Bombay High Court Rules in favor of Air India: Penalty Under Customs Act Not Applicable Once Confiscation Order on Goods is Set Aside
Bombay High Court Rules in favor of Air India: Penalty Under Customs Act Not Applicable Once Confiscation Order on Goods is Set Aside
The Bombay High Court has ruled in favor of Air India Ltd., in a case related to the importation of aircraft parts. The division bench of Justices G.S. Kulkarni and Jitendra Jain held that the penalty imposed under Section 112(a) of the Customs Act was applicable only to goods that were liable for confiscation. Since the confiscation order was set aside by the Customs, Excise & Service Tax Appellate Tribunals (CESTAT), the penalty under Section 112(a) was not applicable in this case.
The facts of the case are that an appeal was filed by the appellant/revenue under Section 130 of the Customs Act, 1962, against the Respondents- Air India Ltd.
Air India, engaged in air cargo and passenger transportation, imported various aircraft parts falling under heading 8802, availing exemption under Notification dated 1 March, 2002, as amended by Notification dated 7 March, 2007.
During the period 2010-11 and 2011-12, the import records displayed shortages and excess of parts. The Commissioner of Customs alleged that the short-found parts were utilized for purposes other than specified in the exemption notification, and the excess parts were not declared in the import documents.
On 28 April, 2016, the Commissioner of Customs issued an Order-in-Original, rejecting Air India’s contention and confirming a custom duty demand of Rs. 1,47,94,926. The Commissioner had further ordered the confiscation of excess goods valued at Rs. 3,08,18,771.
Air India was granted the option to redeem the goods by paying a fine of Rs. 50,00,000 under Section 125 of the Customs Act. Additionally, a penalty of Rs. 25,00,000 was imposed under Section 112(a) of the Customs Act.
However, on 25 September, 2019, the CESTAT upheld the duty demand, but they set aside the confiscation order and redemption fine. The CESTAT also nullified the penalty imposed under Section 112(a).
The Court noted that Section 125 of the Customs Act is attracted if there is a confiscation of goods because redemption fine was in lieu of confiscation of goods.
In the present case, the Court noted that the Tribunal in its order had set aside the order of confiscation of goods. Moreover, the Court noted that the Tribunal setting aside the order of confiscation of goods was not challenged by the appellant revenue in the present appeal which was evident from the questions raised in the memo of appeal.
Therefore, the Court observed, “The sequitur of not challenging the setting aside order of confiscation of goods brings about a result of the Revenue taking a position that provisions of section 111 of the Act dealing with confiscation are not applicable to the case of the respondent/ assessee. If that be so, the question of redemption fine in lieu of confiscation would not arise.”
The bench was of the considered view that the provisions of Section 125 would get attracted only if the goods are confiscated. Since in the instant case, the appellant/ revenue had accepted the setting aside order of confiscation of goods, question of applying provisions of Section 125 dealing with the redemption fine which were in lieu of confiscation would not arise opined the Court.
Additionally, the bench observed that the CESTAT had deleted the penalty, considering the enormity of the inventory managed and handled by Air India, taking into account the fact that it was a Public Sector Undertaking. Pertinently, the CESTAT had found that there was no deliberate act on the part of Air India to evade customs duty.
Accordingly, bench held that no substantial question of law arose for the Court’s consideration. As a result, the Court dismissed the appeal filed by the Commissioner of Customs.
