M/S ASCENT CIRCUITS PVT LTD vs Bangalore Customs

C/20780/2024



CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1

Customs Appeal No. 20780 of 2024

(Arising out of Order-in-Appeal No. 16-17/2024 dated 29.01.2024
passed by the Commissioner of Customs (Appeals), Bangalore.)


M/s. Ascent Circuits Pvt. Ltd.
B13, ITC Ancillary Industrial Estate,
Mahadevapura,
Bangalore – 560 048.
Appellant(s)

VERSUS
Commissioner of Customs,
Airport and Air Cargo Complex, KIAL,
Devanahalli,
Bengaluru - 560 300.
Respondent(s)
APPEARANCE:


Mr. K.V. Srinivasa Prasad, Advocate for the Appellant
Ms. Daisy Joseph, Superintendent (AR) for the Respondent

CORAM:

HON'BLE MRS R. BHAGYA DEVI, MEMBER (TECHNICAL)

Final Order No. 20996 / 2026


DATE OF HEARING: 27.08.2026
DATE OF DECISION: 27.08.2026

PER : R. BHAGYA DEVI


This appeal is filed by the appellant M/s. Ascent Circuits
Pvt. Ltd., against Order-in-Appeal No. 16-17/2024 dated
29.01.2024 wherein the Commissioner (Appeals) had decided
two appeals; one filed by the appellant and other filed by the
Revenue against the Order-in-Original No. 405/2022-23-DC
dated 05.08.2022.

2. Briefly the facts are that the appellant had imported
“Posalux Machine DLR Measuring Unit” which on examination are
found to be second hand goods which are restricted as per the
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Foreign Trade Policy and hence, the goods are liable for absolute
confiscation and accordingly, the original authority held that the
products imported by the appellant were to be redeemed on
payment of Rs.30,000/- under Section 125 of the Customs Act,
1962 and also imposed penalty of Rs.10,000/- under Section
112(a) of the Customs Act, 1962. On appeal by the Revenue and
the appellant, the Commissioner (Appeals) dismissed the appeal
filed by the appellant and allowed the appeal filed by the
Revenue and held that the goods were liable for absolute
confiscation without redemption fine and also enhanced the
penalty under Section 114AA of the Customs Act, 1962 from
Rs.10,000/- to Rs.1,00,000/-.

3. The learned Authorised Representative (AR) for the
Revenue reiterating the findings of the Commissioner (Appeals)
submits that the goods were liable for absolute confiscation in
view of the fact that the goods were found to be second hand
goods on examination and are restricted as per the Foreign
Trade Policy and the Commissioner (Appeals) hence absolutely
confiscated the goods and also enhanced the penalty.

4. Countering his arguments, the learned counsel for the
appellant submits that the goods were not second hand goods;
hence, the question of holding the imported goods as restricted
goods cannot be sustained. Accordingly, redemption fine and
penalty also cannot be sustained.

5. Heard both sides. The Commissioner (Appeals) in the
impugned order at para 8.2 after referring to the Section 125 of
the Customs Act, 1962 observes as follows:

“8.2. Further, it is pertinent to mention that Section 125 of the Customs
Act, 1962 allowed to redeem the goods so confiscated under Section 111
of the Customs Act, 1962. For the sake of clarity, Section 125 of the
Customs Act is reproduced below for reference-

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"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:

Provided that, without prejudice to the provisions of the proviso to
sub-section (2) of section 115, such fine 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.

The provisions of Section 125 are very clear, and it give discretionary
power to the adjudication authority to give an option to the owner of
goods to redeem the goods on payment of redemption fine. Before
proceeding further, the adjudicating authority has to clearly construe as
to whether the goods in question are liable for absolute confiscation or
not. In the instant case, the lower authority has failed to exercise the
discretion vested under Section 125 of the Customs Act, 1962. It is true
that, ordinarily, when a statutory authority is invested with discretion, the
same deserves to be left for exercise by that authority consciously with
reasoned findings. The findings of the lower authority are not justifiable
on the redemption of the goods. I will rely on the judgement of Hon'ble
Supreme Court of India in the case of Union of India Vs Raj Grow Impex
LLP [2021 (377) E.L.T. 145 (S.C.)] which will suffice.

