Customs Act, 1962 Section 125 — Option to pay fine in lieu of confiscation

Type Section

Legislation Customs Act, 1962

Amendments 5

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Plain-English Explanation

Plain English Summary

Overview

Section 125 of the Customs Act, 1962, grants the adjudicating officer the power to offer an option to the owner of confiscated goods to pay a fine in lieu of confiscation. This provision aims to provide an alternative to the complete loss of goods due to confiscation, balancing revenue concerns with the interests of the owner.

Who Does This Apply To?

This section primarily affects:

Owners of goods that are subject to confiscation proceedings under the Customs Act, 1962.
Persons from whose possession or custody the goods were seized, in cases where the owner is unknown.
Adjudicating officers who are authorized to order confiscation of goods.

How It Works

The process under Section 125 generally unfolds as follows:

Confiscation Order Authorized: The adjudicating officer determines that goods are liable for confiscation under the Customs Act or any other applicable law.
Option to Pay Fine Offered: The officer shall offer the owner (or the person from whose possession the goods were seized if the owner is unknown) the option to pay a fine in lieu of confiscation, except if the goods are prohibited under the Act or any other law. In case the goods are prohibited, the officer may offer such an option.
Fine Determination: The adjudicating officer determines the amount of the fine, considering the nature of the offense and the value of the goods. The maximum fine cannot exceed the market price of the goods, less any applicable import duty in the case of imported goods.
Payment of Duty and Charges: In addition to the fine, the owner is also liable to pay any outstanding duty and other charges applicable to the goods.
Payment Deadline: The owner must pay the fine within 120 days from the date the option was given, unless an appeal against the confiscation order is pending.
Goods Released: Upon payment of the fine, duty, and other charges, the confiscated goods are released to the owner.

Important Conditions & Exceptions

Condition 1: The fine imposed must not exceed the market value of the confiscated goods, less the duty chargeable in case of imported goods. This ensures that the fine is proportionate to the value and prevents excessive penalties.
Condition 2: The owner remains liable for all applicable duties and charges on the goods, even after paying the fine in lieu of confiscation.
Exception: If proceedings against non-prohibited or non-restricted goods are concluded under Section 28(2) proviso or Section 28(6)(i), no fine can be imposed under Section 125. This exception prevents the imposition of fines where certain procedural requirements under Section 28 (related to the determination of duty) are met.

Practical Example

Imagine a business, "ImportEx Inc.," imports a consignment of electronic gadgets. Customs officials discover that the declared value of the goods is significantly lower than the actual market value, leading to a potential evasion of customs duty. The adjudicating officer issues a notice proposing confiscation of the goods. The market value of the gadgets is determined to be INR 500,000, and the applicable duty is INR 100,000.

Under Section 125, the adjudicating officer offers ImportEx Inc. the option to pay a fine in lieu of confiscation. The officer determines a fine of INR 350,000. ImportEx Inc. accepts the offer and pays the fine of INR 350,000 plus the unpaid duty of INR 100,000. The goods are then released to ImportEx Inc.

Key Amendments

No major amendments since enactment.

(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,¹ 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 respect of the goods which are not prohibited or restricted, ²no such fine shall be imposed³:²

Provided further that²no such fine shall be imposed³:

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.⁴

(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 .-For removal of doubts, it is hereby declared that in cases where an order under sub-section (1) has been passed before the date** on which the Finance Bill, 2018 receives the assent of the President and no appeal is pending against such order as on that date, the option under said sub-section may be exercised within a period of one hundred and twenty days from the date on which such assent is received.⁵

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Frequently Asked Questions

What is the 'fine in lieu of confiscation' under Section 125 of the Customs Act, 1962, and when does it apply?

Section 125 allows customs officers to offer the owner (or the person from whose possession goods were seized) the option to pay a fine instead of having the goods confiscated. This applies when goods are liable for confiscation under the Customs Act. For goods where import or export is prohibited, offering this option is at the officer's discretion; for other goods, it's mandatory.

How is the amount of the fine in lieu of confiscation determined under Section 125?

The fine is determined by the adjudicating officer, but cannot exceed the market price of the confiscated goods. In the case of imported goods, the fine should also be reduced by the amount of duty chargeable on those goods, as stated in Section 125(1).

Are there any instances where a fine in lieu of confiscation cannot be imposed under Section 125?

Yes. According to the proviso to Section 125(1), if proceedings regarding non-prohibited or restricted goods are concluded under specific provisions of Section 28(2) or 28(6), then no fine in lieu of confiscation can be imposed.

If I choose to pay the fine in lieu of confiscation, am I still liable for other charges?

Yes. Section 125(2) explicitly states that if you opt to pay the fine, you are still liable for any applicable duties and charges on the goods, in addition to the fine itself.

What is the time limit to pay the fine imposed in lieu of confiscation under Section 125, and what happens if I miss the deadline?

Section 125(3) specifies a period of one hundred and twenty days from the date the option to pay the fine is given. If the fine is not paid within this period, the option becomes void, unless an appeal against the order is pending.

If my goods are confiscated, can I demand the option to pay a fine in lieu of confiscation under Section 125?

The option to pay a fine instead of confiscation is not always guaranteed. While customs officers *shall* offer this option for goods that are not prohibited or restricted, they have discretion in the case of goods whose import or export is prohibited or restricted under the Customs Act or any other law.

How does the proviso to Section 115 affect the fine imposed under Section 125?

Section 125(1) states that the fine cannot exceed the market value of the goods after subtracting the chargeable import duty, and it's without prejudice to the proviso to Section 115(2). This proviso typically deals with situations involving fraudulent or illegal activities where higher penalties can be imposed notwithstanding the value of the goods.

Key Conditions & Requirements

Condition	Details
Option for fine instead of confiscation	Officer can allow payment of a fine instead of confiscating goods. Mandatory for non-prohibited goods; discretionary for prohibited goods.
Eligible Parties	The option is given to the owner of the goods or, if unknown, the person from whose possession the goods were seized.
Maximum Fine Amount	The fine cannot exceed the market price of the confiscated goods, less the duty chargeable on imported goods.
Liability for Duty and Charges	In addition to the fine, the owner/relevant person is liable for any duty and charges payable on the goods.
Time Limit for Fine Payment	The fine must be paid within 120 days from the date the option is given; otherwise, the option becomes void unless an appeal is pending.
Exemption for Specific Cases	If proceedings concluded under Section 28(2) proviso or Section 28(6)(i) regarding non-prohibited/restricted goods, no such fine shall be imposed.

Amendment History

12345Superscript numbers in the text mark amended passages — click them to jump here. Click "↑ view in text" to jump back.

1985↑ view in text

Inserted by the Customs (Amendment) Act, 1985 (80 of 1985), section 9(a) (w.e.f. 27.12.1985).

2018↑ view in text

Substituted by section 95(i)(w.e.f. 29-3-2018) of the Finance Act, 2018 (13 of 2018) for "Provided that".

2019↑ view in text

Substituted (w.e.f. 1-8-2019) s. 78 of the Finance (No.2) Act, 2019 (23 of 2019).