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1. Introduction:

1.1 Persons involved in import or export activity in violation of prohibitions or restrictions in vogue or with the intent to evade duties or fraudulently claim export incentives are liable for strict penal action under the Customs Act, 1962. The offending goods can be confiscated and heavy fines and penalties imposed on the persons concerned. In fact, sensitive goods like narcotics, FICN, arms and ammunitions, etc. are absolutely confiscated. There are also provisions for arrests and prosecution to deter smuggling or commercial fraud, which seriously affects the economic security.

1.2 In the context of penal provisions under the Customs Act, 1962 the term “smuggling” has vast connotations and means “any act or omission which will render such goods liable for confiscation under Sections 111 or 113 of the said Act”.

1.3 In general terms, the word “penalty” means punishment under the law, i.e., such punishment as is provided in penal laws. It also means the sum payable as a punishment for a default. The Customs Act, 1962 contains specific provisions for imposition of penalty in case of contraventions of the legal stipulations.

2. Seizure of offending goods:

2.1 In terms of Section 110 of the Customs Act, 1962 an officer of Customs can seize any goods, if he has reason to believe that the goods are liable to confiscation under the said Act. If it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. The proper officer may also seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under the said Act. The person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts there from in the presence of an officer of customs.

2.2 he person from whom the goods are seized is issued Show Cause Notice, usually within 6 months, otherwise the goods shall be returned to the person from whose possession they were seized. However, Principal Commissioner of Customs or Commissioner of Customs may, for reasons to be recorded in writing, extend the time period to further period, for issue of Show Cause Notice, for a period not exceeding 6 months and inform the person from whom such goods were seized before the expiry of the period so specified. Further, where any order for provisional release of the seized goods has been passed under section 110A, the specified period of six months shall not apply. Further, Section 110 of Customs Act, also provides for the proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act. However, the person from whose custody any documents are seized shall be entitled to make copies hereof or take extracts there from in the presence of an officer of customs.

2.3 In case the seized goods are perishable or hazardous in nature or prone to depreciate in value over time or for reasons of constraints in space, or for any other relevant consideration, the Central Government can specify the goods or class of goods by notification of such goods which shall as soon as be after seizure be disposed by the proper officer before the conclusion of the proceedings in such manner as determined by the Central Government after following the procedure specified.

3. Confiscation of seized goods:

3.1 The word “confiscation” implies appropriation consequential to seizure. The essence and the concept of confiscation is that after confiscation, the property of the confiscated goods vests with the Central government.

3.2 The adjudicating authority makes the decision regarding confiscation of goods. The specific/different categories of violations under which the import or export goods are liable to confiscation, are enumerated in Section 111 and 113 of the Customs Act. In general, any goods imported which are unloaded or attempted to be unloaded at any place other than appointed under clause (a) of section 7 for the unloading of such goods; or any goods imported through any routes other than notified under clause (c) of Section 7 of the Customs Act, 1962; also the goods which are imported or attempted to be imported or brought into Indian customs waters, contrary to any prohibition imposed by or under Customs Act, 1962 or any other law for the time being in force; also any dutiable or prohibited goods attempted to be cleared by way of concealment, undeclared in arrival manifest or import manifest, mis-declaration in quantity, description or value etc., are liable to be confiscated. The imported or export goods are also liable to confiscation if there is an intention to evade Customs duty or to fraudulently avail the exemption / benefits available subject to any condition or under various export promotion schemes, such as Drawback, EOU etc. Also liable to confiscation are goods entered for exportation which does not correspond in respect of value or in any material particular with the entry made or in the case of baggage with the declarations made under Section 77 of the Customs Act, 1962.

3.3 Smuggled goods may be confiscated even if its form has been changed. In case the smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, then the whole of goods are liable to be confiscated as per Section 120 of the Customs Act, 1962.

4. Confiscation of conveyances/packages etc.:

4.1 In addition to confiscation of goods, the conveyances, i.e., any vessel or any aircraft which is or has been within Indian customs waters / in India or any vehicle, which is or has been in a customs area, while constructed, adapted, altered or fitted in any manner for the purpose of concealing goods shall be liable to confiscation; also any conveyance or animal used, as a means of transport/ or in the carriage, in the smuggling of any goods shall be liable to confiscation; also any conveyance from which any warehouse goods cleared for exportation, or any other goods cleared for exportation under a claim for drawback, are unloaded, without the permission of the proper officer are liable to confiscation as per Section 115 of the Customs Act, 1962.

4.2 As per Section 118 of the Customs Act, 1962, in case where any goods imported in a package are liable to confiscation, the package and any other goods imported in that package shall also be liable to confiscation. Also in case where any goods are brought in a package within the limits of customs area for the purpose of exportation and are liable to confiscation, the package and any other goods contained therein shall also be liable to confiscation.

4.3 The goods used for concealing smuggled goods are liable to confiscation as per Section 119 of the Customs Act, 1962. [in this section “goods” do not include a conveyance used as a means of transport.]

4.4 Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale proceeds thereof shall be liable to confiscation as per Section 121 of the Customs Act, 1962.

5. Penalties in respect of improper importation of goods:

5.1 In terms of Section 112 of the Customs Act, 1962 any person, who, in relation to any goods, does or omits to do any act which act or omission would renders such goods liable to confiscation under Section 111 or abets the doing or omission of such an act, or, acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111, shall be liable to penalties as follows:-

(i) In the case of goods in respect of which any prohibition is in force under the Customs Act, 1962 or any other law for the time being in force, to a penalty not exceeding the value of the goods or Rs.5,000/-, whichever is the greater;

(ii) In the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten percent (10%) of the duty sought to be evaded or Rs.5,000/-, whichever is higher; provided that where such duty as determined under sub­section (8) of section 28 and the interest payable thereon under section 28AA is paid within 30 days from the date of communication of the order, the amount of penalty liable to be paid by such person under this section shall be 25% of the penalty so determined.

