ORDER
V.P. Gulati, Vice President
1. These three appeals involve a common issue and are therefore taken up for disposal together.
2. The learned Counsel for the appellants has referred us to the facts in Appeal No. C/2127/92-A for the purpose of adducing common pleas. The issue in the appeals relate to confiscation of the goods which had been earlier imported by some body else and were sold after changing hands ultimately to the appellants. At the time of importation the goods were found to have been imported in violation of the import restrictions and the goods were confiscated for want of proper import licence under Section 111(d) of the Customs Act, 1962. The goods were released on payment of redemption fine and the duty was paid based on the value assessed at the time of importation. Subsequently on enquiry, it was found that the goods had been grossly under valued and were originally invoiced from the country of origin i.e. Germany at DM 19 per kg as against DM 9 per Kg declared by the importers. It was found that the goods had been re-invoiced at a lower price through a party in Singapore. The goods as imported were traced to the appellants and the same were thereafter seized for action under the provisions of the Customs Act, 1962 and the goods were allowed provisional release on execution of bond by the appellants. By the impugned order, the goods were ultimately confiscated after the due process of law in terms of the Customs Act, 1962, i.e. by issue of show cause notice and after affording the appellants opportunity of hearing. The goods were confiscated under Section 111(m) of the Customs Act, 1962 and allowed to be redeemed on payment of redemption fine. Duty also in terms of the show cause notice was asked to be paid by the appellants to the extent of the differential duty that became payable by reason of revision of assessable value. It is against this finding of the lower authority that the appellants are in appeal before us.
3. The learned Counsel for the appellants has urged before us on the following propositions:
(1) The goods had already been confiscated under Section 111(d) and the same could not be confiscated second time over under Section 111(m).
(2) Duty could not be demanded from the appellants as the provisions of Section 28 of the Customs Act, 1962 were available for demanding duty from the importers.
(2a) Proceedings could not have been drawn against the appellants without the issue of show cause notice to the importers.
(3) Duty could not be demanded from the appellants as there was no order of confiscation in respect of the goods under Section 111(m) of the Customs Act, 1962.
(4) Differential duty could not be fastened on the appellants for reason of being owner of the goods when the provisions of Section 28 are available for demand of duty from the importers.
4. The learned Counsel for the appellants in support of the above proposition has urged that when proceedings were originally drawn for confiscation of the goods for reason of absence of requisite import licence it should be taken that the lower authority in the order passed in those proceedings would -have applied his mind to all the aspects including valuation and therefore the authorities were estopped from drawing any fresh proceedings for confiscation of the goods under Section 111 of the Customs Act, 1962. He has pleaded that the law does not envisage the same goods being subjected to proceedings for confiscation for different reasons at different point of time. He, therefore, urged that the proceedings are ab initio void and the order of the lower authority for that reason is not sustainable in law. In regard to demand of duty he has pleaded when there is specific provision of law for demanding duty which has been short levied there was no reason to traverse beyond the provisions of the said specific requirements i.e. Section 28 of the Customs Act, 1962, and the authorities, he pleaded, should have had resort to this Section for demanding duty rather than proceeding under Section 125(2) of the Customs Act, 1962. He has pleaded that demand of duty for this reason is illegal. He has further pleaded that the importer has been let off while the innocent buyer i.e. the appellants have been chosen for penal action. He has pleaded that the appellants had purchased the goods in good faith paying the market price for the goods and they have been put in a position where they have been called upon to explain the violations which have been committed by the importer of the goods. In these circumstances, therefore, drawal of proceedings against the appellants without implicating the importer is not accordance with law. He has further pleaded the goods had been earlier released after seizure on execution of bond by the appellants and the lower authority in his order has merely stated that the goods were liable to confiscation and since the same were not available he has proceeded to recover the redemption fine in respect of the same in terms of the bond executed. He has stated in his order that he is appropriating the sum in question from the securities furnished. The learned Counsel has pleaded that there is no specific order to say that the goods had been confiscated and in the absence of that he has pleaded that the provisions of Section 125 could not be invoked. He has further pleaded that for the purpose of operating Section 125, he has to confiscate all the goods if available for release and only in that event when the option is exercised by the owner of the goods the question of payment of duty would arise. In the present case, he has pleaded that all these parameters set out under Section 125 have not been complied with. He therefore, urged that the question of payment of duty and even that of redemption fine levied would not arise. He has further pleaded that in case duty could not be demanded from the customer who purchased the imported goods, provisions of Section 28 are available for demand of duty from the importer. He has further pleaded that there is no attribution by the department that the customers were guilty of any act of omission or commission with reference to the goods to render them liable to any consequential penal action by way of demand of redemption fine or duty leviable on the goods. As an alternate plea, the learned Counsel pleaded that the appellants have paid the full market value for the goods when they purchased the goods and the burden of redemption fine and duty has been placed on them unjustly and the same is very heavy and he pleaded that substantial reduction should be allowed. The learned Counsel on a query from the Bench has clarified that so far as the valuation aspect is concerned, he is not contesting the same on merits. He has pleaded that the appellants have no locus standi to contest the same.
