Goods Confiscated by Customs Vest in Govt. Even if Option to Pay Redemption Fine is Not Exercised | NCLAT

Case Details: Principal Commissioner of Customs GST v. Pratim Bayal RP For B.K.M. Industries Ltd. - [2024] 162 taxmann.com 745 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Ashok Bhushan, Chairperson & Barun Mitra, Technical Member
  • Piyush Beriwal & Nikhil Kumar Chaubey, Advs. for the Appellant.
  • Rishav Banerjee & Shambo Nandy, Advs. for the Respondent.

Facts of the Case

In the instant case, the corporate debtor entered into an agreement with a company to facilitate the transfer of machinery owned by the corporate debtor to its 100% subsidiary Company in Nigeria.

Subsequently, the second consignment was seized by Customs Authorities, and a Show-Cause Notice was issued to the corporate debtor. Later, the Additional Commissioner also gave the option for goods to be redeemed upon payment of a redemption fine.

After confiscation, goods remained in the custody of the Customs Department. Consequently, the Respondent filed an application before NCLT seeking directions for the release of assets comprising the corporate debtor’s machinery. The Respondent further stated that the option for payment of the redemption fine was not exercised within 120 days, and, therefore, goods continued to vest in the corporate debtor.

The NCLT, vide the impugned order, directed the release of goods. It was noted that the order passed by Custom Authorities clearly indicated that goods that were seized were confiscated. However, the Additional Commissioner had allowed goods to be redeemed on payment of a redemption fine of Rs.16.83 lakhs in terms of the Customs Act, 1962.

NCLAT Held

The NCLAT observed that vesting of goods under section 126 (1) is not dependent on the exercise of the option to pay the redemption fine and payment of the redemption fine and redeeming goods is a benefit, which is provided by statute, which option can be availed after the confiscation of goods.

Further, it was always open for RP, who was entitled to represent the corporate debtor, to exercise the option and redeem goods by payment of redemption fine and, thus, the contention of the respondent that even though it had neither exercised the option of payment of redemption fine nor redeemed goods, they still continued to be the owner of goods could not be accepted.

The NCLAT held that the impugned order passed by the NCLT, which only directed the release of goods to the Customs Department without giving any reason or even adverting to facts, was unsustainable and deserved to be set aside.

List of Cases Reviewed

• • Trimurti Associate (P.) Ltd. v. BKM Industries Ltd. [2024] 162 taxmann.com 744 (NCLT -Kol.) (para 28) reversed See Annex.