Holding

The owner who redeems confiscated goods by paying a fine under Section 125 is liable to pay customs duty assessed under Section 28 and the accompanying interest under Section 28AB, and the Jagdish Cancer case does not bar such assessment.

Summary

The appellant, Navayuga Engineering, had imported hydraulic piling rigs under an exemption notification but later violated the conditions, leading to confiscation proceedings under Section 124 of the Customs Act. The appellant paid a fine under Section 125 to redeem the goods and contested the liability to also pay customs duty and interest. The Supreme Court examined whether duty becomes payable upon redemption, whether interest under Section 28AB accrues, and clarified the correct ratio of the earlier Jagdish Cancer decision. Relying on the Security Finance case and the 1985 amendment to Section 125, the Court held that duty liability arises under Section 125(2) and must be assessed under Section 28, thereby attracting interest under Section 28AB. It further held that the Jagdish Cancer case does not preclude assessment of duty under Section 28 in such circumstances. Consequently, the Court upheld the High Court’s order and disposed of the appeal.

Issues considered

Whether there is a liability to pay customs duty when confiscated goods are redeemed after payment of fine under Section 125 of the Customs Act, 1962
Whether the liability to pay such duty includes liability to pay interest on delayed payment under Section 28AB of the Customs Act, 1962
What is the true and correct ratio of the decision in Commr. of Customs (Import) v. Jagdish Cancer and Research Centre

Legislation cited

Customs Act, 1962s. 111(o), s. 112, s. 114A, s. 124, s. 125, s. 125(2), s. 28, s. 28AB

Subjects

Custom dutyLiability to pay custom dutyConfiscated goodsFinePayment of fineRedemption of confiscated goods after payment of fineSection 125 of the Customs Act, 1962Liability to pay interest on delayed paymentSection 28AB of the Customs Act, 1962True and correct ratio of the decision in Jagdish Cancer case

Judgment

[2024] 7 S.C.R. 1183 : 2024 INSC 547

M/s Navayuga Engineering Co. Ltd.
v.
Union of India & Anr.
(Civil Appeal No. 1024 of 2014)
23 July 2024
[Pamidighantam Sri Narasimha* and Aravind Kumar, JJ.]

Issue for Consideration
(i) Whether there is a liability to pay customs duty when the
confiscated goods are redeemed after payment of fine under
Section 125 of the Customs Act, 1962; (ii) Whether, the liability to
pay such duty will include the liability to pay interest on delayed
payment under Section 28AB of the Act; (iii) What is the true and
correct ratio of the decision in Jagdish Cancer case.

Headnotes†
Customs Act, 1962 – s.125 – Whether there is a liability to pay
customs duty when the confiscated goods are redeemed after
payment of fine under Section 125 of the Customs Act, 1962:
Held: The owner of goods has a liability to pay customs duty,
even after confiscated goods are redeemed after payment of
fine and other charges under Section 125 of the Act – When
confiscation proceedings are initiated under Section 124 of the
Act, the obligation to pay duty and other charges under Section
125(2) will arise only when the owner of goods exercises the
option to pay fine for redemption of goods and the Department
accepting it. [Paras 8.2, 8.4]
Customs Act, 1962 – Whether, the liability to pay such duty
will include the liability to pay interest on delayed payment
under Section 28AB of the Act:
Held: The text of Section 125(2) clearly provides that, where any
fine in lieu of confiscation of goods is imposed under sub-Section
(1), the owner of such goods shall be ‘liable to any duty and charges
payable with respect to such goods’– The sub-section provides that
the liability to any duty and charges, that are payable, shall be paid
in addition to the fine – Section 28 would come into operation for
assessing and determining the duty and other charges payable with

* Author
1184 [2024] 7 S.C.R.

