Paragraph numbers below are the court’s original numbering, recovered from the source text.
11. In order to find out as to whether the High Court is 1H right or CESTAT's interpretation of the provisions of Section FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 467 IMPORT [A K. SIKRI, J.] . 125(2) of the Act is correct, it would be necessary to peep. A into the said provision along with Section 124 of the Act. These two Sections are worded as follows: "Section 124. Issue of show cause notice before confiscation of goods, etc. – No order confiscating B any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person- (a) is given a notice in writing with the prior approval of the officer of customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned E therein; and (c) is given a reasonable opportunity of being heard in the matter: Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may at the request of the person concerned be oral." "Section 125. Option to pay fine in lieu of G 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 expo~a!ion iVJh:_reJ'?f }~ Pf~hibi~ed. u.~de~ thjs f:c__t 1o( 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: Provided that, without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine c shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon. (2)Where any fine in lieu of confiscation of goods is imposed under sub- section (1) the owner of such _goods or the person referred to in sub- section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods."
12. It may be seen from the bare reading of the aforesaid Section that under Section 125( 1) of the Act, option is given to the importer whose goods are confiscated, to pay the fine in lieu of confiscation and F redeem the confiscated goods. Before this action is taken, Show Cause Notice is to be issued under the provision of Section 124 of the said Act. This provision pertains to confiscation of goods and provides procedural safeguards G inasmuch as there cannot be any order of confiscating any goods or imposing any penalty on any person without complying with the procedure contained in Section 124. Section 124 mandates issuance of the Show Cause Notice before passing any such order and contemplates two H actions: first, relating to confiscating of the goods and FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 469 IMPORT [A. K. SIKRI, J.] second, pertaining to imposition of penalty. Pertinently, this A action does not deal with payment of import duty at all.
13. It is not in dispute that Show Cause Notice in the instant case was issued under Section 124 of the Act. Once such a Show Cause Notice was issued and as can B be seen from the proposed action which was contemplated in this provision (as has been taken note of above), it was also confined to confiscation of the imported machinery and imposition of penalty. Nothing was stated about the c payment of duty. However, in spite of the fact that Show Cause Notice was limited to confiscation of the goods and imposition of penalty, the final order which was passed included the direction to pay the customs duty as well. It is D clear that when such an action was not contemplated, which even otherwise could not be done while exercising the powers under Section 124 of the Act, in the final order there could not have been direction to pay the duty.
14. Notwithstanding the aforesaid position, as pointed out above, the Department is taking shelter under the provisions of sub-section (2) of Section 125 of the Act. However, on a plain reading of the said provision, we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods. Only when this contingency is met, the G duty becomes payable. In the present case, admittedly, such an option was not exercised and the confiscated machinery was not redeemed by the Institute. As a matter of fact, thus, no fine has been paid.
15. Mr. K. Radhakrishnan, learned senior counsel appearing for the Department, argued that even if an option was not exercised, the moment it was stated in the order of the Commissioner that fine is being "imposed", sub- B section (2) would get attracted. We do not agree with the aforesaid submission of Mr. Radhakrishnan. The order confiscating the goods has already been reproduced above. Insofar as the payment of fine is concerned, only option was given (and that was only course of action which C could be visualised under section 125). The order cate·gorically states that "the importer "may" redeem the confiscated goods on payment of fine of Rs.1,00,000 (Rs. One lakh only)"
16. Indubitably, unless an option is exercised, fine does not become payable. Sub-section (2) of Section 125 uses the expression "imposed" by stating "where any fine in lieu of confiscation of goods is imposed". In Black law E dictionary (Tenth edition), the word 'impose' is defined as "To levy or exact (a tax or duty)". Thus, it has to be a levy or exact which is become payable and has to be paid. Likewise, the word 'impose' is defined by Oxford English F Dictionary, as relevant for the purpose of the present case, as "Lay or inflict (a tax, duty, charge, obligation, etc.) (on or upon), esp. forcibly; compel compliance with; force (oneself) on or upon the attention etc. of."
17. In view of the above, we cannot agree with the submission of Mr. Radhakrishnan that fine been "imposed" in the present case. The stipulation contained in the adjudicating order was only contingent in nature which H contingency would have arisen only on exercising the FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 471 IMPORT [A. K. SIKRI, J.] option by the importer to pay fine in lieu of confiscation and 1-A to redeem the goods. ri,
18. As already mentioned above, Section 124 dJals with confiscation of goods and penalty and does not deal with payment of import duty. No doubt, such a payment of B import duty becomes payable by virtue of sub- section'~(2) of Section 125 but only when condition stipulated in-the c said provision is fulfilled, namely, fine is paid in lieu of confiscation of goods. When the Department chose to take ,c action under Section 124 of the Act, it should have been alive of the situation that the Noticee may not exercise the option and in such case, duty would not be payable automatically.
