2024 INSC 547 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1024 OF 2014

M/S NAVAYUGA ENGINEERING CO . LTD. ...APPELLANT(S)

VERSUS

UNION OF INDIA & ANR. …RESPONDENT( S)

Table of Contents

1. Introduction: ........................................................................................................ 2

2. Facts: ................................................................................................................... 3

3. Sections 11 and 12 of the Act:............................................................................ 6

4. Section 28 of the Act: .......................................................................................... 7

5. Confiscation of goods under Chapter XIV of the Act: ...................................... 8

6. Section 125 of the Act: ........................................................................................ 9

7. Issues: ............................................................................................................... 11

8. Re: Whether there is a liability to pay customs duty, when the confiscated

goods are redeemed after payment of fine under section 125 of the Act? ..... 11

9. Re: What is the true and correct ratio of the decision in Jagdish Cancer

case?. ................................................................................................................. 18

10. Re: Whether the liability to pay such duty will include the liability to pay

interest on delayed payment under section 28AB of the Act? ........................ 21

11.Conclusion:. ........................................................................................................ 22

2

J U D G M E N T

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, 1962

1? 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 Centre

2. 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.

3

the option to pay fine for redemption of goods and the Department

accepts it. Liability to pay customs duty in such confiscation

proceedings under Section 125(2) is distinct from the assessment

and determination of duty, which can rise only under Section 28. The

duty liability arising under Section 125(2) must be assessed under

Section 28. Thus, we answered the second question by holding that

once Section 28 applies for determination of duty, interest on delayed

payment of duty under Section 28AB follows. We have also clarified

that Jagdish Cancer case is not an authority for the proposition that

when the liability to pay customs duty arises under Section 125(2) ,

the calculation, determination or the assessment of such duty cannot

be made under Section 28.

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 NHAI

3 and PWD

4. 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.

4

appellant deposited Rs.16,29,22,282/ - and interest of Rs.

1,84,39,696/- between May, 2007 to August, 2007. Thereafter, a

show- cause notice

5 was issued on 23.01.2008 proposing confiscation

under Section 111(o) with respect to goods that were valued at Rs.

48.55 crores involving duty liability of Rs. 17,37,57,039/- under

Section 28, interest under Section 28 AB and penalties under

Sections 112(a) and (b) and 114A of the Act. The appellant filed an

application under Section 127B of the Act before the S ettlement

Commission claiming that it has not violated any condition of the

notification dated 01.03.2002 and further claimed that in order to

avoid prolonged litigation, they had accepted the liability subject to

further adjustments as may be approve d by the Settlement

Commission. The appellant also asserted that the claim for interest

under Section 28AB is impermissible as the proceedings were

initiated with show cause notice under Section 124 and not under

Section 28.

2.1. The Settlement Commission upheld the duty liability and

directed it to be recovered. The p enalty 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

Act.

5

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 become s 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.

6

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 Act

6

vests the power in the Central Government to prohibit absolutely or

subject to such conditions, as may be specified in the notification,

the import or export of goods into or out of India. Under Section 45

of the Act, all imported goods unloaded in a customs area shall

remain in the custody of the customs authorities. The importer shall

present a bill of entry under Section 46 and self-assess the duty

under Section 17. Alternatively, under Section 47 the goods are

provisionally assessed by the authority under Section 18 and cleared

for home consumption. Goods are cleared for home consumption

only after the customs officer is satisfied that the goods are not

prohibited for home consumption and the import duty is paid. Duties

of customs shall be levied under Section 12

7 on goods that are

6

Section 11: Power to prohibit importation or exportation of goods. —(1) If the Central

Government is satisfied that it is necessary so to do for any of the purposes specified in sub-

section (2), it may, by notification in the Official Gazette, prohibit either absolutely or subject

to such conditions (to be fulfilled before or after clearance) as may be specified in the

notification, the import or export of goods of any specified description.

(2) …

(3) …

7

Section 12: Dutiable goods.—(1) Except as otherwise provided in this Act, or any other

law for the time being in force, duties of customs shall be levied at such rates as may be

specified under [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time

being in force, on goods imported into, or exported from, India.

7

imported into or exported from India at such rates as are specified

under the Customs Tariffs Act, 1975.

