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Case Law Details

Case Name : Manoj Kumar Sharma Vs Union of India (Rajasthan High Court)
Appeal Number : Civil Writ Petition No. 12001/2020
Date of Judgement/Order : 17/02/2022
Related Assessment Year :

Manoj Kumar Sharma Vs. Union of India (Rajasthan High Court)

Having said that, there are two areas in which we find that revisional authority has committed an error. First is of enhancing personal penalty under Section 112 of the Customs Act to Rs.40 lacs. We may recall that the adjudicating authority had imposed penalty under Section 112 of the Act which was reduced to Rs.5 lacs by the Commissioner of Appeals. In a revision petition filed by the Government of India the revisional authority could have restored the order of adjudicating authority but could not have enhanced the penalty over and above what was imposed by the adjudicating authority without specific show-cause notice having been issued to the petitioner which in the present case was not done.

The second area of concern is applicability of Section 125 of the Act. Sub-section (1) of Section 125 provides that whenever confiscation of any goods is authorised by the Act the officer adjudging it may in the case of any goods, the importation or exportation whereof is prohibited under the Act or under any other law for the time being in force and shall in 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. This provision thus comes in two parts. The first part covers the cases where importation or exportation of the goods is prohibited under the Act. In such a case discretion is given to the competent authority to offer redemption fine in lieu of confiscation. The second part covers a case where importation or exportation of the goods is not prohibited. In such a case there is a mandate to offer redemption fine in lieu of confiscation as the officer thinks fit. In the present case all three authorities have provided for absolute confiscation of the goods without any facility of payment of redemption fine. This in our view was not correct.

Section 112 of the Act pertains to penalty for improper importation of goods. Section 125 on the other hand pertains to option to pay fine in lieu of confiscation. As noted sub-section (1) of Section 125 comes in two parts. Whenever confiscation of goods is authorized under the Act, as per sub-section (1) of Section 125 the adjudicating officer has a discretion to offer redemption fine in lieu of confiscation in case of goods importation or exportation whereof is prohibited. In all other cases there is a statutory mandate on the adjudicating officer to offer such redemption fine. If the interpretation of Section 112 and 125(1) is not reconciled as above, this latter portion of sub-section (1) of Section 125 which covers all cases except where the importation or exportation of the goods is prohibited, would become otiose.

Learned counsel for the respondents however heavily relied on the decision of Supreme Court in case of Om Prakash Bhatia Vs. Commissioner of Customs, Delhi reported in AIR 2003 SC 3581. Our attention was drawn to paragraph 9 and 10 of the judgment. However in our view this decision does not hold anything contrary to what we have observed in connection with Section 125 of the Customs Act. In fact it was a case in which the Supreme Court had confirmed the view of the customs authority of offering redemption fine in lieu of confiscation.

FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT

1. The petitioner has challenged a revisional order dated 30.12.2019 passed by the Government of India, Ministry of Finance by which revisional authority dealt with two revision petitions, one filed by the petitioner and other filed by the respondent-Customs Department. Brief facts are as under:-

2. The petitioner travelling from Dubai landed at Jaipur International Airport on 23.09.2012. He was carrying a handbag with him. According to the Customs Department he did not declare on arrival that he was carrying large quantity of gold bars in his handbag and also foreign currency. Upon finding the movement of the petitioner suspicious the customs officers posted at airport kept a vigil and in presence of panchas carried thorough search of his handbag upon which it was found that in his cover for glasses in two plastic bags he was carrying 6 and 4 gold biscuits of 10 tolas each. It was further found that he was carrying 60 more such gold biscuits of 10 tolas each in plastic bags covered by canon camera case. He was also carrying foreign currency in UAE Dirham valued at Rs.16,02,232/-. The punchnama was drawn on 23.09.2012 which records all these details and further records that the passenger had submitted a declaration form to the custom authorities in which he had not made a declaration of any of these goods.

3. Based on these facts a show-cause notice came to be issued to the petitioner why the seized articles i.e. gold and currency should not be confiscated and fine should not be imposed upon him in terms of the provisions of the Customs Act, 1962. The adjudicating authority after giving opportunity of hearing to the petitioner passed an order dated 11.12.2013. In this order he made absolute confiscation of 70 gold biscuits weighing 8164.800 gms valued at Rs.2,51,89,735/-. He also confiscated Indian currency of Rs.20,000/- and draft of Rs.12 lacs for contravention of the Foreign Exchange Management (Export and Import of currency) Regulations, 2000. He imposed a penalty of Rs.30 lacs. He imposed further penalty of Rs.10 lacs for mis-declaration of the contents of the baggage.

4. Against the said order in original the petitioner preferred an appeal. The Commissioner of Appeals by his order dated 23.02.2015 confirmed the absolute confiscation of gold but reduced the penalty to Rs.5 lacs. Penalty under Section 114AA of the Customs Act was waived.

5. Against the said order of the appellate authority petitioner had preferred the revision petition. The department had also filed a revision petition challenging the reduction of fine by the Commissioner of Appeals under Section 112(a) of the Act and for waiver of fine under Section 114AA of the said Act. After one round of remand the revisional authority passed the impugned order in which the absolute confiscation of gold biscuits was confirmed. A penalty of Rs.40 lacs was imposed under Section 112(a) of the Customs Act. Waiver of penalty under Section 114AA was upheld. Revisional authority disposed of both the revision petitions by the impugned order.

6. Appearing for the petitioner learned counsel Mr. Javed Khan vehemently contended that power of confiscation was wrongly exercised. The petitioner had not breached any of the provisions of the Customs Act. Gold is not a prohibited or even a restricted item for import. The petitioner had no intention of concealing the import. The findings of the authorities below are erroneous and contrary to the documents on record. In any case redemption fine in lieu of the confiscation should have been offered. It was argued that revisional authority had enhanced penalty under Section 112(a) of the Customs Act without show-cause notice to the petitioner.

7. On the other hand learned counsel Mr. Sandeep Pathak appearing for the department opposed the petition contending that the petitioner had made a blatant attempt to smuggle gold. The order of confiscation is therefore correctly passed. In facts of the case redemption fine was rightly not offered.

8. Having heard learned counsel for the parties and having perused the documents on record what clearly emerges is that all the three authorities have concurrently come to the conclusion that petitioner had made a clear attempt of smuggling gold biscuits to evade payment of duty. As noted, as per the punchnama the petitioner had made a declaration to the customs officer however in which there was no indication of him carrying sizable quantity of gold. It was only when customs officer carried out a thorough search of his handbag that several gold biscuits were found concealed in spectacle case and camera case. These findings are thus supported by material on record. In writ jurisdiction the High Court would not interfere with findings of facts unless it is shown that the findings are perverse.

9. Proceeding on such basis, we may examine the legal position. Section 2(33) of the Customs Act defines the term ‘prohibited goods’ as to mean any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but would not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. No notification issued by the Government of India is produced or brought to our notice which either prohibits import of gold or even makes the import subject to conditions. Import of an item which is not prohibited or restricted but is subjected to import duty and in which case duty may not have been paid is vastly different from categorising the item as prohibited or restricted so as to fall within the ambit of Section 2(33) of the Customs Act.

10. In essence if the petitioner had made a declaration of import of gold and offered the same to the custom duty, there is no provision under which he would have been prevented from doing so. Be that as it may as per the facts arrived at by the authorities below the petitioner intentionally made no such disclosure and this was for the purpose of evading duty.

CESTAT explains Provision of redemption fine in lieu of confiscation under Customs

11. Section 111 of the Act pertains to confiscation of improperly imported goods etc. and provides that following goods brought from a place outside India shall be liable to confiscation. This Section contains several sub-clauses. Clause (l) of Section 111 pertains to any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under the Act or in case of bagage in the declaration made under Section 77. Section 77 in turn requires the owner of any baggage to make a declaration of its contents to a proper officer for the purpose of its clearing. The case of the petitioner would thus squarely cover under clause (l) of Section 111 and goods were liable to confiscation.

12. Section 112 of the Act provides for imposition of penalty for improper importation of goods etc. This provision inter alia provides that any person who in relation to any goods does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111 or abets the doing or omission of such an act shall be liable to penalty not exceeding the value of goods or Rs.5,000/- whichever is greater.

13. The decision of the authorities to confiscate the goods and impose personal penalty was thus fully justified. Learned counsel for the petitioner is not correct in contending that since the importation of gold was not complete, the custom authorities could not have confiscated the goods or imposed any penalty. As noted the mischief in the present case falls squarely under Section 111 read with Section 112 of the Act. A similar issue had come up before the Division Bench of Gujarat High Court in case of Bhargavraj Rameshkumar Mehta Vs. Union of India and Ors. decided on 22.01.2018 reported in 2018(361) ELT 260 (Guj.) It was a case in which petitioner a Non Resident Indian had made imports declaring it to be zinc ingots. The cargo arrived at Mundra port. The customs department intercepted the cargo and on further search found that there was systematic attempt to smuggle gold concealed in such ingots. It was argued that the import of gold was not prohibited. It was not even restricted merely because an attempt to smuggle the gold was made the import of gold per se would not become prohibited. It was therefore contended that maximum penalty that could be imposed in terms of clause (2) of Section 112 was 10% of the duty sought to be evaded. This contention was negatived by the Division Bench making following observations:-

“15. We may recall, the contention of the counsel for the petitioner in this respect was that the gold at the relevant time was freely importable. Import of gold was not prohibited. Case of the petitioner would therefore, fall under second clause of section 112 and penalty not exceeding 10% of the duty sought to be evaded would be the maximum penalty imposable. Such contention shall have to be examined in light of the statutory provisions noted above. As noted, section 111 of the Act provides for various eventualities in which the goods brought from a place outside India would be liable for confiscation. As per clause (d) of section 111, goods which are imported or attempted to be imported or are brought within the Customs quarters for import contrary to any prohibition imposed by or under the Act or any other law for the time being in force, would be liable for confiscation. Similarly, for dutiable or prohibited goods found concealed in any manner in any conveyance would also be liable to confiscation. As per section 2(39) the term ‘smuggling’ would mean in relation to any goods, any act or omission which will render such goods liable to confiscation under section 111 or section 113. Thus, clearly section 111 of the Customs Act prohibits any attempt at concealment of goods and bringing the same within the territory of India without declaration and payment of prescribed duty. Term ‘prohibited goods’ as defined under section 2(33) means any goods, the import or export of which is subject to any prohibition under the Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. This definition therefore, comes in two parts. The first part of the definition explains the term ‘prohibited goods’ as to mean those goods, import or export of which is subject to any prohibition under the law. The second part is exclusionary in nature and excludes from the term ‘prohibited goods’, in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. From the definition of term ‘prohibited goods’, in case of goods, import of which is permitted would be excluded subject to satisfaction of the condition that conditions for export have been complied with. By necessary implication therefore in case of goods, import of which is conditional, would fall within the definition of prohibited goods if such conditions are not complied with.

16. Further clarity in this respect would be available when one refers to the term ‘dutiable goods’ as to mean any goods which are chargeable to duty and on which duty has not been paid. We refer to this definition since section 112 makes the distinction in respect of goods in respect of which any prohibition is imposed and dutiable goods other than prohibited goods. When clause (ii) of section 112 therefore, refers to dutiable goods other than prohibited goods, it shall necessarily have the reference to the goods, import of which is not prohibited or of which import is permissible subject to fulfillment of conditions and such conditions have been complied with. Condition of declaration of dutiable goods, their assessment and payment of customs duties and other charges is a fundamental and essential condition for import of dutiable goods within the country. Attempt to smuggle the goods would breach all these conditions. When clearly the goods are sought to be brought within the territory of India concealed in some other goods which may be carrying no duty or lesser duty, there is clear breach of conditions of import of goods though per se import of goods may not be prohibited.

17. In an elaborate judgment, Division Bench of Madras High Court in case of Malabar Diamond Gallery Ltd. (supra) has taken such a view. Interpretation of section 112 of the Customs Act in context of prohibition for import of goods came up for consideration before the Court. In the said case, the department had prior intelligence that the petitioner’s consignment of gold jewellery to be smuggled into the country was to arrive from Singapore. On the basis of such information, the imported consignment of the petitioner was intercepted. The gold jewellery of foreign origin was seized. The authorised representative of the petitioner company also admitted that such jewellery was of Singapore origin and that the same was smuggled into India without the payment of customs duty. The petitioner approached the High Court of Madras seeking provisional release of such gold jewellery on suitable conditions. One of the issues which arose before the High Court was of applicability of section 112 of the Customs Act. On behalf of the petitioner it was argued that the gold jewellery was not an item whose import was prohibited and that therefore, the goods were not liable to be confiscated and consequently, cannot be seized. For the petitioner in the context of definition of prohibited goods, it was contended that import of gold was not prohibited. The Court held that the expression “prohibition under this Act” used in section 2(33) of the Customs Act has to be examined bearing in mind other provisions of the said Act. The Court referring to several judgments of the Supreme Court including in case of Om Prakash Bhatia v. Commissioner of Customs, Delhi reported in 2003(6) SCC 161 and in case of Sheikh Mohd. Omer v. Collector of Customs, Calcutta and others reported in 1970 (2) Supreme Court Cases 728 held as under :

“47. Smuggling in relation to any goods is forbidden and totally prohibited. Failure to check the goods on the arrival at the customs station and payment duty at the rate prescribed, would fall under the second limb of section 112(a) of the Act, which states omission to do any act, which act or omission, would render such goods liable for confiscation under Section 111 of the Act. Sub section (b) to Section 111 of the Act covers the persons involved.

xxxx

54. If the contentions of the appellant have to be accepted, then all the goods seized and liable for confiscation have to be provisionally released, in terms of Section 110(1A) of the Customs Act, 1962, and in such circumstances, the very object of the Customs Act, 1962, would be defeated. Going through the notifications, we are of the view that the abovesaid notifications do not confer any absolute right to the appellant, to seek for provisional release of gold, alleged to have been smuggled. At this juncture, it is relevant to extract Paragraphs 41 and 42 in the show cause notice, dated 16.09.2013, issued by the Directorate of Revenue Intelligence, as to how, the gold came to be seized and liable for confiscation…. “

It was thus held that the authorities below were therefore justified in invoking powers under Section 111 and 112 of the Customs Act.

14. Having said that, there are two areas in which we find that revisional authority has committed an error. First is of enhancing personal penalty under Section 112 of the Customs Act to Rs.40 lacs. We may recall that the adjudicating authority had imposed penalty under Section 112 of the Act which was reduced to Rs.5 lacs by the Commissioner of Appeals. In a revision petition filed by the Government of India the revisional authority could have restored the order of adjudicating authority but could not have enhanced the penalty over and above what was imposed by the adjudicating authority without specific show-cause notice having been issued to the petitioner which in the present case was not done.

15. The second area of concern is applicability of Section 125 of the Act. Sub-section (1) of Section 125 provides that whenever confiscation of any goods is authorised by the Act the officer adjudging it may in the case of any goods, the importation or exportation whereof is prohibited under the Act or under any other law for the time being in force and shall in 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. This provision thus comes in two parts. The first part covers the cases where importation or exportation of the goods is prohibited under the Act. In such a case discretion is given to the competent authority to offer redemption fine in lieu of confiscation. The second part covers a case where importation or exportation of the goods is not prohibited. In such a case there is a mandate to offer redemption fine in lieu of confiscation as the officer thinks fit. In the present case all three authorities have provided for absolute confiscation of the goods without any facility of payment of redemption fine. This in our view was not correct. This is exactly what the Andhra Pradesh High Court has held in case of Shaik Jamal Basha Vs. Government of India reported in 1997 (91) ELT 277 (AP). The Division Bench of the High Court in the context of Section 125 of the Customs Act had held as under:-

“3. But, all the same, we find the petitioner is entitled to a different relief. The order of confiscation is made under Section 111 of the Customs Act, 1962 on account of concealment. Section 125 requires that whenever confiscation of any goods is authorised by the Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under the 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 an option to pay in lieu of confiscation such fine as the said officer thinks fit. Rule 9 of the Baggage Rules, 1978 framed under Section 79(2) of the Customs, Act, 1962 lists Gold in any form other than ornaments in Appendix B of the Rules as articles which shall not be imported free of duty. Hence gold in the form other than ornaments is entitled to be imported on payment of duty. Attempt to import gold unauthorisedly will thus come under the second part of Section 125(1) of the Act where the adjudging officer is under mandatory duty to give option to the person found guilty to pay (fine) in lieu of confiscation. Section 125 of the Act leaves option to the officer to grant the benefit or not so far as goods whose import is prohibited but no such option is available in respect of goods which can be imported, but because of the method of importation adopted, become liable for confiscation…….. “

16. This view may seem incongruent with the view expressed by Gujarat High Court in case of Bhargavraj Rameshkumar Mehta (supra) which we have also followed in this judgment but flavours of Section 112 and 125 of the Customs Act are entirely different. Section 112 of the Act pertains to penalty for improper importation of goods. Section 125 on the other hand pertains to option to pay fine in lieu of confiscation. As noted sub-section (1) of Section 125 comes in two parts. Whenever confiscation of goods is authorized under the Act, as per sub-section (1) of Section 125 the adjudicating officer has a discretion to offer redemption fine in lieu of confiscation in case of goods importation or exportation whereof is prohibited. In all other cases there is a statutory mandate on the adjudicating officer to offer such redemption fine. If the interpretation of Section 112 and 125(1) is not reconciled as above, this latter portion of sub-section (1) of Section 125 which covers all cases except where the importation or exportation of the goods is prohibited, would become otiose.

17. Learned counsel for the respondents however heavily relied on the decision of Supreme Court in case of Om Prakash Bhatia Vs. Commissioner of Customs, Delhi reported in AIR 2003 SC 3581. Our attention was drawn to paragraph 9 and 10 of the judgment. However in our view this decision does not hold anything contrary to what we have observed in connection with Section 125 of the Customs Act. In fact it was a case in which the Supreme Court had confirmed the view of the customs authority of offering redemption fine in lieu of confiscation.

18. In the result petitions is disposed of with following directions:-

(i) The fine of Rs.40 lacs under Section 112 of the Customs Act imposed by revisional authority is reduced to Rs.30 lacs.

(ii) The issue of fixing the redemption fine in lieu of confiscation requires to be decided. To avoid further delay let this issue be decided by the revisional authority. The proceedings are placed back before the said authority for the limited purpose of deciding the redemption fine that the petitioner may pay if he wishes to avoid absolute confiscation of the seized gold. Fresh order shall be passed preferably within four months from today.

19. All pending applications also stand disposed of.

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