Customs Authorities cannot Levy Redemption Fine Beyond Market Value of Seized Goods u/s 125 less Duty Payable: CESTAT [Read Order]
While acknowledging that under the Partnership Act partners are generally liable for the acts of the firm, the Tribunal held there was no justification for penalising an individual partner separately in this case.
Customs Authorities - Seized Goods - CESTAT - taxscan
Customs Authorities - Seized Goods - CESTAT - taxscan
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, has emphatically held that redemption fine imposed under Section 125 of the Customs Act, 1962, cannot exceed the market value of confiscated goods, less the duty chargeable thereon.
The tribunal, on the issue of levying penalty on one of the partners, clarified that simultaneous penalties on both the firm and one of its partners were not permissible under the Customs Act.
An appeal was filed by M/s S. Kantilal & Company and its partner, challenging excessive redemption fine and penalties imposed by the Principal Commissioner of Customs, Airport Special Cargo, Mumbai, in relation to a misdeclaration case involving import of “rough diamonds” that were later found to be low-value natural topaz.
The firm had declared its import at a value of ₹1.24 crore, but customs examination and expert opinion confirmed the actual market value of the goods at merely ₹8,291. Despite this, the adjudicating authority imposed a redemption fine of ₹12.5 lakh and penalties of ₹5 lakh on the firm and ₹2 lakh on its partner under Section 112(a).
The appellants argued that such fines were unsustainable in law, as Section 125’s second proviso clearly restricts redemption fine to the market value of the goods minus duty payable, and no duty was leviable in this case.
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The bench of Dr. Suvendu Kumar Pati (Judicial member) noted that the Commissioner’s justification, imposing a high fine to adequately punish the importer as an “economic offender”, could not override statutory limits.
It was ruled that the market value determined at ₹8,291 formed the ceiling for redemption fine. Consequently, the Tribunal restricted the redemption fine as well as penalty to ₹8,291, pointing out that proportionality is central to customs adjudication.
While acknowledging that under the Partnership Act partners are generally liable for the acts of the firm, the Tribunal held there was no justification for penalising an individual partner separately in this case.
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It was observed that “Admittedly, under the Partnership Act, for each act of the firm, each of the partners are supposed to be made liable as it the act has been committed by each of them but there is no justification to penalise one of the partners for the Act of the firm only because he is a relation of the exporter and had apparently dealt with the matter.”
Accordingly, partner Sanjay K. Shah was absolved of liability, and the penalty was confined to the partnership firm.
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