4. Section 28 of the Act: If duties are, i) not levied, ii) not paid, iii)

short levied, iv) short p aid, v) erroneously refunded, vi) interes t not

paid, vii) interest, part paid or viii) interest erroneously refunded, a

distinct procedure is provided in Section 28 of the Act. This very

section provides a slightly varied procedure for recovery in

sub-Section (4) for instances, where duties are not paid due to,

i) collusion, ii) wilful misstatement or iii) suppression of facts. The

distinction in the procedure includes different periods of limitation

for initiation of recovery process. Section 28 to the extent, it is

relevant for us is as under:

“Section 28. Recovery of duties not levied or not paid

or short-levied or short-paid or erroneously

refunded.—(1) Where any [duty has not been levied or not

paid or has been short-levied or short-paid] or erroneously

refunded, or any interest payable has not been paid, part-

paid or erroneously refunded, for any reason other than the

reasons of collusion or any wilful mis-statement or

suppression of facts,—

(a) the proper officer shall, within [two years] from the

relevant date, serve notice on the person chargeable with

the duty or interest which has not been so levied [or paid] or

which has been short-levied or short-paid or to whom the

refund has erroneously been made, requiring him to show

cause why he should not pay the amount specified in the

notice:

[Provided that before issuing notice, the proper officer shall

hold pre-notice consultation with the person chargeable

with duty or interest in such manner as may be prescribed;]

[(2) The provisions of sub- section (1) shall apply in respect of all goods belonging to

Government as they apply in respect of goods not belonging to Government.]

8

(b) the person chargeable with the duty or interest, may pay

before service of notice under clause (a) on the basis of,—

(i) his own ascertainment of such duty; or

(ii) the duty ascertained by the proper officer,

the amount of duty along with the interest payable thereon

under section 28AA or the amount of interest which has not

been so paid or part-paid.

[Provided that the proper officer shall not serve such show

cause notice, where the amount involved is less than rupees

one hundred.]

(2) […]

(3) […]

(4) Where any duty has not been [levied or not paid or has

been short-levied or short-paid] or erroneously refunded, or

interest payable has not been paid, part-paid or erroneously

refunded, by reason of,—

(a) collusion; or

(b) any wilful mis-statement; or

(c) suppression of facts,

by the importer or the exporter or the agent or employee of

the importer or exporter, the proper officer shall, within five

years from the relevant date, serve notice on the person

chargeable with duty or interest which has not been [so

levied or not paid] or which has been so short-levied or

short-paid or to whom the refund has erroneously been

made, requiring him to show cause why he should not pay

the amount specified in the notice.”

5. Confiscation of goods under Chapter XIV of the Act: The third

circumstance where duty is collected is when goods are improperly

imported into or exported out of India. Chapter XIV of the Act

provides for confiscation of such goods and imposition of penalties

under Sections 111

8 to 114. Section 111(o) is the specific instance

8

Section 111.Confiscation of improperly imported goods, etc .—The following goods

brought from a place outside India shall be liable to confiscation:—

(a) …(n)

(o) any goods exempted, subject to any condition, from duty or any prohibition in

respect of the import thereof under this Act or any other law for the time being in force,

in respect of which the condition is not observed unless the non-observance of the

condition was sanctioned by the proper officer;

9

for confiscation of goods for violation of conditions of exemption from

payment of duty after the importation. These goods were not

subjected to levy and collection of duty as they enjoyed the benefit of

exemption. Upon detection of a violation, the legal consequence s

must and will follow and Chapter XIV provides for confiscations and

penalties.

5.1. Confiscation of goods is appropriation of property by the

revenue. The right, title and interest in the property, if any, is

transferred and vested in the state under S ection 126. Considering

the serious consequences of such an action, authority and process

of law mandated Article 300A

9, Parliament prescribed the procedure

under Section 122A, adjudicatory authority under S ection 122,

obligated issuance of a show-cause notice under Section 124 before

confiscation.

6. Section 125 of the Act: Alternatively, there is also the option of

redemption of the confiscated goods u nder Section 125, the statute

specifically empowers the owner of the goods to exercise an option of

legitimising the importation by paying fine, duty and other charges.

The procedure prescribed is simple; i) confiscation must be

authorised, ii) those goods should not be prohibited goods, iii) the

9

Article 300A. Persons not to be deprived of property save by authority of law.— No

person shall be deprived of his property save by authority of law.

