Govt can retain Sale Proceeds of Confiscated Goods If Redemption Fine Not Paid: Delhi HC [Read Judgment]

Confiscated Goods - Delhi High Court - Taxscan

While overruling a two-judge bench decision rendered in the case of MMTC Vs. Surjit Singh Kanda, the Delhi High Court has held that where the redemption fine in lieu of confiscation is not paid within the time stipulated, the Central Government is entitled to retain the excess auction sale proceeds of the confiscated goods, after adjustment of the duty, penalty, interest and other statutory dues.

Under Section 125 of the Act, an option indeed is given to the importer to redeem the goods by payment of the fine. A time limit is also set for that purpose.

In the present case, the importer failed to avail the opportunity which led to confirm the confiscation of the goods and their sale by public auction. The department held that since the importer did not pay the redemption fine within time, the ownership of the goods vested with the Central Government in terms of Section 126 of the Customs Act, 1962.

The three-judge bench comprising Justice S. Ravindra Bhatt, Justice S. Muralidhar and Justice Vibhu Bhakru held that once there is a failure to pay the fine within the time stipulated, the consequence is the same whether the goods are “prohibited goods” or “other goods”. The transient nature of the confiscation ends and it becomes “absolute”.

“This is what is made clear by Section 126 of the Act. Sections 125 and 126 of the Act form one continuous scheme and are not to be read disjunctively. Once the vesting of the goods in the government is absolute, it would be inconsistent with the character of that vesting to contend that the Central Government can only recover through the sale of such goods the duty, penalty and interest and should return the excess to the owner/possessor of the goods,” the bench said.

The bench said that “Section 150 of the Act makes it clear that the legislature has drawn a conscious distinction between what should happen to the sale proceeds when it comes to goods that are confiscated and those that are not. In other words, the goods that form the subject matter of Section 150 of the Act are not the improperly imported goods which are liable for confiscation on a collective reading of Sections 125 and 126. This differential treatment accorded to the two kinds of goods is based on an intelligible, rational criteria. The objective of Section 150 of the Act is for the government not to recover more than the duty, penalty and interest. This explains the requirement under Section 150 (2) for the ‘balance, if any’ after adjusting the sums spelt out in clauses (a) to (e) thereunder, to be ‘paid to the owner of the goods’.”

According to the Court, “the importer/owner/possessor of the goods loses control over the property thereafter. It logically follows that the government is free to retain the excess sale proceeds after adjusting the duty, interest, penalty, warehousing charges and any other dues.”

To Read the full text of the Judgment CLICK HERE