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M/S Navayuga Engineering Co. Ltd. vs. Union of India & Anr.

Not available · 2024 INSC 547Decided 23 Jul 2024
Not available
Justice Pamidighantam Sri Narasimha · Justice Aravind Kumar

Background

The appellant company had imported specialised machinery (hydraulic piling rigs) duty-free under an exemption meant for road/bridge construction projects for government authorities. When investigations found the company had violated the conditions of that exemption, it voluntarily deposited a large sum toward duty and interest even before a formal show-cause notice was issued. The government then issued a notice proposing confiscation of the goods (under Section 111) along with duty, interest, and penalty. The company approached the Settlement Commission, which upheld the duty liability but waived the penalty and fine, while the company disputed that interest on delayed duty payment could be charged since the proceedings had originated under the confiscation provisions rather than the standard duty-assessment provision (Section 28).

Decision Breakdown

The Supreme Court, resolving a perceived conflict in its own earlier precedent (Commr. of Customs (Import) v. Jagdish Cancer and Research Centre), held that an importer whose goods are confiscated but who then chooses to pay a fine to redeem them under Section 125 of the Customs Act still remains liable to pay customs duty on those goods. It clarified that while the liability to pay duty in such cases arises under Section 125(2), the actual assessment, calculation, and determination of how much duty is owed must still be carried out under the ordinary duty-assessment machinery of Section 28: the two provisions work together rather than being mutually exclusive as some had read the earlier Jagdish Cancer ruling to suggest. Because Section 28 applies for the assessment, the Court held that interest on delayed payment of that duty, under Section 28AB, is also payable. The appeal was accordingly dismissed and the High Court's order upholding the duty liability was affirmed.

Lesson Learnt

Choosing to pay a fine to get confiscated imported goods released does not let an importer escape customs duty on those goods: the duty (and interest for delay in paying it) still has to be worked out and paid under the standard customs duty-assessment rules, even though the confiscation and redemption happened under a different, specific provision of the Customs Act.

Official source (sci.gov.in)View Judgment (PDF)

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