10

officer shall give an option to redeem the goods in lieu of fine, iv) the

owner or the possessor must exercise the option and v) pay the fine

vi) within 120 days. The purpose and object of Section 125 is to

enable a transition from ‘ illegality’ to ‘compliance’ of laws. It grants

an opportunity to the owner or possessor of the confiscated goods to

regularise the transaction by payment of fine. This provision is based

on a public policy consideration that balances crime and punishment

and achieves the twin objectives of enabling a citizen to remain on

the right side of law by adopting a prescribed measure and amicable

settlement of disputes through resolution. Section 125 is extracted

herein below for ready reference:

“Sec 125. Option to pay fine in lieu of confiscation.

(1) Whenever confiscation of any goods is authorised by this

Act, the officer adjudging it may, in the case of any goods,

the importation or exportation whereof is prohibited under

this Act or under any other law for the time being in force,

and shall, in the case of any other goods, give to the owner

of the goods [or, where such owner is not known, the person

from whose possession or custody such goods have been

seized,] an option to pay in lieu of confiscation such fine as

the said officer thinks fit.

Provided that where the proceedings are deemed to be

concluded under the proviso to sub-section (2) of section 28

or under clause (i) of sub-section (6) of that section in respect

of the goods which are not prohibited or restricted, the

provisions of this section shall not apply:

[Provided further that], without prejudice to the provisions of

the proviso to sub-section (2) of section 115, such fine shall

not exceed the market price of the goods confiscated, less in

the case of imported goods the duty chargeable thereon.

[(2) Where any fine in lieu of confiscation of goods is imposed

under sub-section (1), the owner of such goods or the person

11

referred to in sub-section (1), shall, in addition, be liable to

any duty and charges payable in respect of such goods.]

[(3) Where the fine imposed under sub-section (1) is not paid

within a period of one hundred and twenty days from the

date of option given thereunder, such option shall become

void, unless an appeal against such order is pending.

Explanation.—……”]

7. Issues: It is in the above referred ‘context’ that we will now

interpret the ‘text’ of Section 125 to examine the following issues:

i) Whether there is a liability to pay customs duty when

confiscated goods are redeemed after payment of fine under

Section 125 of the Act?

ii) Whether, the liability to pay such duty will include the liability

to pay interest on delayed payment under S ection 28AB of the

Act?

7.1 While answering these questions, we will have to explain the

decision of this court in Jagdish Cancer case as it is argued to have

ruled that duty in confiscation proceedings is payable only under

Section 125 and not under Section 28, and if Section 28 does not

apply, Section 28AB also will not apply. Therefore, the third question

is:

iii) What is the true and correct ratio of the decision in Jagdish

Cancer case?

8. Re: Whether there is a liability to pay customs duty, when the

confiscated goods are redeemed after payment of fine under section

125 of the Act?

12

8.1. This issue is no more res integra . The uncertainty about the

liability to impose and collect duties in confiscation proceedings was

resolved in 1976 by a decision of this court in U nion of India v. M/s

Security and Finance (P) Ltd.

10 while interpreting identical provisions,

as they stood under the Sea Customs Act, 1878. I n this case, the

court was dealing with confiscation of goods that were imported

without a proper license which was and is prohibited by law. Though

the goods were confiscated, they were released to the importer, who

exercised the option to redeem them under S ection 183 of the

repealed Act. Consequently, Customs Department sought to collect

the duty payable on such goods. The High Court accepted the

importer’ s challenge to imposition and collection of duty on the

ground that Section 183 proceedings authorised only a fine and not

customs duty. This court allowed the appeal of the Custom

Departments by drawing a distinction between the power to impose

or recover duty under Section 20 (Section 12/28 of our Act) on one

hand, and the power to impose penalty and/or fine under Section

183 (Section 125 of our Act). This Court held that they are distinct

and operate independently. The relevant portion of the judgement is

as under:

“5. Does the order under Section 183 preclude him from

levying duty under Section 20? This is the short issue before

10

(1976) 1 SCC 166, hereinafter referred to as Security Finance case.

13

us. A close study of the scheme of the relevant provisions,

powers and levies discloses a clear dichotomy which has

escaped the attention of the High Court. Import/Export duty

is an obligation cast by Section 20 of the Act. It is a tax, not

a penalty; it is an innocent levy once the exigible event

occurs; it is not a punitive impost for a contravention of the

law. Confiscation, penalty and fine provided for under

Sections 167 (item 8) and 183 are of the species of

punishment for violation of the scheme of prohibition and

control. Once this distinction and duality are remembered,

the interpretative process simplifies itself.