Redemption fine in lieu of confiscation - Option to pay Adjudicating
Authority had exercised discretion to release goods with redemption fine
and penalty; thus, option to pay redemption fine given without
consideration of other alternative to absolute confiscation - Exercise of
such discretion was assumptive and ritualistic, rather than conscious and
cautious adherence to applicable principles On facts, as imports were
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contrary to relevant D.G.F.T. Notification Nos. S.O. 1478(E), 1479(E),
1480(E) and 1481(E), dated 29-3-2019 Notice and subsequent D.G.F.T.
Trade Notice No. 6/2019-2020, dated 16-4-2019 regarding quantities
more than annual quota that could adversely impact economy, absolute
confiscation was proper - As imports were not bona fide no leniency can
be given to importer on basis of equity and having suffered huge losses -
Section 125(1) of Customs Act, 1962. [paras 80, 81, 86.11.
(Emphasized)

Adjudication-Discretion - Exercise of discretion by Adjudicating Authority
as per first part of Customs Act has to be guided by law, according to
rules of reason and justice, based on relevant considerations - Exercise of
discretion is discernment of what is right and proper by differentiating
between shadow and substance as also equity and pretence - It has to
further purpose underlying conferment of power - Reasonableness,
rationality, impartiality, fairness and equity are inherent-It cannot be
according to private opinion - Discretion has to be exercised judiciously
and, for matter, all facts and all relevant surrounding factors as also
implication of exercise of discretion either way have to be properly
weighed and balanced decision is required to be taken………….”
(Emphasized)

5.1 The Commissioner (Appeals) at paragraph 9.1 observed
that:

“9.1. Now, I am taking up the next contentious issue as to whether the
imposition of meagre penalty imposed of Rs.10,000/-on the
Respondent / Importer under Section 114 AA of the Customs Ac, 1962
is legally tenable and justifiable or not. It is to note that the lower
adjudicating authority has imposed redeemed on payment of
Rs.30,000/- under Section 125 of Customs Act, 1962 to allow the
goods. In the departmental appeal it is contended that in the instant
case the confiscated goods are Rs. 2,74,767/- and accordingly, the
maximum penalty imposable under Section 114AA is five times of Rs.
2,74,767/- which amounts to Rs.13,73,835/-. Whereas the LAA has
imposed a meagre penalty of Rs. 10,000/- which appears to be very
less when compared to the intensity of fraud by the importer. Before
proceeding further, it needs to be checked whether appellate authority
has power vested to reduce or enhance the penalty imposed by the
lower adjudicating authority or not. I find that Section 128A(2)
provides that the appellate authority, after giving opportunity has the
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power to enhance the levy of penalty. For the sake of clarity, relevant
provisions of Section 128A of the Customs Act, 1962 are reproduced
below -

Section 128A. Procedure in appeal. -

(1) The Commissioner (Appeals) shall give an opportunity to
the appellant to be heard if he so desires.

(2) The Commissioner (Appeals) may, at the hearing of an
appeal.......

(3) The Commissioner (Appeals) shall, after making such
further inquiry as may be necessary, pass such order, as he
thinks just and proper-

(a) confirming, modifying, or annulling the decision or order
appealed against; or (b) referring the matter back to the
adjudicating authority.......

(i) where an order or decision has been passed without
following the principles of natural justice; or

(ii) where no order or decision has been passed after re-
assessment under section 17; or

(iii) where an order of refund under section 27...... the
applicant.]:

Provided that an order enhancing any penalty or fine in lieu of
confiscation or confiscating goods of greater value or reducing
the amount of refund shall not be passed unless the appellant
has been given a reasonable opportunity of showing cause
against the proposed order.

Provided further that where the Commissioner (Appeals) is of
opinion that any duty has.......................... in section 28 to
show cause against the proposed order.

(Emphasized)

The provisions of Section 128A are very clear and reading the
aforementioned provisions indicates that appellate authority has power
vested to reduce or enhance the penalty imposed by the lower
adjudicating authority by providing reasonable opportunity to the
appellant or respondent company.

Also, at para 9.1 the Commissioner (Appeals) justifies the
enhancement of penalty under Section 114AA, considering the
fact that the goods are valued at Rs.2,74,767/- and the
maximum penalty under this Act is five times the value which
amounts to Rs.13,73,835/-; accordingly, he goes on to enhance
penalty from Rs.10,000/- to Rs.1,00,000/-. I find that the goods
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are found to be restricted as per the Foreign Trade Policy, hence
there are no reasons found in the above para of the
Commissioner (Appeals) in the impugned order to justify
absolute confiscation and the reliance placed by the
Commissioner (Appeals) on the decision of the Hon’ble Supreme
Court in the case of Union of India Vs. Raj Grow Impex LLP:
2021 (377) ELT 145 (SC) is on different set of facts where the
appellant-importer was very well aware of the goods being
restricted but continued to import without license. The Hon’ble
Supreme Court in the said case of observed as:

