A) ABSTRACT / HEADNOTE

This case addresses critical questions under the Customs Act, 1962, particularly relating to the liability of customs duty and interest on confiscated goods redeemed through payment of fine under Section 125. The Supreme Court clarified the applicability of duty obligations arising from confiscation proceedings and interest liabilities under Section 28AB. It also delineated the scope of earlier precedents, particularly the decision in Jagdish Cancer and Research Centre v. Commissioner of Customs. The judgment reaffirms that liability for duty and related charges arises upon the exercise of the redemption option and elucidates the procedural interplay between Sections 125 and 28 for assessment and determination of customs obligations.

Keywords: Customs duty, confiscated goods, redemption fine, Section 125, Section 28AB, delayed interest.

B) CASE DETAILS

i) Judgement Cause Title
M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

ii) Case Number
Civil Appeal No. 1024 of 2014

iii) Judgement Date
23 July 2024

iv) Court
Supreme Court of India

v) Quorum
Hon’ble Justices Pamidighantam Sri Narasimha and Aravind Kumar

vi) Author
Justice Pamidighantam Sri Narasimha

vii) Citation
[2024] 7 S.C.R. 1183

viii) Legal Provisions Involved

• Customs Act, 1962: Sections 125, 28, 28AB, 111, 112, 114A.

ix) Judgments Overruled by the Case (if any)
None explicitly overruled but clarified ambiguities in Jagdish Cancer and Research Centre v. Commissioner of Customs [(2001) 6 SCC 483].

x) Case Related to Which Law Subjects
Customs Law, Taxation Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

This appeal arose from a Bombay High Court judgment that imposed interest liabilities under Section 28AB of the Customs Act for delayed payment of customs duty on goods redeemed under Section 125. The appellant sought clarity on whether liability for customs duty and interest arises in confiscation proceedings. The case revolved around exemptions availed under a notification and subsequent violation of conditions, leading to confiscation and subsequent redemption of goods.

D) FACTS OF THE CASE

Between 2003 and 2007, the appellant imported goods under an exemption notification, subject to conditions for exclusive use in road construction. Upon violations of these conditions, investigations ensued, and a show-cause notice was issued under Section 124, proposing confiscation under Section 111(o) and penalties under Sections 112 and 114A.

The appellant deposited significant amounts toward duty and interest but disputed the demand for interest under Section 28AB, asserting its inapplicability to proceedings under Section 125. The matter escalated through writ petitions and appeals, culminating in the Supreme Court.

E) LEGAL ISSUES RAISED

1. Whether there is a liability to pay customs duty when confiscated goods are redeemed through payment of fine under Section 125.
2. Whether liability for interest under Section 28AB applies to delayed payment of customs duty in such cases.
3. What is the correct interpretation of the decision in Jagdish Cancer and Research Centre v. Commissioner of Customs.

F) PETITIONER/APPELLANT’S ARGUMENTS

1. The appellant argued that liability for customs duty arises under Section 125, distinct from Section 28, and that Section 28AB’s interest obligations apply only when duty is assessed under Section 28.
2. The Jagdish Cancer precedent was cited to assert that customs duty under Section 125 is standalone, precluding procedural reliance on Section 28.
3. Interest for delayed payment cannot apply when the duty arises out of redemption under confiscation proceedings initiated under Section 124.

G) RESPONDENT’S ARGUMENTS

1. The respondents contended that Section 125 imposes a duty obligation as a prerequisite for redeeming confiscated goods, which necessitates assessment under Section 28.
2. Section 28AB, being procedural, applies to delayed payments even when the origin of duty liability is Section 125.
3. Reliance on Security and Finance v. Union of India [(1976) 1 SCC 166] was placed to establish the co-existence of duty and fine obligations under confiscation laws.

H) JUDGEMENT

a) Ratio Decidendi

1. Section 125(2) creates liability for customs duty when goods are redeemed, and the duty must be assessed under Section 28.
2. The interest liability under Section 28AB arises for delayed payments following assessment under Section 28.
3. Jagdish Cancer does not preclude reliance on Section 28 for duty assessment in confiscation cases.

b) Obiter Dicta

The court noted that procedural safeguards in Section 124 must be rigorously followed but emphasized the substantive liability arising under Section 125 for redeeming confiscated goods.

c) Guidelines

1. Confiscation proceedings under Section 124 necessitate liability determination under Section 125 upon redemption.
2. Duty assessed under Section 125(2) must follow procedures under Section 28, attracting Section 28AB interest.
3. Exemptions availed through notifications must be strictly adhered to; violations attract consequences under Chapter XIV of the Customs Act.

I) CONCLUSION & COMMENTS

The judgment reinforces the interplay between statutory provisions for confiscation and duty assessment, ensuring no ambiguity in liability and interest obligations. It resolves inconsistencies in judicial precedents, upholding procedural and substantive customs law integrity.

J) REFERENCES

a) Important Cases Referred

• Jagdish Cancer and Research Centre v. Commissioner of Customs [(2001) 6 SCC 483].
• Union of India v. M/s Security and Finance [(1976) 1 SCC 166].
• Fortis Hospital Ltd. v. Commissioner of Customs [(2015) 12 SCC 715].

b) Important Statutes Referred

• Customs Act, 1962: Sections 125, 28, 28AB, 111, 112, 114A.