Absolute discretion of Customs Authority either to order absolute confiscation or impose fine in lieu of confiscation

The Hon'ble Customs, Excise & Services Tax Appellate Tribunal, Delhi ("CESTAT") in the matter of M/s. Ferryman Trading Company v. Commissioner of Customs (Appeals) [FINAL ORDER No. 51910/2021 dated October 28, 2021], held that the confiscating officer under section 125 of the Customs Act, 1962 has the absolute discretion to either impose fine in lieu of confiscation or to order the absolute confiscation.

The M/s. Ferryman Trading Company("the Appellant") filed the current appeal being aggrieved of the Order-in-Appeal ("OIO") passed by Commissioner (Appeals), New Delhi. The Appellant is an importer who had imported the cosmetic products through its CHA firm M/s. R.P. Cargo Handling Services at the declared value of Rs.2288502.77. The Adjudicating Authority however, rejected the said value and accepted the re-determined assessable value of Rs.25,45,129/- and the goods were ordered to be confiscated. However the option was given to the importer to redeem the goods but those having clearance value of Rs.2455289.94 on the payment of redemption fine of Rs. one lakh. However, the goods having a value of Rs.89829/- were ordered for absolute confiscation on the ground that they were not declared in the Central Drugs Standard Control Organisation("CDSCO") Registration Certificate.

The Appellant submitted that there is no provision ordering the absolute confiscation of the goods. It is impressed upon that goods in question are the cosmetics products, hence, these goods were neither prohibited nor restricted. For this reason also the authorities have committed an error while ordering the absolute confiscation. The Appellant has also impressed upon the CDSCO certificate as was produced before the adjudicating authorities incorporating the impugned product.

Further the Respondent Department submitted that where the Appellant himself has acknowledged its mistake about the address of the manufacturer being wrong and also about the products to have been misdeclared. He also admitted not to have the CDSCO Registration Certificate at the relevant point of time. And in the absence of the said Certificate, there is no infirmity in ordering the absolute confiscation of the impugned goods.

The Hon'ble CESTAT, Delhi while considering the technicality attached to the CDSCO Certificates observed that all cosmetic products that are imported for sale in India need to be registered with the Licensing Authority, as is defined under Rule 21 of Drugs and Cosmetic Act, 1940 which regulate the import of cosmetic to ensure safety, quality and performance.

Further upholding the order of the adjudicating authority, the CESTAT held that no doubt section 125 of the Customs Act, 1962 gives the importer an option to pay fine in lieu of confiscation but the word used in the provision is "may'' hence the intention of the statute is apparently clear that the discretion lies with the Confiscating Officer to either impose fine in lieu of confiscation or to order the absolute confiscation.

Relevant Provisions

"SECTION 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.