The liability to pay customs duty arises upon redemption of confiscated goods under Section 125, and interest on delayed payment is applicable under Section 28AB.

PAMIDIGHANTAM SRI NARASIMHA, J.

1. Introduction: “The following two questions arose for our consideration; i) Whether there is a liability to pay customs duty when the confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 19621? ii) Whether, the liability to pay such duty will include the liability to pay interest on delayed payment under Section 28AB of the Act? Adjudication of these questions brought to light certain seemingly contradictory decisions on this question, and this requires us to reflect on the correct ratio of the decision of this Court in Commr. of Customs (Import) v. Jagdish Cancer and Research Centre2. Therefore, the third question that fell for our consideration is; iii) What is the true and correct ratio of the decision in Jagdish Cancer case?”

1.1. For the reasons to follow, we have held that the owner of goods has a liability to pay customs duty, even after confiscated goods are redeemed after payment of fine under Section 125 of the Act. Furthermore, when confiscation proceedings are initiated under Section 124 of the Act, the obligation to pay duty and other charges under Section 125 will arise only when the owner of goods exercises

1 Hereinafter referred to as ‘the Act’.

2 (2001) 6 SCC 483, hereinafter referred to as Jagdish Cancer case.

1.2. The facts relevant for consideration of the issues are as follows.

2. Facts: Between 30.11.2003 to 18.04.2007, the appellant availed the benefit of exemption from payment of customs duty under a notification dated 01.03.2002, as per which certain self-propelled hydraulic piling rigs were to be utilised exclusively for the construction of roads, bridges etc. for NHAI3 and PWD4. When investigations revealed that the appellant has violated the import conditions, even before a show-cause notice was issued, the 3 National Highways Authority of India.

4 Public Works Department.

2.1. The Settlement Commission upheld the duty liability and directed it to be recovered. The penalty and fine were waived in full in view of the finding that this is not a case of brazen defiance of law and also that there is no contumacious conduct such as

5 The show cause notice is purportedly issued under Section 124 read with Section 28 of the misdeclaration or manipulation of documents to evade payment of duty. On payment of interest under Section 28AB , the Settlement Commission held that, for violation of post-importation conditions, imported goods become liable for confiscation but are redeemable on payment of fine in lieu of confiscation and the duty becomes payable under Section 125 (2). Following the decision of this Court in Jagdish Cancer case, the Commission held that as Section 28 is inapplicable in confiscation proceedings, Section 28AB will also not be attracted. The interest deposited by the appellant was, therefore, directed to be refunded.

2.2. The writ petitions filed by the Customs Department were allowed by the order impugned before us. The High Court held that i) interest can be levied only when there is a substantive provision enabling it, ii) Section 125 has no such enabling provision, not even the procedure to assess duty, therefore, iii) assessment of duty must necessarily be done under Section 28 and iv) once Section 28 procedure is adopted, application of Section 28AB is inevitable. The High Court, therefore, distinguished Jagdish Cancer case and held that interest under Section 28AB is payable even for proceedings under Section 125 and remanded the matter to the Settlement Commission to calculate and recover interest under Section 28AB .

2.3. Ms. Charanya Lakshmikumaran and Mr. V C Bharathi appeared for the Appellant and the Custom Department respectively. They have not only enhanced our understanding of the subject and the issue, but have elevated the debate.

3. Sections 11 and 12 of the Act: Section 11 of the Customs Act6 vests the power in the Central Government to prohibit absolutely or subject to such conditions,