8. ….In the present case, the Deputy Collector, the

competent authority, has chosen to give the owner of the

goods, the respondent, option to pay, in lieu of confiscation,

a fine. He has not confiscated the goods and, therefore,

Section 184 is not operational in this context. In short, the

obligation under Section 20 is independent of the liability

under Section 183. The order, dual in character, although

clubbed together in a single document, is therefore valid in

entirety. Even so, the confusion has been caused by the

Deputy Collector failing to keep distinct the two powers and

the two liabilities and thereby leading to avoidable

jumbling.

10. However, we are prepared to gather from the order

under attack two levies imposed in exercise of two distinct

powers, as earlier explained. The import duty has been

made a condition for the clearance of the goods. This is right

and it is impossible to say that the said payment is not

justified by Section 20. Likewise, the authority when it

imposed a fine, was exercising its power under Section 183.

We can readily see that he did not mean to confiscate the

goods. He only proposed to confiscate and proceeded to fix

a fine in lieu thereof. Non-felicitous and inept expressions

used in the order are perhaps apt to mislead, but the

intendment is clear that what was done was not

confiscation but giving an option to pay a quantified fine in

place of confiscation. The order was a composite one, when

read in the sense we have explained, and is quite legal.

Therefore, we reach the conclusion that the appellant is

entitled to win and the High Court was in error.”

8.2. The Act must always be read as a whole. Once the liability of

confiscation is withdrawn after the option to pay fine is exercised and

the goods are redeemed, it is natural for the goods to be subjected to

duty. The power and the machinery provisions for imposition and

14

collection of duty liability exist only under Section 12 and/or Section

28 and not under Section 125. The essence of the judgment in

Security Finance case is in the following sentence: “The import duty

has been made a condition for the clearance of the goods. This is right

and it is impossible to say that the said payment is not justified by

Section 20”.

8.3. The scope of enquiry in this judgement was limited to

answering whether there is a liability to pay customs duty in

confiscation proceedings when goods are redeemed upon payment of

fine. This judgment is not concerned with instances like in the

present case where goods are imported without payment of duty

under an exemption notification.

8.4. The above referred judicial interpretation has attained statutory

recognition in 1985 when the Parliament introduced subsection (2)

to Section 125 to clarify and declare that the owner of goods, in

addition to payment of fine, shall also be liable to pay duty and other

charges upon exercising the option to pay fine to redeem goods. Thus,

the owner of goods has a liability to pay customs duty, even after

confiscated goods are redeemed after payment of fine and other

charges under Section 125 of the Act. This is the first principle.

15

8.5. In our view, th is position gleaned from Security Finance case

has remained consistent with amendments introduced to Section

125 in the year 1985. The customs duty obligation on once exempted

goods, liable to be confiscated for violation of conditions, arises only

after the option to redeem them is exercised under S ection 125. Once

the option is exercised, the acceptance is subject to the conditions

specified in Section 125. The primary condition is payment of fine in

lieu of confiscation. Thus, this duty obligation is inextricably

connected to the option to redeem the confiscated goods. In other

words, it is a precondition for redemption.

8.6. The decision of this court in Fortis Hospital Ltd v. Commr. of

Customs, Import

11 affirms this position. In Fortis Hospital case, the

owner of the confiscated goods chose not to exercise the option under

Section 125. However , the revenue sought to recover the duty payable

under Section 28 of the Act. Holding that this is impermissible, the

court held that:

“9…… It may be seen from the bare reading of the aforesaid

Section that under Section 125(1) of the Act, option is given

to the importer whose goods are confiscated, to pay the fine

in lieu of confiscation and redeem the confiscated goods.

Before this action is taken, show-cause notice is to be issued

under the provision of Section 124 of the said Act. This

provision pertains to confiscation of goods and provides

procedural safeguards inasmuch as there cannot be any

order of confiscating any goods or imposing any penalty on

any person without complying with the procedure contained

in Section 124. Section 124 mandates issuance of the show -

11

(2015) 12 SCC 715, hereinafter referred to as Fortis Hospital case.

16

cause notice before passing any such order and

contemplates two actions: first, relating to confiscating of

the goods and second, pertaining to imposition of penalty.

Pertinently, this action does not deal with payment of import

duty at all.