19. It is not that the Department is without any rem~dy. We have gone through the provisions of notification N~. 64/ 88 dated 01.03.1988. As pointed out above, importer would be exempted from payment of import duty on hospital .:iE equipment only when the conditions contained in the s~id · – notification are satisfied. Some of the conditions,' ~s pointed out above, are to be fulfilled in future. If that is not done and the importer is found to have violated those conditions, Show Cause Notice could always be given 1F under the said notification on payment of duty, indepen_d~nt of the action which is permissible under Section 124 ~nd Section 125 of the Act. It is also important to mention that under certain circumstances mentioned in the notification, ~.G r. the importer can be asked to execute a bond as welt, In those cases, action can be taken under the said pol)d when the conditions contained therein are viplat~d. Therefore, if the Department wanted the Institute to pay the , ·H A duty, which may have become payable, it could have taken independent action; de hors Section 124 of the Act, for payment of duty, simultaneously with the notice under Section 124 of the Act or by issuing composite notice for 8 such an action. No doubt, it could have waited for option to be exercised by the Institute under Section 125(1) of the Act as well and in that eventuality, duty would have automatically become payable under Section 125(2) of the Act. But when such an option was not exercised, it could C have taken separate and independent action by issuing Show Cause Notice to the effect that the Institute had violated the terms of exemption notification and therefore, was liable to pay duty.
20. What is emphasised is that when in the Show Cause Notice issued under Section 124, nothing was stated about the payment of import duty, there could not have been direction to that effect in the final order Further, E insofar as Section 125(2) is concerned, the contingency contained therein did not occur in the present procedure for want of exercise of option to pay fine. We, thus, are of the opinion that the view taken by the CESTAT is correct and F the contrary view taken by the High Court in the impugned judgment is not warranted on the interpretation of Section 125(2) of the Act.
21. High Court is not correct in observing that it is G immaterial whether option under Section 125(2) is exercised or not. We would like to point out that the High Court has referred to the judgment in the case of 'Commissioner of Customs(lmport), Mumbai v. Jagdish H Cancer & Research Centre' [2001 (6) SCC 483] in support FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 473 IMPORT [A. K. SIKRI, J.] of its conclusion. However, on going through the said A judgment, we find that the issue with which we are concerned in the present case did not occur for consideration before the court in that case at all, as is clear from para 12 of the said judgment, which is reproduced below: – "12. Whenever an order confiscating the imported goods is passed, an option, as provided under sub- section (1) of Section 125 of the Customs Act, is to c be given to the person to pay fine in lieu of the confiscation and on such an order being passed according to sub-section (2) of Section 125, the person "shall in addition be liable to any duty and 0 charges payable in respect of such goods". A reading of sub-sections (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under sub-section (2) in addition to the fine under sub- section (1). Therefore, where an order is passed for E pc_iyment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to sub-section (2) to Section 125 of the Customs Act. It would not attract Section F 28(1) of the Customs Act which covers the cases of duty not levied, short-levied or erroneously refunded, etc. The order for payment of duty under Section 125(2) would be an integral part of proceedings relating to confiscation and consequential orders G thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods was granted, without attracting the provisions of Section 28(1) of the H c Customs Act. A reference may beneficially be made to a decision of this Court reported in Mohan Meakins Ltd. v. CCE wherein it has been observed in para 6: (SCC p.465) Therefore, there is a mandatory requirement on the adjudicating officer before permitting the redemption of goods, firstly, to assess the market value of the goods and then to levy any duty or charge payable on such goods apart from the redemption fine that he intends to levy under sub-section (1) of that section." In this view of the matter the objection raised by the Centre that Section 28 of the Customs Act would be attracted is not sustainable."
22. Obviously, the argument raised in that case predicated on Section 28(1) of the Customs Act and plea was that notice was not issued by the "competent officer" E and was also beyond the time prescribed under Section 28(1). In that context, the Court dealt with the provisions of Section 125(1) as well as 125(2) and observed that order of payment of duty under Section 125(2) would be an F integral part of the proceedings relating to confiscation and consequential orders thereon. This order, however, must be pursuant to a show cause notice and adjudication. The court dealing with the question as to whether sub-section (2) of G Section 125 would be applicable even when option to pay fine in lieu of confiscation is not exercised.
23. Accordingly, we allow the appeal and set aside the order passed by the High Court. We make it clear that it H would still be open to the Department to take appropriate FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 475 IMPORT [A K. SIKRI, J.] independent action against the appellant for payment of A import duty, in case it is still within period of limitation. Nidhi Jain Appeal allowed.