Confiscation of immovable property without prior notice is invalid: CESTAT Mumbai

Prakash Mistry Vs Commissioner of Customs Air Special Cargo (CESTAT Mumbai)

Introduction: The case of Prakash Mistry versus the Commissioner of Customs Air Special Cargo, as heard by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Mumbai, revolves around the controversial issue of confiscating immovable property without prior notice. This article provides an in-depth analysis of the case and highlights the critical aspects of the CESTAT’s ruling.

1. Context and Background: This section introduces the case and sheds light on the central concern—confiscation of immovable property without notice. It outlines the appellant’s challenge against the order of the Additional Commissioner of Customs, highlighting procedural irregularities.

2. Seizure of Gold and Investigations: The article briefly discusses the sequence of events leading to the case. It mentions the interception of a consignment containing smuggled gold and the subsequent investigations by the Directorate of Revenue Intelligence (DRI).

3. Involvement of Mr. Mangesh Prakash Mistry: This section provides details about Mr. Mangesh Prakash Mistry’s involvement in the case, including his admissions related to property ownership funded through smuggling activities.

4. Legal Provisions and Procedures: The article elaborates on the relevant legal provisions and procedures under the Customs Act, 1962. It focuses on Section 121 and the necessity of issuing a notice for confiscating property.

5. Appellant’s Arguments: The appellant’s stance is presented, emphasizing the following key points:

• Lack of proper notice regarding the intention to confiscate the property.
• The property should not be considered “sale proceeds” of smuggled goods.
• The failure to examine the intent behind the term “sale” in Section 121.
• An incorrect ruling on property ownership by the first appellate authority.

6. Revenue’s Response: This section outlines the Revenue’s counterarguments, citing precedents and corroborative evidence related to the source of funding for the property’s purchase.

7. CESTAT’s Decision and Analysis: The CESTAT’s ruling is analyzed in depth, emphasizing the following aspects:

• The importance of issuing notice before confiscating property.
• The consequences of a lack of notice on the integrity of adjudication proceedings.
• The distinction between legality of property ownership and the legal requirement of notice issuance.
• The potential for misuse of property confiscation without notice.

8. Conclusion: The article concludes by summarizing the CESTAT’s decision to set aside the impugned order. It clarifies that the ruling is based on the legal necessity of issuing notice and does not pass judgment on the source of funds for property purchase.

The case of Prakash Mistry versus the Commissioner of Customs Air Special Cargo highlights the significance of adhering to legal procedures, particularly the issuance of notice, before confiscating immovable property. This ruling serves as a reminder of the importance of upholding the integrity of adjudication proceedings and preventing potential misuse of legal provisions for property confiscation.

FULL TEXT OF THE CESTAT MUMBAI ORDER

This appeal of Shri Prakash Mistry is hinged upon the scope and extent to which section 121 of Customs Act, 1962 may be invoked against property that ostensibly had no connection with any activity within the purview of Customs Act, 1962 and arises from proceedings before Commissioner of Customs (Appeals), Mumbai-III initiated by the appellant herein, without success, against order of Additional Commissioner of Customs (Import), Air Cargo Complex (ACC), Chhatrapati Shivaji Maharaj International Airport (CSMIA), Mumbai confiscating immoveable property belonging to the appellant. The impugned order¹ had dismissed the plea of the appellant on several counts, including procedural.

2. The facts, briefly, are that, acting on information, officers of Directorate of Revenue Intelligence (DRI) intercepted a consignment, covered by airway bill no. 176-86657502/24.12.2017, for carrying on Emirates Airlines (EK 504) of 25^th December 2017 consigned to M/s Shankar Enterprises by M/s Trans Arabia General Trading LLC, Ajman, UAE at Mumbai International Airport on arrival on board and, on examination, was found to contain, among the clamps, nuts and bolts in six packages weighing 108 kgs, ‘washers’ made of gold weighing 10.950 kgs that were seized under section 110 of Customs Act, 1962. Investigations undertaken apace included the role of Mr Mangesh Prakash Mistry and he admitted in statement of 12^th March 2018 that he had purchased two properties, viz., 2201 and 2401, Shreeji Heights, TH Kataria Marg, Matunga (W), Mumbai from his share of earnings through similar smuggling of gold in the past; other details of investigative outcome are not relevant to the present proceedings. Other consequences of the order of the original authority are not in appeal here which is concerned solely with the deprivation of one of the two properties in the name of the appellant herein who is the father of the said Mr Mangesh Prakash Mistry merely on the basis of admission that it procured by deploying proceeds of smuggled goods.

3. Learned Counsel for appellant submitted that the appropriation of flat no. 2401 in proceedings relating to alleged smuggling of gold was entirely uncalled for. He contended that the procedure under section 124 of Customs Act, 1962 was not complied with inasmuch as the appellant, as owner of the property, had not been put to notice of intention to confiscate under section 121 of Customs Act, 1962 and, thereby, was unable to plead his lack of connection with the alleged offence; moreover, the notices in the proceedings would have been handicapped in attempting to disprove lack of title to the said property. It was further contended that the property could not be termed as ‘sale proceeds’ even if it be conjectured that ‘sale proceeds’ of smuggled goods had been used for the purchase. According to him, the adjudicating authority had not examined the intent of the expression ‘sale’ in section 121 of Customs Act, 1962. He argued that the first appellate authority had, after conceding locus standii in accordance with section 128 of Customs Act, 1962, gone on to rule, and incorrectly, on the ownership of the property.

4. Relying upon the decisions of the Tribunal in Commissioner of Customs (Prev), Mumbai v. Shamshuddin MA Kadar [2010 (259) ELT 44 (Bom)], in Kanha Vanaspati Ltd v. Commissioner of Customs, Kandal [2003 (157) ELT 659 (Tri-Del)] and Pradeep Master Batches Pvt Ltd v. Commissioner of Customs (Export), Mumbai [2017 (348) ELT 692 (Tri-Mumbai)], Learned Authorized Representative elaborated upon the seizure and investigation into smuggling in which the son of the appellant was involved and submitted that statements recorded from the person concerned with flow of money had corroborated the source of funding for the purchase of the impugned property.

5. Confiscation of sale proceeds of smuggled good is authorized by section 121 of Customs Act, 1962. Without going into the issue of intent of ‘sale’ therein, we find that the appellant was not placed on notice of proposal to confiscate his property. It is clear from

‘124. Issue of show cause notice before confiscation of goods, etc.—No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person—

a) is given a notice in writing with the prior approval of the officer of customs not below the rank of a Deputy Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;

b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and

c) is given a reasonable opportunity of being heard in the matter: Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may at the request of the person concerned be oral.’

of Customs Act, 1962 that notice is a pre-requisite and ‘constructive notice’ at that. Inclusion of such proposal in a notice issued to another is premised on conclusion that the property is owned by such notice. That, in itself, is premature and compromises the integrity of adjudication proceedings.

6. Indeed, both the lower authorities have failed to determine ownership of the property in question and have merely concerned themselves with its alleged characteristic as ‘sale proceeds’ of smuggled goods for dealing with it in the context of finding on gold having been smuggled. This is a dangerous trend for such action could be used whimsically to deprive any legal owner of property – an act of expropriation under cover of law.

7. The essential condition of the owner having to be placed on notice before depriving title to the goods has rendered the confiscation illicit. For that reason the impugned order is set aside. We make it abundantly clear that we have not rendered a ruling on the legality of the source of funds used for purchase of the property but only on the legal requirement to issue notice to the appellant of proposal to confiscate.

8. Appeal is allowed on above terms. Miscellaneous application disposed off.

(Order pronounced in the open court on 14/09/2023)