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respect to goods redeemed under Section 125(2) – Once Section
28 applies for determination of duty obligation arising under Section
125(2), the interest on delayed payment of duty arises under Section
28AB – The said provision obligates payment of interest in addition
to the duty – Thus, the question is answered by holding that the
interest liability under Section 28 AB is also attracted. [Para 10.1]
Customs Act, 1962 – What is the true and correct ratio of the
decision in Jagdish Cancer case:
Held: Jagdish Cancer case is not an authority for the proposition
that when the liability to pay customs duty has occasioned under
Section 125, the calculation, determination or the assessment of
such duty cannot be made under Section 28. [Para 9.6]

Case Law Cited
Commr. of Customs (Import) v. Jagdish Cancer and Research
Centre [2001] Supp. 1 SCR 245 : (2001) 6 SCC 483; Union of
India v. M/s Security and Finance (P) Ltd. [1976] 2 SCR 87 : (1976)
1 SCC 166; Fortis Hospital Ltd. v. Commr. of Customs, Import
[2015] 4 SCR 456 : (2015) 12 SCC 715 – referred to.

List of Acts
Customs Act, 1962.

List of Keywords
Custom duty; Liability to pay custom duty; Confiscated goods; Fine;
Payment of fine; Redemption of confiscated goods after payment
of fine; Section 125 of the Customs Act, 1962; Liability to pay
interest on delayed payment; Section 28AB of the Customs Act,
1962; True and correct ratio of the decision in Jagdish Cancer case.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1024 of 2014
From the Judgment and Order dated 29.08.2009 of the High Court
of Bombay in WP No. 1387 of 2009
Appearances for Parties
Ms. Charanya Lakshmikumaran, Ms. Apeksha Mehta, Ms. Neha
Choudhary, Ms. Umang Motiyani, Ms. Jyoti Pal, Ayush Agrawal, Ms.
Falguni Gupta, M. P. Devanath, Advs. for the Appellant.
[2024] 7 S.C.R. 1185

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

N Venkataraman, A.S.G., V C Bharathi, Ms. Amritha Chandramoulli,
S A Haseeb, Kritagya Kait, Udai Khanna, Mukesh Kumar Maroria,
Advs. for the Respondents.
Judgment / Order of the Supreme Court

Judgment
Table of Contents*

1. Introduction: ........................................................................ 2
2. Facts: .................................................................................. 3
3. Sections 11 and 12 of the Act: ............................................. 6
4. Section 28 of the Act: .......................................................... 7
5. Confiscation of goods under Chapter XIV of the Act:.......... . 8
6. Section 125 of the Act:......................................................... 9
7. Issues:................................................................................. 11
8. Re: Whether there is a liability to pay customs duty, when
the confiscated goods are redeemed after payment of fine
under section 125 of the Act?............................................... 11
9. Re: What is the true and correct ratio of the decision in
Jagdish Cancer case?......................................................... 18
10. Re: Whether the liability to pay such duty will include the
liability to pay interest on delayed payment under section
28AB of the Act?.................................................................. 21
11. Conclusion:......................................................................... 22

Pamidighantam Sri Narasimha, J.
1. Introduction: “The following two questions arose for our consideration;
i) Whether there is a liability to pay customs duty when the confiscated
goods are redeemed after payment of fine under Section 125 of the
Customs Act, 1962?1 ii) Whether, the liability to pay such duty will
include the liability to pay interest on delayed payment under Section
28AB of the Act? Adjudication of these questions brought to light
certain seemingly contradictory decisions on this question, and this

1 Hereinafter referred to as ‘the Act’.
* Ed. Note: Pagination as per the original Judgment.
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requires us to reflect on the correct ratio of the decision of this Court
in Commr. of Customs (Import) v. Jagdish Cancer and Research
Centre.2 Therefore, the third question that fell for our consideration
is; iii) What is the true and correct ratio of the decision in Jagdish
Cancer case?”
1.1. For the reasons to follow, we have held that the owner of goods
has a liability to pay customs duty, even after confiscated goods
are redeemed after payment of fine under Section 125 of the
Act. Furthermore, when confiscation proceedings are initiated
under Section 124 of the Act, the obligation to pay duty and other
charges under Section 125 will arise only when the owner of
goods exercises the option to pay fine for redemption of goods
and the Department accepts it. Liability to pay customs duty in
such confiscation proceedings under Section 125(2) is distinct
from the assessment and determination of duty, which can rise
only under Section 28. The duty liability arising under Section
125(2) must be assessed under Section 28. Thus, we answered
the second question by holding that once Section 28 applies
for determination of duty, interest on delayed payment of duty
under Section 28AB follows. We have also clarified that Jagdish
Cancer case is not an authority for the proposition that when
the liability to pay customs duty arises under Section 125(2),
the calculation, determination or the assessment of such duty
cannot be made under Section 28.
1.2. The facts relevant for consideration of the issues are as follows.
2. Facts: Between 30.11.2003 to 18.04.2007, the appellant availed
the benefit of exemption from payment of customs duty under a
notification dated 01.03.2002, as per which certain self-propelled
hydraulic piling rigs were to be utilised exclusively for the construction
of roads, bridges etc. for NHAI3 and PWD.4 When investigations
revealed that the appellant has violated the import conditions, even
before a show-cause notice was issued, the appellant deposited
Rs.16,29,22,282/- and interest of Rs. 1,84,39,696/- between May,

2 [2001] Supp. 1 SCR 245 : (2001) 6 SCC 483, hereinafter referred to as Jagdish Cancer case.
3 National Highways Authority of India.
4 Public Works Department.
[2024] 7 S.C.R. 1187

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

2007 to August, 2007. Thereafter, a show-cause notice5 was issued
on 23.01.2008 proposing confiscation under Section 111(o) with
respect to goods that were valued at Rs. 48.55 crores involving
duty liability of Rs. 17,37,57,039/- under Section 28, interest under
Section 28AB and penalties under Sections 112(a) and (b) and
114A of the Act. The appellant filed an application under Section
127B of the Act before the Settlement Commission claiming that it
has not violated any condition of the notification dated 01.03.2002
and further claimed that in order to avoid prolonged litigation, they
had accepted the liability subject to further adjustments as may be
approved by the Settlement Commission. The appellant also asserted
that the claim for interest under Section 28AB is impermissible as
the proceedings were initiated with show cause notice under Section
124 and not under Section 28.
2.1. The Settlement Commission upheld the duty liability and
directed it to be recovered. The penalty and fine were waived
in full in view of the finding that this is not a case of brazen
defiance of law and also that there is no contumacious conduct
such as misdeclaration or manipulation of documents to
evade payment of duty. On payment of interest under Section
28AB, the Settlement Commission held that, for violation of
post-importation conditions, imported goods become liable
for confiscation but are redeemable on payment of fine in lieu
of confiscation and the duty becomes payable under Section
125(2). Following the decision of this Court in Jagdish Cancer
case, the Commission held that as Section 28 is inapplicable
in confiscation proceedings, Section 28AB will also not be
attracted. The interest deposited by the appellant was, therefore,
directed to be refunded.
2.2. The writ petitions filed by the Customs Department were allowed
by the order impugned before us. The High Court held that
i) interest can be levied only when there is a substantive provision
enabling it, ii) Section 125 has no such enabling provision, not
even the procedure to assess duty, therefore, iii) assessment
of duty must necessarily be done under Section 28 and
iv) once Section 28 procedure is adopted, application of Section

5 The show cause notice is purportedly issued under Section 124 read with Section 28 of the Act.
1188 [2024] 7 S.C.R.

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28AB is inevitable. The High Court, therefore, distinguished
Jagdish Cancer case and held that interest under Section
28AB is payable even for proceedings under Section 125 and
remanded the matter to the Settlement Commission to calculate
and recover interest under Section 28AB.
2.3. Ms. Charanya Lakshmikumaran and Mr. V C Bharathi appeared
for the Appellant and the Custom Department respectively. They
have not only enhanced our understanding of the subject and
the issue, but have elevated the debate.
3. Sections 11 and 12 of the Act: Section 11 of the Customs Act6 vests
the power in the Central Government to prohibit absolutely or subject
to such conditions, as may be specified in the notification, the import
or export of goods into or out of India. Under Section 45 of the Act,
all imported goods unloaded in a customs area shall remain in the
custody of the customs authorities. The importer shall present a bill
of entry under Section 46 and self-assess the duty under Section
17. Alternatively, under Section 47 the goods are provisionally
assessed by the authority under Section 18 and cleared for home
consumption. Goods are cleared for home consumption only after
the customs officer is satisfied that the goods are not prohibited for
home consumption and the import duty is paid. Duties of customs
shall be levied under Section 127 on goods that are imported into
or exported from India at such rates as are specified under the
Customs Tariffs Act, 1975.
4. Section 28 of the Act: If duties are, i) not levied, ii) not paid, iii)
short levied, iv) short paid, v) erroneously refunded, vi) interest not
paid, vii) interest, part paid or viii) interest erroneously refunded,
a distinct procedure is provided in Section 28 of the Act. This

6 Section 11: Power to prohibit importation or exportation of goods.—(1) If the Central Government
is satisfied that it is necessary so to do for any of the purposes specified in sub-section (2), it may, by
notification in the Official Gazette, prohibit either absolutely or subject to such conditions (to be fulfilled
before or after clearance) as may be specified in the notification, the import or export of goods of any
specified description.
(2) …
(3) …
7 Section 12: Dutiable goods.—(1) Except as otherwise provided in this Act, or any other law for the time
being in force, duties of customs shall be levied at such rates as may be specified under [the Customs
Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or
exported from, India.
[(2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they
apply in respect of goods not belonging to Government.]
[2024] 7 S.C.R. 1189

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

very section provides a slightly varied procedure for recovery in
sub-Section (4) for instances, where duties are not paid due to,
i) collusion, ii) wilful misstatement or iii) suppression of facts. The
distinction in the procedure includes different periods of limitation for
initiation of recovery process. Section 28 to the extent, it is relevant
for us is as under:
“Section 28. Recovery of duties not levied or not
paid or short-levied or short-paid or erroneously
refunded.—(1) Where any [duty has not been levied or not
paid or has been short-levied or short-paid] or erroneously
refunded, or any interest payable has not been paid, part-
paid or erroneously refunded, for any reason other than
the reasons of collusion or any wilful mis-statement or
suppression of facts,—
(a) the proper officer shall, within [two years] from the
relevant date, serve notice on the person chargeable with
the duty or interest which has not been so levied [or paid]
or which has been short-levied or short-paid or to whom
the refund has erroneously been made, requiring him to
show cause why he should not pay the amount specified
in the notice:
[Provided that before issuing notice, the proper officer shall
hold pre-notice consultation with the person chargeable
with duty or interest in such manner as may be prescribed;]
(b) the person chargeable with the duty or interest, may pay
before service of notice under clause (a) on the basis of,—
(i) his own ascertainment of such duty; or
(ii) the duty ascertained by the proper officer,
the amount of duty along with the interest payable thereon
under section 28AA or the amount of interest which has
not been so paid or part-paid.
[Provided that the proper officer shall not serve such show
cause notice, where the amount involved is less than
rupees one hundred.]
(2) […]
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(3) […]
(4) Where any duty has not been [levied or not paid or has
been short-levied or short-paid] or erroneously refunded, or
interest payable has not been paid, part-paid or erroneously
refunded, by reason of,—
(a) collusion; or
(b) any wilful mis-statement; or
(c) suppression of facts,
by the importer or the exporter or the agent or employee of
the importer or exporter, the proper officer shall, within five
years from the relevant date, serve notice on the person
chargeable with duty or interest which has not been [so
levied or not paid] or which has been so short-levied or
short-paid or to whom the refund has erroneously been
made, requiring him to show cause why he should not
pay the amount specified in the notice.”
5. Confiscation of goods under Chapter XIV of the Act: The third
circumstance where duty is collected is when goods are improperly
imported into or exported out of India. Chapter XIV of the Act
provides for confiscation of such goods and imposition of penalties
under Sections 1118 to 114. Section 111(o) is the specific instance
for confiscation of goods for violation of conditions of exemption
from payment of duty after the importation. These goods were not
subjected to levy and collection of duty as they enjoyed the benefit
of exemption. Upon detection of a violation, the legal consequences
must and will follow and Chapter XIV provides for confiscations and
penalties.
5.1. Confiscation of goods is appropriation of property by the revenue.
The right, title and interest in the property, if any, is transferred
and vested in the state under Section 126. Considering the

8 Section 111.Confiscation of improperly imported goods, etc.—The following goods brought from a
place outside India shall be liable to confiscation:—
(a) …(n)
(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the
import thereof under this Act or any other law for the time being in force, in respect of which the
condition is not observed unless the non-observance of the condition was sanctioned by the proper
officer;
[2024] 7 S.C.R. 1191

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

serious consequences of such an action, authority and process
of law mandated Article 300A,9 Parliament prescribed the
procedure under Section 122A, adjudicatory authority under
Section 122, obligated issuance of a show-cause notice under
Section 124 before confiscation.
6. Section 125 of the Act: Alternatively, there is also the option of
redemption of the confiscated goods under Section 125, the statute
specifically empowers the owner of the goods to exercise an
option of legitimising the importation by paying fine, duty and other
charges. The procedure prescribed is simple; i) confiscation must
be authorised, ii) those goods should not be prohibited goods, iii)
the officer shall give an option to redeem the goods in lieu of fine,
iv) the owner or the possessor must exercise the option and v) pay
the fine vi) within 120 days. The purpose and object of Section 125
is to enable a transition from ‘illegality’ to ‘compliance’ of laws. It
grants an opportunity to the owner or possessor of the confiscated
goods to regularise the transaction by payment of fine. This provision
is based on a public policy consideration that balances crime and
punishment and achieves the twin objectives of enabling a citizen
to remain on the right side of law by adopting a prescribed measure
and amicable settlement of disputes through resolution. Section 125
is extracted herein below for ready reference:
“Sec 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 where the proceedings are deemed to be
concluded under the proviso to sub-section (2) of section
28 or under clause (i) of sub-section (6) of that section in

9 Article 300A. Persons not to be deprived of property save by authority of law.— No person shall be
deprived of his property save by authority of law.
1192 [2024] 7 S.C.R.

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respect of the goods which are not prohibited or restricted,
the provisions of this section shall not apply:
[Provided further 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.]
[(3) Where the fine imposed under sub-section (1) is not
paid within a period of one hundred and twenty days
from the date of option given thereunder, such option
shall become void, unless an appeal against such order
is pending. Explanation.—……”]
7. Issues: It is in the above referred ‘context’ that we will now interpret
the ‘text’ of Section 125 to examine the following issues:
i) Whether there is a liability to pay customs duty when
confiscated goods are redeemed after payment of fine
under Section 125 of the Act?
ii) Whether, the liability to pay such duty will include the
liability to pay interest on delayed payment under Section
28AB of the Act?
7.1. While answering these questions, we will have to explain the
decision of this court in Jagdish Cancer case as it is argued to
have ruled that duty in confiscation proceedings is payable only
under Section 125 and not under Section 28, and if Section 28
does not apply, Section 28AB also will not apply. Therefore,
the third question is:
iii) What is the true and correct ratio of the decision in Jagdish
Cancer case?
8. Re: Whether there is a liability to pay customs duty, when the
confiscated goods are redeemed after payment of fine under section
125 of the Act?
[2024] 7 S.C.R. 1193

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

8.1. This issue is no more res integra. The uncertainty about the
liability to impose and collect duties in confiscation proceedings
was resolved in 1976 by a decision of this court in Union of India
v. M/s Security and Finance (P) Ltd.10 while interpreting identical
provisions, as they stood under the Sea Customs Act, 1878.
In this case, the court was dealing with confiscation of goods
that were imported without a proper license which was and is
prohibited by law. Though the goods were confiscated, they were
released to the importer, who exercised the option to redeem
them under Section 183 of the repealed Act. Consequently,
Customs Department sought to collect the duty payable on
such goods. The High Court accepted the importer’s challenge
to imposition and collection of duty on the ground that Section
183 proceedings authorised only a fine and not customs duty.
This court allowed the appeal of the Custom Departments by
drawing a distinction between the power to impose or recover
duty under Section 20 (Section 12/28 of our Act) on one hand,
and the power to impose penalty and/or fine under Section
183 (Section 125 of our Act). This Court held that they are
distinct and operate independently. The relevant portion of the
judgement is as under:
“5. Does the order under Section 183 preclude him
from levying duty under Section 20? This is the short
issue before us. A close study of the scheme of the
relevant provisions, powers and levies discloses a
clear dichotomy which has escaped the attention of
the High Court. Import/Export duty is an obligation
cast by Section 20 of the Act. It is a tax, not a
penalty; it is an innocent levy once the exigible event
occurs; it is not a punitive impost for a contravention
of the law. Confiscation, penalty and fine provided
for under Sections 167 (item 8) and 183 are of the
species of punishment for violation of the scheme
of prohibition and control. Once this distinction and
duality are remembered, the interpretative process
simplifies itself.

10 [1976] 2 SCR 87 : (1976) 1 SCC 166, hereinafter referred to as Security Finance case.
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8. ….In the present case, the Deputy Collector, the
competent authority, has chosen to give the owner
of the goods, the respondent, option to pay, in lieu of
confiscation, a fine. He has not confiscated the goods
and, therefore, Section 184 is not operational in this
context. In short, the obligation under Section 20 is
independent of the liability under Section 183. The
order, dual in character, although clubbed together in
a single document, is therefore valid in entirety. Even
so, the confusion has been caused by the Deputy
Collector failing to keep distinct the two powers and
the two liabilities and thereby leading to avoidable
jumbling.
10. However, we are prepared to gather from the
order under attack two levies imposed in exercise of
two distinct powers, as earlier explained. The import
duty has been made a condition for the clearance
of the goods. This is right and it is impossible to say
that the said payment is not justified by Section 20.
Likewise, the authority when it imposed a fine, was
exercising its power under Section 183. We can
readily see that he did not mean to confiscate the
goods. He only proposed to confiscate and proceeded
to fix a fine in lieu thereof. Non-felicitous and inept
expressions used in the order are perhaps apt to
mislead, but the intendment is clear that what was
done was not confiscation but giving an option to
pay a quantified fine in place of confiscation. The
order was a composite one, when read in the sense
we have explained, and is quite legal. Therefore, we
reach the conclusion that the appellant is entitled to
win and the High Court was in error.”
8.2. The Act must always be read as a whole. Once the liability of
confiscation is withdrawn after the option to pay fine is exercised
and the goods are redeemed, it is natural for the goods to be
subjected to duty. The power and the machinery provisions for
imposition and collection of duty liability exist only under Section
12 and/or Section 28 and not under Section 125. The essence
of the judgment in Security Finance case is in the following
[2024] 7 S.C.R. 1195

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

sentence: “The import duty has been made a condition for the
clearance of the goods. This is right and it is impossible to say
that the said payment is not justified by Section 20”.
8.3. The scope of enquiry in this judgement was limited to answering
whether there is a liability to pay customs duty in confiscation
proceedings when goods are redeemed upon payment of fine.
This judgment is not concerned with instances like in the present
case where goods are imported without payment of duty under
an exemption notification.
8.4. The above referred judicial interpretation has attained statutory
recognition in 1985 when the Parliament introduced subsection
(2) to Section 125 to clarify and declare that the owner of goods,
in addition to payment of fine, shall also be liable to pay duty
and other charges upon exercising the option to pay fine to
redeem goods. Thus, the owner of goods has a liability to pay
customs duty, even after confiscated goods are redeemed after
payment of fine and other charges under Section 125 of the
Act. This is the first principle.
8.5. In our view, this position gleaned from Security Finance case
has remained consistent with amendments introduced to
Section 125 in the year 1985. The customs duty obligation on
once exempted goods, liable to be confiscated for violation
of conditions, arises only after the option to redeem them is
exercised under Section 125. Once the option is exercised, the
acceptance is subject to the conditions specified in Section 125.
The primary condition is payment of fine in lieu of confiscation.
Thus, this duty obligation is inextricably connected to the
option to redeem the confiscated goods. In other words, it is a
precondition for redemption.
8.6. The decision of this court in Fortis Hospital Ltd v. Commr. of
Customs, Import 11 affirms this position. In Fortis Hospital case,
the owner of the confiscated goods chose not to exercise the
option under Section 125. However, the revenue sought to
recover the duty payable under Section 28 of the Act. Holding
that this is impermissible, the court held that:

11 [2015] 4 SCR 456 : (2015) 12 SCC 715, hereinafter referred to as Fortis Hospital case.
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“9…… 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
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 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 actions:
first, relating to confiscating of the goods and second,
pertaining to imposition of penalty. Pertinently, this
action does not deal with payment of import duty at all.
10. 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 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 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 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.
11. 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
[2024] 7 S.C.R. 1197

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

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 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.”
8.7. This judgment also explains the position when the Customs
Department wants to recover duty through ways, other than
confiscation at the Chapter XIV. Explaining the alternative modes
of recovery of customs duty, the court observed as follows;
“16. It is not that the Department is without any
remedy. We have gone through the provisions of
notification No. 64 of 1988 dated 01.03.1988. As
pointed out above, importer would be exempted from
payment of import duty on hospital equipment only
when the conditions contained in the said notification
are satisfied. Some of the conditions, as 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 under the said notification on payment of duty,
independent of the action which is permissible under
Section 124 and Section 125 of the Act. It is also
important to mention that under certain circumstances
mentioned in the notification, the importer can be
asked to execute a bond as well. In those cases,
action can be taken under the said bond when the
conditions contained therein are violated. Therefore,
if the Department wanted the Institute to pay the 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 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
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payable under Section 125(2) of the Act. But when
such an option was not exercised, it could have
taken separate and independent action by issuing
a show-cause notice to the effect that the Institute
had violated the terms of exemption notification and
therefore, was liable to pay duty.”
8.8. We can thus conclude the second principle that, when
confiscation proceedings are initiated under Section 124 of the
Act, the obligation to pay duty and other charges under Section
125(2) will arise only when the owner of goods exercises the
option to pay fine for redemption of goods and the Department
accepting it.
8.9. An important principle that needs to be recognised is that, the
customs duty obligation in confiscation proceedings does not
occasion either under Section 12 or 28. It has arisen because
of the option available and exercised under Section 125. This
obligation should not be confused with the method and procedure
by which that customs duty is assessed and determined, which
is provided under Section 28. It is in this context that we need
to consider and explain the decision of this court in Jagdish
Cancer case.
9. Re: What is the true and correct ratio of the decision in Jagdish
Cancer case?
9.1. The real contest in this case is about the correct ratio of the
judgement in Jagdish Cancer case. According to the appellant, as
this judgment holds that duty liability in confiscation proceedings
arises because of Section 125 and not Section 28, there is
no liability to pay interest on delayed payments under Section
28AB. The facts of this case are necessary to be recounted for
a clear understanding of the ratio of this decision. In this case,
the department issued a show-cause notice under Section 124
of the Customs Act demanding customs duty and proposed
confiscation under Section 111(o) and penalty under Section 112.
9.2. The importer contended that as there is no notice under Section
28, the demand and collection of duty are impermissible. We
will extract the submission as recorded by this court in para 9
of the judgment, as it is important to know what was argued
and what was decided:
[2024] 7 S.C.R. 1199

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

“9. […] Section 28 of the Act which falls in Chapter V
provides for notice for payment of duties which has
been demanded by the notice in this case. Therefore,
it is submitted on behalf of the Centre that demand of
customs duty and the order for payment of the same
is relatable to only Section 28(1) of the Customs Act,
as also found by the CEGAT. That being the position,
the notice was beyond time and not by a competent
officer authorised to issue the same. The argument,
as advanced, though seems to be attractive but on
scrutiny, we find no merit in it […]”
9.3. On the other hand, the Department defended its position by
submitting as follows:
“8. […] It is submitted that the copy of the notice,
as annexed, does not mention Section 28(1) of the
Customs Act, in any case if it is taken to be there,
as contended, that would make no difference. The
submission is that sub-section (2) of Section 125 of
the Customs Act provides that where any fine in lieu
of confiscation of goods is imposed, the importer shall
also, in addition, be liable to any duty and charges
payable in respect of such goods.”
9.4. It is in the context of the above-referred submissions, that the
court considered the fact that an option under Section 125
was given and it was in fact exercised. Thus, the liability to
pay customs duty arose under Section 125(2) and therefore,
the court held that the separate notice under Section 28 is not
required. This is exactly what the court ruled by holding:
“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 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
charges payable in respect of such goods” […]”.
9.5. Again, in the same paragraph, the court notes that the occasion,
origin, or the circumstance in which the liability to pay duty arose in
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the confiscation proceedings under Section 125 (2). In this case,
the court was considering and rejecting the submission made on
a misplaced premise that the proceedings have originated under
Section 28. Payment of customs duty has not arisen either
under Section 12 or Section 28, it has arisen because of Section
125(2). Therefore, a notice under Section 28 is not necessary.
This is how the judgment needs to be understood, and it is in
this perspective that the court has in fact rejected the importer’s
objection to the payment of duty.
“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 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 charges payable in
respect of such goods.” A reading of sub-section (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 payment 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) of Section 125 of the Customs Act. It
would not attract Section 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 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 Customs Act.”
9.6. We conclude by holding that Jagdish Cancer case is not
an authority for the proposition that when the liability to pay
customs duty has occasioned under Section 125, the calculation,
determination or the assessment of such duty cannot be made
under Section 28.
[2024] 7 S.C.R. 1201

M/s Navayuga Engineering Co. Ltd. v. Union of India & Anr.

10. Re: Whether the liability to pay such duty will include the liability to
pay interest on delayed payment under section 28AB of the Act?
10.1. The text of Section 125(2) clearly provides that, where any fine
in lieu of confiscation of goods is imposed under sub-Section
(1), the owner of such goods shall be ‘liable to any duty and
charges payable with respect to such goods’. The sub-section
provides that the liability to any duty and charges, that are
payable, shall be paid in addition to the fine. We have held
that Section 28 would come into operation for assessing and
determining the duty and other charges payable with respect
to goods redeemed under Section 125(2). Once Section 28
applies for determination of duty obligation arising under Section
125(2), the interest on delayed payment of duty arises under
Section 28AB. The said provision obligates payment of interest
in addition to the duty. We thus answer the last issue by holding
that the interest liability under Section 28 AB is also attracted.
11. Conclusion: For the reasons mentioned hereinabove, we uphold the
decision of the High Court in Writ Petition Lodging No. 1387 of 2009
dated 29.08.2009 and dispose of the present Civil Appeal No. 1024
of 2014. No order as to costs.

Result of the case: Appeal disposed of.

†
Headnotes prepared by: Ankit Gyan