Redemption Fine imposed cannot exceed Market Value of Product: CESTAT sets aside Redemption Fine imposed on Jute Bags [Read Order]

In a recent case, the Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) set aside the redemption fine imposed on jute bags. Further, observed that the redemption fine imposed cannot exceed the market value of the product.

Shri M. Harri Viswanaath, Advocate appeared for the appellant and Shri Harendra Singh Pal, Assistant Commissioner appeared for the Revenue.

M/s. Vinayaga Traders, the appellant filed a Bill-of-Entry No. 4558159 dated 05.02.2014 for goods declared as 4,12,400 pieces of used jute bags weighing about 75 kgs., at  USD 0.07/- per piece, for which the declared assessable value was Rs.18,33,947/- and self-assessed duty was Rs.5,29,128/-. 

The impugned goods were subjected to first check and based upon the examination by the Shed Officers, the Revenue entertained a doubt that the declared value of the goods was liable to be rejected under Rule 12 of the Customs Valuation ( Determination of Value of Imported Goods ) Rules, 2007 and thus, re-determined the value under Rule 9 ibid. considering the contemporaneous imports of similar goods as per NIDB.

It has also been alleged that the used jute bags were restricted for import in terms of the Foreign Trade Policy and that the impugned import was contrary to the provisions of Section 3(3) of the Foreign Trade ( Development and Regulation ) Act, 1992, thus rendering the goods liable for confiscation under Section 111(d) of the Customs Act, 1962.

The appellant-importer appears to have accepted the proposed re-determination as well as the value and requested for adjudication of the case without the issuance of a Show Cause Notice and personal hearing. 

The original authority has passed the Order-in-Original rejecting the declared transaction value of the impugned goods and re-determining the same at Rs.11.59/kg. [as per paragraph 12(a) of the Order-in-Original in terms of Rule 9 of the Customs Valuation Rules, 2007.

He has also ordered the confiscation of the goods under Section 111(d) of the Customs Act, 1962 while giving the option to redeem the same upon payment of a redemption fine of Rs.12,00,000/- under Section 125 ibid., apart from imposing a penalty of Rs.3,00,000/- under Section 112(a) ibid. On appeal, the Commissioner of Customs ( Appeals ), Chennai reduced the quantum of redemption fine and penalty to Rs.8,00,000/- and  Rs.1,00,000/- respectively.

The appellant chose to accept the enhanced value suggested by the adjudicating authority. Had there been an objection then, then there was a possibility of the adjudicating authority having gone into the issue by conducting a detailed examination, but that letter dated 26.02.2014 of the appellant estopped any further action by the adjudicating authority.

It was observed that the imposition of a redemption fine cannot be disproportionate or arbitrary and, in any case, the same cannot exceed the market value of the product in question itself less the duty payable.

“When we consider the impugned order, the adjudicating authority’s logic has been defied when the first appellate authority has felt it proper to reduce both the redemption fine and penalty, which is not challenged by the adjudicating authority/Revenue. Having reduced the redemption fine, the first appellate authority should have taken note of the provisions which prescribe the guidelines insofar as the levy of redemption fine is concerned.”, the bench comprising  Mr P Dinesha, Member ( Judicial ) and Mr M Ajit Kumar, Member ( Technical ) held.

The Tribunal reduced the redemption fine to Rs.3,00,000/- (Rupees Three Lakhs only). Insofar as penalty is concerned, the action of the appellant in shooting the letter dated 26.02.2014 before the adjudicating authority itself is an indication, which prompted the adjudicating authority to pass the Order-in-Original assuming that the import, primarily, was improper. Since the Revenue has accepted the reduced penalty amount by the first appellate authority’s order, the same is sustained.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates