Case Law Details
Sherly Sany Vs C.C, Cochin (CESTAT Bangalore)
It is arbitrary not to give option to pay fine in lieu of confiscation to the person in possession of Gold
While quashing an order of the customs authorities, CESTAT, Bangalore held that the order of confiscation without offering an option to pay fine to the person in possession of gold is arbitrary since the provisions of law provide such an option to the person.
Sherly Sany (Appellant) filed the current appeal being aggrieved by the Order-in-Appeal (“OIO”) No. COC-CUSTM-000-APP-104/2019-20 dated December 19, 2019 passed by the Commissioner of Customs, wherein the issue that arises in the present appeal is whether the impugned order is correct insofar as it relates to the upholding of absolute confiscation ordered by the adjudicating authority without giving an option to the appellant for redemption as per Section 125 of the Customs Act, 1962 (“the Customs Act”) and penalty imposed under Section 112(a) & (b) of the Customs Act.
The Appellant is an individual and argued that the gold did not belong to her but to her neighbor in Kerala and that she had no intention to smuggle the gold. A finding is recorded thereafter that by virtue of the Appellant being not the owner of the gold in question which was not declared before the Customs authorities had rendered the gold liable for absolute confiscation under Section 111 ibid read with Section 3(3) of the Foreign Trade (D&R) Act, 1992. The said authority has also imposed a penalty of Rs. 1,00,000/- under Section 112(a) & (b) of Foreign Trade (D&R) Act, 1992
The Hon’ble CESTAT, Delhi after analyzing the provisions of the law observed that the heading of the relevant Section 125 of the Customs Act makes it clear that an option to pay a fine in lieu of confiscation is available. Further the CESTAT said that an amendment w.e.f. July 12, 1985 is made to include the person from whose possession or custody, the goods have been seized if the owner of such goods is not known who shall be offered an option to pay fine in lieu of confiscation. Therefore, the CESTAT is of the view that it is in the nature of a mandate that the officer shall extend in the case of any other goods an option to the person from whom the gold is seized since the gold is not a prohibited item.
Hence, non-offering of such an option clearly provided by the statute amounts to arbitrariness which cannot be sustained.
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.
FULL TEXT OF THE CESTAT BANGALORE ORDER
The only issue that arises for my consideration is whether the impugned order is correct insofar as it relates to the upholding of absolute confiscation ordered by the adjudicating authority without giving an option to the appellant for redemption as per S. 125 of the Customs Act, 1962 and penalty imposed under Section 112(a) & (b) of the Customs Act, 1962.
2. Heard Shri Sandeep Huilgol, learned advocate for the appellant and Smt C.V. Savitha, learned Superintendent for the respondent, I have gone through the documents placed on record as well as orders/decisions relied on during the course of hearing.
3. In the Order-in-Original dated 09/10/2018 and after granting personal hearing to the appellant, it is recorded that the appellant reiterated that the gold did not belong to her but to her neighbour in Kerala and that she had no intention to smuggle the gold. A finding is recorded thereafter that by virtue of the appellant being not the owner of the gold in question which was not declared before the Customs authorities, had rendered the gold liable for absolute confiscation under Section 111 ibid read with Section 3(3) of the Foreign Trade (D&R) Act, 1992. The said authority has also imposed a penalty of 1,00,000/- (Rupees One Lakh only) under Section 112(a) & (b) ibid. These findings have been upheld in the impugned Order-in-Appeal.
4. Section 125 ibid which is relevant, reads as under:
“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”
The heading of the very Section makes it clear that an option to pay fine in lieu of confiscation is available. Further, an amendment w.e.f. 12/07/1985 is made to include the person from whose possession or custody, the goods have been seized, if the owner of such goods is not known who shall be offered an option to pay fine in lieu of confiscation. Therefore as per the above, it is in the nature of a mandate that the officer shall extend, in the case of any other goods, an option to the person from whom the gold is seized since the gold is not a prohibited item. It appears that the gold is treated as a prohibited item and no option for redemption was offered. Hence, non-offering of such an option clearly provided by the statute amounts to arbitrariness which cannot be sustained.
4.1. The Commissioner (Appeals) in the impugned order, has referred to a decision of Hon’ble Kerala High Court in the case of Commissioner of Customs, Cochin V. Om Prakash Khatri which thereafter was upheld by the Hon’ble Apex Court as reported in 2019 (368) E.L.T. A155 (SC) wherein the following observation is made:
“We are in agreement with the view of the High Court. The appellant was unable to explain the source of the gold which was confiscated. In the circumstances, we find no merit in the civil appeals, which are accordingly dismissed.”
The above decision may not come in the way of a legitimate owner if the source of gold is established. The Order-in-Original does not record as to any such queries or any answer thereto from the appellant, and hence it is necessary in the first place to ascertain if the appellant can explain the sources before the adjudicating authority and if not, then the ratio of the above Supreme Court judgment would apply. An attempt was made before this forum by the appellant by filing a copy of the tax invoice, to which learned DR objected to seriously, contending that firstly the same was not furnished before the lower authorities and secondly, the said document is clearly an afterthought, with no signature of the buyer.
5. In view of the above, I deem it proper to remit this issue back to the file of adjudicating authority who having failed in the first instance to offer redemption option, shall now offer the same to the appellant, and then it is for the appellant to clear the test prescribed by the Apex court The authority shall thereafter pass a proper order after considering the decision of the Kerala High Court/Apex Court in the case of Om Prakash Khatri (supra).
6. The impugned order is accordingly set aside and the matter is restored to the file of adjudicating authority who shall pass a fresh order on the above terms. The appeal is allowed by way of remand.
(Order pronounced in the Open Court on 28/10/2021)
*****
(Author can be reached at info@a2ztaxcorp.com)
Author Bio