“67.4.3 The present case is of an entirely different restriction where
import of the referred peas/pulses has been restricted to a particular
quantity and could be made only against a licence. The letter and spirit of
this restriction, as expounded by this Court earlier, is that, any import
beyond the specified quantity is clearly impermissible and is prohibited.
This Court has highlighted the adverse impact of excessive quantity of
imports of these commodities on the agricultural market economy in the
case of Agricas (supra) whereas, it had not been the case in Atul
Automations (supra) that the import was otherwise likely to affect the
domestic market economy. In contrast to the case of Atul Automations,
where the goods were permitted to be imported (albeit with
authorisation) for the reason that they were not manufactured in the
country, in the present case, the underlying feature for restricting the
imports by quantum has been the availability of excessive stocks and
adverse impact on the price obtainable by the farmers of the country.
The decision in Atul Automations (supra), by no stretch of imagination,
could be considered having any application to the present case.

68. Thus, we have no hesitation in holding that the goods in question,
having been imported in contravention of the notifications dated 29-3-
2019 and trade notice dated 16-4-2019; and being of import beyond the
permissible quantity and without licence, are ‘prohibited
xxxx
82. The sum and substance of the matter is that as regards the imports
in question, the personal interests of the importers who made improper
imports are pitted against the interests of national economy and more
particularly, the interests of farmers. This factor alone is sufficient to find
the direction in which discretion ought to be exercised in these matters.
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When personal business interests of importers clash with public interest,
the former has to, obviously, give way to the latter. Further, not a
lengthy discussion is required to say that, if excessive improperly
imported peas/pulses are allowed to enter the country’s market, the
entire purpose of the notifications would be defeated. The discretion in
the cases of present nature, involving far-reaching impact on national
economy, cannot be exercised only with reference to the hardship
suggested by the importers, who had made such improper imports only
for personal gains. The imports in question suffer from the vices of
breach of law as also lack of bona fide and the only proper exercise of
discretion would be of absolute confiscation and ensuring that these
tainted goods do not enter Indian markets. Imposition of penalty on such
importers; and rather heavier penalty on those who have been able to
get some part of goods released is, obviously, warranted.”

6. In the instant case, I find that as per the paragraphs 2.31
(II) and para 2.10 of Foreign Trade Policy 2015-2020 reads as
follows:
"Import of second hand goods other than capital goods is
restricted and importable only against authorisation. Further,
goods which are importable freely without any "restrictions' may
be imported by any person. However, if such imports require an
authorisation, actual user condition is specifically dispensed with
by DGFT.”

In view of the above, the goods are found to be restricted
only. Therefore, I do not find any reason for absolute
confiscation of the goods, since the goods are found to be
restricted as they are second hand goods, the same can be
allowed on redemption fine. I also find that in view of the above
decision of the Hon’ble Supreme Court unless there are specific
reasons specified as to why the goods have to be absolutely
confiscated, the discretion as provided under Section 125 of
Customs Act, 1962 cannot be invoked and I find no specific
reasons provided by the Commissioner (Appeals) in the
impugned order for absolutely confiscating the goods, hence the
same cannot be sustained.

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7. The contention of the appellant that goods are not second
hand goods is also misplaced since they have foregone the
issuance of show-cause notice and also have not appeared for
the personal hearing asking the original authority to decide the
case on merits. Hence, they cannot now argue that the goods
were not second-hand goods since the examination report
clearly establishes that the goods were second hand goods and
they were restricted. Also, I find that the Commissioner
(Appeals) in the impugned order notes that the importer had
claimed that the goods are not liable for confiscation as the
Chartered Engineer had concluded that the goods are not
refurbished or reconditioned. He also observed as follows: “I
have seen the Chartered Engineer report No. NEC/BNG/22-
23/3445 dated 13.05.2022 issued by M/s. Nagson Engineers &
Consultants and noted that ‘the goods are second-hand parts of
capital goods aged above six months with residual life over six
years”. In view of the above, there is no dispute that they are
second-hand goods. Therefore, the original authority was
justified in releasing the goods on payment of redemption fine.
Secondly, I also find that the original authority has imposed
penalty under Section 112(a) but the Commissioner (Appeals)
goes on to enhance the penalty under Section 114AA which is
absolutely misplaced since these two provisions are entirely on
different premises; hence, the same is set aside. Accordingly,
the impugned Order-in-Appeal is set aside by upholding the
order of the original authority.

Appeal is allowed.

(Order dictated and pronounced in Open Court.)



(R. BHAGYA DEVI)
MEMBER (TECHNICAL)
Gb/RV
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