Summary
Customs duty remains payable when goods are redeemed in lieu of confiscation. The Court distinguished the duty obligation arising under Section 125(2) from its assessment under Section 28, and held that interest under Section 28AB follows that assessment. It upheld the High Court’s decision requiring calculation and recovery of interest.
Issues
- Whether redemption of goods in lieu of confiscation entails payment of customs duty in addition to fine.
- Whether duty arising under Section 125(2) is assessed under Section 28 and attracts interest under Section 28AB.
- Whether Jagdish Cancer excludes assessment under Section 28 when duty liability arises from redemption.
Provisions considered
- Section 125(1) and (2), Customs Act, 1962In confiscation proceedings, the obligation to pay duty and charges arises when the owner exercises the redemption option and the Department accepts it; fine does not replace duty. (¶¶ 6, 8.4, 8.5, 8.8)
- Section 28, Customs Act, 1962Provides the machinery for assessing and determining the customs duty obligation arising upon redemption under Section 125(2). (¶¶ 4, 8.9, 9.6, 10.1)
- Section 28AB, Customs Act, 1962Interest on delayed payment follows the assessment under Section 28 of duty payable on redemption. (¶ 10.1)
Held
- Payment of redemption fine does not discharge customs duty. Section 125(2) requires payment of duty and charges in addition to fine when the redemption option is exercised. (¶¶ 8.4, 8.5)
- Where proceedings originate in confiscation under Section 124, the duty obligation under Section 125(2) is triggered by the owner exercising the option to redeem and the Department accepting it. Recovery through an independent action for breach of exemption conditions is a distinct route. (¶¶ 8.6, 8.7, 8.8)
- The source of the duty obligation must be distinguished from the machinery for its assessment. Although redemption creates the obligation under Section 125(2), assessment and determination take place under Section 28. (¶¶ 8.9, 9.6, 10.1)
- Jagdish Cancer explains why the duty obligation arising as part of redemption does not require a separate Section 28 notice to originate it. It does not prohibit calculation, determination or assessment of that duty under Section 28. (¶¶ 9.4, 9.5, 9.6)
- Once Section 28 applies to determine the duty obligation arising under Section 125(2), Section 28AB also attracts interest on delayed payment. (¶ 10.1)
Result
High Court decision upheld; civil appeal disposed of without costs. The High Court’s remand to the Settlement Commission to calculate and recover interest under Section 28AB stands.