5. The learned DR for the department has pleaded that the goods were found to be heavily under valued after clearance of the same had been allowed as a result of investigation done by the departmental authorities. He has pleaded that valuation was not one of the issues when originally proceedings were drawn and therefore, when the goods were found heavily under valued the taint of undervaluation came to be attached to the goods and consequential action in respect of the goods had to be taken. He has pleaded that no penalty as such has been levied on the appellants under Section 112 and action taken is only in respect of the goods which are liable for confiscation for reason of undervaluation of the same at the time of importation. He has therefore, pleaded that the lower authority’s order is sustainable in law and he has sought for upholding the same.
6. We have considered the pleas made by both the sides. We observe that the Customs Act, 1962 envisages filing of the Bill of Entry (BE) in respect of any goods which are imported and the importers are required to furnish correct particulars of such goods. One of the item to be declared is the value of the goods imported. Clearance of the goods is contingent upon compliance with the requirement of the law including production of import licence if required in respect of such goods under the import policy in force at the relevant time. In case there is any violation in respect of any one of the prohibition or restriction or there is any mis-declaration in respect of any material particulars required to be declared under the Customs Act, 1962 in the BE action under Act can be taken in respect of the violation which may have been committed. In the present case, when the goods were imported, the importer among other things had declared the value of the goods, as DM 9 per kg. The goods were not covered by the required licence at the time when the papers were processed by the Customs authorities. There was nothing to suspect the value of the goods as declared by the importer and the only violation was that the goods were not covered by the requisite licence under import policy and the proceedings were therefore drawn for the violation of the import trade restrictions. The goods were confiscated under Section 111(d) of the Customs Act, 1962 and the same were allowed to be redeemed on payment of redemption fine. As seen from the records, the goods ultimately came to be sold to the appellants. The authorities in the mean time acting on some intelligence proceeded to conduct investigations in regard to the value of the goods and they were able to gather evidence that the goods as were imported were originally sold from the country of origin or despatch at DM 19 per kg as against DM 9 per kg at which they were re-invoiced by a Singapore party. Since the goods which had been earlier cleared were found under valued the authorities proceeded to trace the course of the goods after clearance and landed at the door of the appellants. The authorities were able to link the goods in the hands of the appellants with those which were imported and the value of which was mis-declared at the time of importation. Since the value of the goods were found to be under declared, in terms of Section 111(m) penal action could be taken for the reason of mis-declaration of the value. Proceedings were accordingly drawn and the appellants were issued with a show cause notice and the appellants did not dispute that the goods were not the same in respect of which the value was under declared. Their plea made was that they had purchased the said goods in good faith in the open market after putting market price on the same. The charge of mis-declaration of the value however, has remained unrebutted. The appellants no doubt, were placed in a very unenviable position as they were not the importers of the goods and there was nothing shown against them that they were in any way concerned with the importation of the goods or had any role to play in the manner in which the goods were shown to have been purchased as per the invoice filed with the Customs authorities originally. The authorities it is seen had not issued any show cause notice to the importer as such who would have been in a better position to explain the position regarding valuation of the goods. The circumstances under which no show cause notice was issued to the importer have not been brought on record nor we have been enlightened in this regard by the learned DR. All the same, we have before us the facts regarding the mis-declaration of the value and the evidence in this regard brought on record and it is not rebutted and therefore, in our view, the evidence is acceptable. The learned Counsel for the appellants has also not contested the Value as has been fixed by the lower authority in the impugned order. Notwithstanding therefore, the fact that no show cause notice was issued to the importer, in our view, the charge of undervaluation has been brought home. The plea of the learned Counsel is that since the goods had been confiscated already once under Section 111(d) there could not be another confiscation of the very same goods under same section once over. This argument no doubt appears to be attractive. But we have to take note of the fact that there are a number of violations which are enumerated under the Customs Act, 1962 for reason of which the goods can be confiscated under Section 111 of the Customs Act, 1962. In fact for the purpose of confiscation of the imported goods there is only one section i.e. Section 111 and the various contingencies which may give rise to the cause of action for confiscation are covered by various Sub-sections of Section 111. Each cause of action gives rise to taint on the goods for the purpose of confiscation of the same. Cause of action for confiscation therefore could be taken compendiously for penal action or individually depending upon when the cause action came to be noticed. In the present case we find that violation regarding importation of the goods without import licence came to be noticed at the time of importation of the goods and before its clearance for home consumption. Therefore, action for such violation was taken at that time and necessary penal action was taken by way of redemption fine and penalty. The under valuation aspect came to light much later and the cognizance of the same was taken for action under the Customs Act, 1962 which provides for separate contingency in this regard i.e. confiscation in terms of Section 111(m) of the Customs Act, 1962. The issue being ‘res integra’ in the above background does not arise. Cause of action for which confiscation was done was different from the cause of action for which the proceedings were drawn in the present case. In our view, therefore, fresh action as taken by the authorities is in accordance with law.
