The Judgement addresses three key issues concerning customs duty and interest obligations under the Customs Act, 1962:

1. Liability to Pay Customs Duty: When confiscated goods are redeemed after paying a fine under Section 125, the owner is liable for customs duty.
2. Interest on Delayed Payment: Under Section 28AB, interest on delayed payment is applicable when duty liability is determined under Section 28.
3. Jagdish Cancer Case: The case clarifies that duty liability arising from Section 125 does not negate the applicability of Section 28 for duty assessment and Section 28AB for interest on delayed payment.

1. Introduction

• Questions Considered:
  1. Liability to pay customs duty when confiscated goods are redeemed after payment of a fine.
  2. Liability to pay interest on delayed payments under Section 28AB.
  3. True interpretation of the Jagdish Cancer case decision.

1.1 Decision Summary

• Customs Duty Liability: Owners of confiscated goods must pay customs duty upon redemption after paying a fine.
• Duty Assessment: Duty liability arises under Section 125 only when redemption is exercised and must be assessed under Section 28, including interest under Section 28AB.
• Jagdish Cancer Case: The case does not prevent the calculation of duty under Section 28 when Section 125(2) applies.

1.2 Relevant Facts

• Background: Between 2003 and 2007, the appellant used customs duty exemptions for construction equipment.
• Violations: Investigations revealed violations of import conditions.
• Actions Taken: The appellant deposited duty and interest before receiving the show-cause notice.
• Proceedings: A show-cause notice proposed confiscation, duty, interest, and penalties. The Settlement Commission waived penalties and fine but upheld duty liability. The High Court later mandated interest calculation under Section 28AB.

2. Legal Provisions and Interpretation

• Sections 11 and 12:
  • Section 11: Central Government can prohibit import/export of goods.
  • Section 12: Customs duties imposed on imported/exported goods.
• Section 28:
  • Procedure for recovering unpaid or short-paid duties.
• Confiscation of Goods (Chapter XIV):
  • Goods improperly imported/exported can be confiscated, with penalties for violations.
• Section 125:
  • Provides for redemption of confiscated goods by paying a fine, duty, and other charges.

3. Issues and Principles

• Key Issues:

  • Duty liability when redeeming confiscated goods.
  • Interest liability on delayed payment under Section 28AB.
  • Correct interpretation of the Jagdish Cancer case.

• Duty Liability:

  • Confirmed by the Security Finance case (1976): Duty arises under Section 12 and/or Section 28, not Section 125.
  • Section 125(2) clarifies that duty is payable in addition to the fine.
  • The Fortis Hospital case (2015) confirms that duty is payable only upon exercising the redemption option.

4. Analysis of the Jagdish Cancer Case

• Facts:

  • Show-cause notice issued under Section 124 for customs duty and proposed confiscation under Section 111(o).
  • Importer argued that without a Section 28 notice, duty demand was impermissible.

• Court's Ruling:

  • Liability to pay duty arose under Section 125(2), not Section 28.
  • No separate Section 28 notice is required when duty liability arises under Section 125(2).

5. Interest on Delayed Payment under Section 28AB

• Section 125(2) and Section 28:
  • Section 125(2) requires payment of duty in addition to the fine.
  • Duty liability assessed under Section 28, making interest under Section 28AB applicable.

6. Conclusion

• Duty liability in confiscation proceedings arises upon redemption under Section 125. Duty must be assessed under Section 28, and interest under Section 28AB applies. The High Court's decision is upheld, with the civil appeal disposed of and no costs ordered.