Learned counsel appearing on behalf of the revenue submits that the goods in question were prohibited goods within the meaning of Section 2(33) of the Customs Act and the Additional Commissioner had furnished valid grounds for imposing a condition of re-export, particularly since only one part of the consignment of Nexon tyres had a BIS certification but which had, in any event, expired on 31 December 2012, whereas the other goods were not even covered by BIS certification. Moreover, the validity of the licence was until 13 December 2012. Hence, it was urged that the Commissioner (Appeals) was not justified in exercising the discretion conferred by Section 125(1).
On the other hand, learned counsel appearing on behalf of the assessee submitted that the option of imposing a redemption under Section 125 (1) of the Customs Act extends also to prohibited goods within the meaning of Section 2(33) of the Customs Act as was held in a judgement of the Delhi High Court in Commissioner of Customs and Central Excise Delhi-IV Versus Achiever International5. In the present case, it was submitted that the Commissioner (Appeals) furnished adequate reasons for exercising the discretion, noting that the certificate of origin issued by an authorised agency was available and some of the brands of imported goods were renowned internationally. Hence, it was urged on behalf of the assessee that there was no evidence on behalf of the revenue to suggest that the goods were of a sub-standard quality.
Section 125 of the Customs Act confers upon the Adjudicating Officer a discretion to grant an option to pay a fine in lieu of the confiscation of goods whenever the confiscation is authorised by the Act and the importation or exportation is prohibited under the Act or any other law for the time being in force. Section 125 of the Customs Act provides as follows:-
"125. Option to pay fine in lieu of confiscation.-(1) Whenever confiscation of any goods is authorized by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit:
Provided that, without prejudice to the provisions of the proviso to sub- section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
(2) Where any fine in lieu of confiscation of goods is imposed under sub- section (1), the owner of such goods or the person referred to in sub- section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods."
Section 2(33) of the Customs Act defines the expression 'prohibited goods' as follows:-
"(33) "prohibited goods" means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with."
Hence, the definition of the expression 'prohibited goods' covers any goods where the import or export is subject to a prohibition under the Customs Act or any other law for the time being in force. However, the definition does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. Section 125 (1) of the Customs Act confers a discretion upon the Adjudicating Officer to allow an option for the payment of a redemption fine in lieu of confiscation where it is found that the importation or exportation is prohibited under the Customs Act.
In the present case, the Commissioner (Appeals) has missed the central aspect of Section 125 of the Customs Act, which is the discretionary element in the exercise of jurisdiction under Section 125 of the Customs Act. In fact, the test which has been formulated by the Commissioner in paragraph 4.7 of the order reads as follows:-
"4.7 I agree with the appellant's contention that the adjudicating authority has not given reasons for not giving an option for redemption of the consignment against Redemption fine. I also agree with the appellant that the import of Pneumatic tyres is neither prohibited under Customs Act, 1962, nor Foreign Trade (Regulation & Development) Act, 1992 or Automotive Vehicles (Quality Control) Order, 2009 and therefore even if the import of some of the Tyres was contrary to the Order, 2009, the appellant is entitled to redemption thereof on payment of appropriate Redemption Fine adjudged by the learned Additional Commissioner in terms of the provisions of Section 125 of the Customs Act, 1962."
The same error has occurred in construing the judgement of the Delhi High Court in Commissioner of Customs and Central Excise Delhi-IV (supra). The Division Bench of the Delhi High Court while construing the provisions of Section 125 of the Customs Act has observed as follows:-
"20. Section 125 of the Act gives discretion to the authorities to impose redemption fine and gives an option to the person to pay the same in lieu of confiscation. The option/discretion is clear from the use of word 'may'. Quantum of the fine is again discretionary as is apparent from the last part of sub-section(1) which stipulates that such fine as the said officer thinks fit can be imposed. The proviso to sub-section (1) stipulates that it shall not exceed the market price of goods confiscated less the duty chargeable thereon. Sub-section (2) clarifies that the duty imposable is in addition to the redemption fine."
Despite this clear statement of law, the manner in which this decision has been interpreted by the Commissioner (Appeals) appears from the following observations:-
"I rely on the said judgment for support of my finding that the appellant were entitled to the redemption of the imported goods for the home consumption."
The Commissioner (Appeals), therefore, proceeded on the misconceived notion that the assessee is entitled to redemption on the payment of an appropriate redemption fine. This was clearly not a proper interpretation of Section 125 of the Customs Act.
That apart, the Commissioner (Appeals) has adduced the following reasons for allowing the redemption of goods;
"Further the imposition of the penalty is resorted to make it prohibitively expensive for importer so that he does not try it again in the future. In the present case, I find that R. F. and penalty have been imposed but the imported goods have not been allowed to be released tin the domestic market for reasons not explained in the impugned order. It has to be acknowledged that the imported goods have been accompanied by a certificate of the origin, which has been issued by an agency, which is authorised. The said certificate certify the origin of the imported goods from their respective countries. Some of the brands of the imported goods are renowned internationally. Therefore the imported goods cannot be treated as of substandard quality. I, therefore, find that the adjudicating authority has travelled a bit too far in the matter & his order regarding re-export order of imported goods is arbitrary."
This reasoning has been extracted by the Tribunal while confirming the finding. In our view, the Commissioner (Appeals) ought to have considered all the relevant facts and circumstances, including in particular, the fact that a BIS certification was available only in respect of a part of the consignment. The Commissioner (Appeals) held that some of the brands are renowned internationally. There has been no effort on the part of the Commissioner (Appeals) to segregate these brands from the rest. In a matter such as the present, the import of prohibited goods which are to be utilised in motor vehicles has an important bearing on the safety of the public at large. The conditions which have been imposed in the 2009 Order and in the Circular of the Board are intended to fulfil a specific purpose of protecting the public interest.
In these circumstances, since the Commissioner (Appeals) proceeded to apply a misconceived test under Section 125 of the Customs Act and has failed to consider this aspect, we are of the view that the ends of justice would warrant that the proceedings be restored back to the file of the Commissioner (Appeals). We, accordingly, dispose of the appeal by restoring the proceedings back to the Commissioner (Appeals), who shall decide the appeal afresh after hearing the Assessee and the Department. Since, we are remanding the matter to the file of the Commissioner (Appeals) for a fresh decision on the basis of the view which we have taken, it is not necessary for the Court to answer the question of law as framed.
In view of the order which we have passed in the appeal filed by the Revenue, no separate orders are necessary on the writ petition. The writ petition is, accordingly, disposed of. However, on remand the Commissioner (Appeals) is directed to decide the matter expeditiously, preferably within a period of one month from the receipt of a certified copy of this order.
The Commissioner (Appeals) is directed to consider all the rights and contentions of the parties on remand, including as to whether the discretion under Section 125(1) of the Customs Act should be exercised by deleting the condition of re-export which was imposed by the Adjudicating Officer while imposing a redemption fine of Rs.8 lacs. All the rights and contentions in that regard are left open.
On the request of the learned counsel appearing on behalf of the assessee, we take note of the submission that the assessee has since received a BIS certification. The assessee would be at liberty to make all submissions in that regard to the Commissioner (Appeals) on which we express no opinion on merits.
Order Date :- 4.8.2014 VMA (Dr. D.Y. Chandrachud, C.J.) (Dilip Gupta, J)