7. Another argument taken before us is that duty could not be demanded from the appellants as action for recovery of differential duty could be taken against the importer under Section 28 of the Act which provides for contingency of recovery of duty not levied or short levied. We observe that while such section may be available for recovery of duty from the importer in respect of duty short levied or not levied the legislature in its wisdom has chosen to provide for demand of duty in respect of goods which are confiscated and allowed redemption from the owner of the goods or the person referred to in Sub-section (1) of Section 125. This Section for convenience of reference is reproduced below:
“(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.”
We observe that a specific provision has been made for making recovery of the duty from the person who had the possession of the goods which were confiscable and have been allowed the benefit of redemption. The plea made before us is that Section 28 and the provisions of Section 125(2) should be read harmoniously in a manner that no invidious burden is placed in the innocent buyer of the goods. The plea is that when the importer is available for making recovery of the duty which has been evaded demand of duty from the person who may have purchased the goods and who is not the importer himself, may not be proper. We are not able to agree to this contention of the learned Counsel. We observe that the appellants as customers are the one who would ultimately suffer the duty burden in respect of the goods which were imported and in respect of which there has been payment of duty. In case higher duty was paid at the initial stage the same ultimately would have devolved on the appellants as customer. The legislature in its wisdom felt that the duty in respect of the goods which may be otherwise confiscable and which are in the hands of the customer should be paid by the said customer. We find the section as worded, there is no other interpretation can be placed except that, when the appellant redeemed the goods duty was to be paid by them. We observe that Section 125(2) covers a specific contingency while Section 28 covers a general contingency of recovery of duty which is not levied or short levied. Both Sections act in an independent spheres. Section 28, it is seen does not control Section 125. We in the circumstances hold that duty has been rightly demanded from the appellants. A plea has also been taken that the importer has not been issued with a show cause notice and the show cause notice issued against the appellants would not be sustainable in law. We observe that in a case like this it was expected that a show cause notice would have been issued to the importer also, as we have observed above, there is nothing in the order of the lower authority as to why this was not done. Even today the learned DR is not able to throw any light in this regard. The appellants have been put in a position where they have to meet a point on which based on the record they cannot be expected to have any knowledge about. The action sought to be taken in the proceedings is however, action in rem and what has to be seen is that whether violation as alleged is sustainable in law and if that be so, action taken against the goods cannot be found fault with. May be hardship is caused to the appellants, but that is not to say that action is not legal. Once the goods are found tainted goods, action in terms of the provisions of the Customs Act, 1962 automatically follows. The goods become confiscable notwithstanding in whose hands they are at the time of when violation is detected. In our view therefore absence of issue of show cause notice to the importer is not fatal to the proceedings. The alternate plea of the learned Counsel is for reduction in the quantum of redemption fine. We observe that in the facts and circumstances of the case, since the goods were purchased in the open market by the appellants, there is nothing to show that the appellants had any benefit in any way from under valuation of the goods. Some leniency is called for in the matter of fixation of redemption fine. Redemption fine fixed is 50% of the duty which is found to be short levied. We hold that ends of justice would be served if the redemption fine is reduced to the level of 30% and we order accordingly. It was pleaded that since the goods had been released against a bond, the duty in terms of Section 125(2) could not be demanded. We observe that provisional release of the goods was allowed to facilitate use of the goods by the appellant and the goods came to be substituted by the bond. The Hon’ble Supreme Court in a recent judgment has held that bonds and securities represent the goods. Therefore just because the bond was executed does not mean that the provisions of Section 125(2) could not be invoked. We, therefore, find no force in the plea of the appellants in this regard. In the result, but for the above modification, the appeals are otherwise rejected.