10. It is not in dispute that show-cause notice in the

instant case was issued under Section 124 of the Act. Once

such a show-cause notice was issued and as can be seen

from the proposed action which was contemplated in this

provision (as has been taken note of above), it was also

confined to confiscation of the imported machinery and

imposition of penalty. Nothing was stated about the

payment of duty. However, in spite of the fact that show -

cause notice was limited to confiscation of the goods and

imposition of penalty, the final order which was passed

included the direction to pay the customs duty as well. It is

clear that when such an action was not contemplated,

which even otherwise could not be done while exercising the

powers under Section 124 of the Act, in the final order there

could not have been direction to pay the duty.

11. Notwithstanding the aforesaid position, as pointed

out above, the Department is taking shelter under the

provisions of sub-section (2) of Section 125 of the Act.

However, on a plain reading of the said provision, we are of

the view that such a provision would not apply in case

where option to pay fine in lieu of confiscation is not

exercised by the importer. Trigger point is the exercise of a

positive option to pay the fine and redeem the confiscated

goods. Only when this contingency is met, the duty becomes

payable. In the present case, admittedly, such an option

was not exercised and the confiscated machinery was not

redeemed by the Institute. As a matter of fact, thus, no fine

has been paid.”

8.7. This judgment also explains the position when the Customs

Department wants to recover duty through ways , other than

confiscation at the C hapter XIV. Explaining the alternative modes of

recovery of customs duty, the court observed as follows;

“16. It is not that the Department is without any remedy.

We have gone through the provisions of notification No. 64

of 1988 dated 01.03.1988. As pointed out above, importer

17

would be exempted from payment of import duty on hospital

equipment only when the conditions contained in the said

notification are satisfied. Some of the conditions, as pointed

out above, are to be fulfilled in future. If that is not done and

the importer is found to have violated those conditions,

show-cause notice could always be given under the said

notification on payment of duty, independent of the action

which is permissible under Section 124 and Section 125 of

the Act. It is also important to mention that under certain

circumstances mentioned in the notification, the importer

can be asked to execute a bond as well. In those cases,

action can be taken under the said bond when the

conditions contained therein are violated. Therefore, if the

Department wanted the Institute to pay the duty, which

may have become payable, it could have taken independent

action; de hors Section 124 of the Act, for payment of duty,

simultaneously with the notice under Section 124 of the Act

or by issuing composite notice for such an action. No doubt,

it could have waited for option to be exercised by the

Institute under Section 125(1) of the Act as well and in that

eventuality, duty would have automatically become

payable under Section 125(2) of the Act. But when such an

option was not exercised, it could have taken separate and

independent action by issuing a show-cause notice to the

effect that the Institute had violated the terms of exemption

notification and therefore, was liable to pay duty.”

8.8. We can thus conclude the second principle that, when

confiscation proceedings are initiated under S ection 124 of the Act, the

obligation to pay duty and other charges under Section 125(2) will

arise only when the owner of goods exercises the option to pay fine for

redemption of goods and the Department accepting it.

8.9. An important principle that needs to be recognised is that, the

customs duty obligation in confiscation proceedings does not

occasion either under Section 12 or 28. It has arisen because of the

option available and exercised under Section 125. This obligation

should not be confused with the method and procedure by which that

18

customs duty is assessed and determined, which is provided under

Section 28. It is in this context that we need to consider and explain

the decision of this court in Jagdish Cancer case.

9. Re: What is the true and correct ratio of the decision in Jagdish

Cancer case?

9.1. The real contest in this case is about the correct ratio of the

judgement in Jagdish Cancer case. According to the appellant, as this

judgment holds that duty liability in confiscation proceedings arises

because of Section 125 and not Section 28, there is no liability to pay

interest on delayed payments under Section 28AB. The facts of this

case are necessary to be recounted for a clear understanding of the

ratio of this decision. In this case, the department issued a show-

cause notice under Section 124 of the Customs Act demanding

customs duty and proposed confiscation under Section 111(o) and

penalty under Section 112.

9.2. The importer contended that as there is no notice under Section

28, the demand and collection of duty are impermissible. We will

extract the submission as recorded by this court in para 9 of the

judgment, as it is important to know what was argued and what was

decided:

“9. […] Section 28 of the Act which falls in Chapter V

provides for notice for payment of duties which has been

19

demanded by the notice in this case. Therefore, it is

submitted on behalf of the Centre that demand of customs

duty and the order for payment of the same is relatable to

only Section 28(1) of the Customs Act, as also found by the

CEGAT. That being the position, the notice was beyond time

and not by a competent officer authorised to issue the same.

The argument, as advanced, though seems to be attractive

but on scrutiny, we find no merit in it […]”

9.3. On the other hand, the Department defended its position by

submitting as follows:

“8. […] It is submitted that the copy of the notice, as

annexed, does not mention Section 28(1) of the Customs

Act, in any case if it is taken to be there, as contended, that

would make no difference. The submission is that sub-

section (2) of Section 125 of the Customs Act provides that

where any fine in lieu of confiscation of goods is imposed,

the importer shall also, in addition, be liable to any duty

and charges payable in respect of such goods.”

9.4. It is in the context of the above-referred submissions, that the

court considered the fact that an option under Section 125 was given

and it was in fact exercised. Thus, the liability to pay customs duty

arose under Section 125(2) and therefore, the court held that the

separate notice under Section 28 is not required. This is exactly what

the court ruled by holding:

“12. Whenever an order confiscating the imported goods is

passed, an option, as provided under sub-section (1) of

Section 125 of the Customs Act, is to be given to the person

to pay fine in lieu of the confiscation and on such an order

being passed according to sub-section (2) of Section 125, the

person “shall in addition be liable to any duty and charges

payable in respect of such goods” […]”.

20

9.5. Again, in the same paragraph, the court notes that the occasion,

origin, or the circumstance in which the liability to pay duty arose in

the confiscation proceedings under Section 125 (2). In this case, the

court was considering and rejecting the submission made on a

misplaced premise that the proceedings have originated under

Section 28. Payment of customs duty has not arisen either under

Section 12 or Section 28, it has arisen because of Section 125(2).

Therefore, a notice under Section 28 is not necessary. This is how the

judgment needs to be understood, and it is in this perspective that

the court has in fact rejected the importer ’s objection to the payment

of duty.

“12. Whenever an order confiscating the imported goods is

passed, an option, as provided under sub-section (1) of

Section 125 of the Customs Act, is to be given to the person

to pay fine in lieu of the confiscation and on such an order

being passed according to sub-section (2) of Section 125, the

person “shall in addition be liable to any duty and charges

payable in respect of such goods.” A reading of sub-section

(1) and (2) of Section 125 together makes it clear that

liability to pay duty arises under sub-section (2) in addition

to the fine under sub -section (1). Therefore, where an order

is passed for payment of customs duty along with an order

of imposition of fine in lieu of confiscation of goods, it shall

only be referable to sub-section (2) of Section 125 of the

Customs Act. It would not attract Section 28(1) of the

Customs Act which covers the cases of duty not levied,

short- levied or erroneously refunded etc. The order for

payment of duty under Section 125(2) would be an integral

part of proceedings relating to confiscation and

consequential orders thereon, on the ground as in this case

that the importer had violated the conditions of notification

subject to which exemption of goods was granted, without

attracting the provisions of Section 28(1) of the Customs

Act.”

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9.6. We conclude by holding that Jagdish Cancer case is not an

authority for the proposition that when the liability to pay customs duty

has occasioned under Section 125, the calculation, determination or

the assessment of such duty cannot be made under Section 28.

10. Re: Whether the liability to pay such duty will include the liability

to pay interest on delayed payment under section 28AB of the Act?

10.1. The text of Section 125(2) clearly provides that, where any

fine in lieu of confiscation of goods is imposed under sub- Section (1),

the owner of such goods shall be ‘liable to any duty and charges

payable with respect to such goods’ . The sub-section provides that

the liability to any duty and charges, that are payable, shall be paid

in addition to the fine. We have held that Section 28 would come into

operation for assessing and determining the duty and other charges

payable with respect to goods redeemed under Section 125(2) . Once

Section 28 applies for determination of duty obligation arising under

Section 125(2), the interest on delayed payment of duty arises under

Section 28AB. The said provision obligates payment of interest in

addition to the duty. We thus answer the last issue by holding that

the interest liability under Section 28 AB is also attracted.

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11. Conclusion: For the reasons mentioned hereinabove, we uphold

the decision of the High Court in Writ Petition Lodging No. 1387 of

2009 dated 29.08.2009 and dispose of the present Civil Appeal No.

1024 of 2014. No order as to costs.

………………………………....J.

[PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J.

[ARAVIND KUMAR]

NEW DELHI;

JULY 23, 2024.