(iii) In the case of goods in respect of which the value declared is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or Rs.5, 000/-, whichever is the greater;

(iv) In the case of goods falling both under (i) and (iii) above, i.e. goods in respect of which any prohibition is in force and the value stated / declared is higher than the value thereof, to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or Rs.5,000/-, whichever is the highest; and

(v) In the case of goods falling both under clauses (ii) and (iii) above, to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or Rs.5,000/-, whichever is the highest.

6. Penalties in respect of improper exportation of goods:

6.1 In terms of Section 114 of the Customs act, 1962 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 113, or abets the doing or omission of such an act, shall be liable to penalties as follows:

(i) In the case of goods in respect of which any prohibition is in force under Customs Act, 1962 or any other law for the time being in force, to a penalty not exceeding three times the value of the goods as declared by the exporter or the value as determined under the Customs Act, 1962, whichever is the greater;

(ii) In the case of dutiable goods, other than prohibited goods, to a penalty not exceeding ten percent (10%) of the duty sought to be evaded on such goods or Rs.5,000/-, whichever is higher; PROVIDED that where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within 30 days from the date of communication of the order, the amount of penalty liable to be paid by such person under this section shall be 25% of the penalty so determined.

(iii) In the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under the Customs Act, 1962, whichever is the greater.

7. Mandatory penalty in certain cases:

7.1 Section 114A of the Customs Act, 1962 deals with imposition of mandatory penalty in certain cases. Thus, in cases where the duty has not been levied or has been short levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful misstatement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under Section 28(8) of the Customs Act, 1962 shall also be liable to pay a penalty equal to the duty or interest so determined. If such duty or interest, as the case may be, as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within 30 days from the date of communication of the order, the amount of penalty liable to be paid by such person under this section shall be 25% of the duty or interest, as the case may be, so determined. Further if the benefit of reduced penalty under the first proviso shall be available subject to the condition that the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso.

7.2 If the duty or interest determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate tribunal or, as the case may be, the Court, then for the purpose of this section, the duty or interest as reduced or increased, as the case may be, shall be taken into account. The duty or interest determined to be payable is increased by the Commissioner (Appeals), the Appellate tribunal or, as the case may be, the Court, then, the benefit of reduced penalty shall be available under the first proviso shall be available if the amount of the duty or the interest so increased, along with the interest payable thereon, and 25% of the consequential increase in penalty have also been paid within 30 days of the communication of the order by which such increase in the duty or interest takes effect. If penalty has been levied under section 114A, no penalty shall be levied under Sections 112 or 114 of the said Act. Any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.

8. Other penalties:

8.1 If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of the Customs Act, 1962, then in terms of Section 114AA of the said act, such person shall be liable to a penalty not exceeding five times the value of goods.

8.2 In terms of Section 116 of the Customs Act, 1962 if any goods loaded in a conveyance for importation into India, or any goods transshipped under the provisions of the said Act or coastal goods carried in a conveyance, are not unloaded at their place of destination in India, or if the quantity unloaded is short of the quantity to be unloaded at that destination, and, if the failure to unload or the deficiency is not accounted for to the satisfaction of the Assistant/Deputy Commissioner of Customs, the person in charge of the conveyance shall be liable:

(i) In the case of goods loaded in a conveyance for importation into India or goods transhipped under the provisions of the Customs Act, 1962 to a penalty not exceeding twice the amount of duty that would have been chargeable on the goods not unloaded or the deficient goods, as the case may be, had such goods been imported;

(ii) In the case of coastal goods, to a penalty not exceeding twice the amount of export duty that would have been chargeable on the goods not unloaded or the deficient goods, as the case may be, had such goods been exported.

8.3 Any person who contravenes any provision of the Customs Act, 1962 or abets any such contravention or who fails to comply with any provision of this Act, with which it was his duty to comply, where no express penalty is elsewhere provided for such contravention or failure, shall be liable to a penalty not exceeding Rs.1 lakh.

9. Adjudication of confiscations and penalties:

9.1 The Customs Act, 1962 enjoins quasi-judicial proceedings to be followed before any penalties are mposed and any confiscation action etc., initiated against any offending goods. Apart from issuing Show Cause Notice under Section 124 of the said Act, the persons concerned are required to be given opportunity of representation in writing and personal hearing in the matter. The notice and the representation may be at the request of the person concerned be made oral. Besides issue of notice under section 124, the proper officer may issue a supplementary notice under circumstances or manner prescribed by the Board. The adjudication authority is then required to pass final order taking due note of all evidence brought on record.

9.2 As per Section 122 of the Customs Act 1962, in every case, in which anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty may be adjudged:-

(a) Without limit, by a Principal Commissioner of Customs or Commissioner of Customs or a Joint Commissioner of Customs;

(b) up to such limit by such officers, as the Board may, by notification, specify.

Board Notification 50/2018- Customs (N.T.) dated 8th June, 2018 specified the limits as below Table 30.1.

Table 30.1: Limits for confiscation of goods for respective Customs Officers

No. Sl.

Customs Offices   Value of goods liable for confiscation
(1)  Assistant Commissioner of Customs or Deputy Commissioner of Customs Above rupees one lakh but not exceeding rupees ten lakhs
(2) A Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs or Deputy Commissioner of Customs Not exceeding rupees one lakh

9.3 Generally, ‘mens rea’ is not required to be proof for the imposition of penalty under the provisions of the Customs Act. The amount of penalty depends on the gravity of the offence and is to act as a deterrent for the future.

9.4 Section 125 of the Customs Act, 1962 provides for option to pay fine in lieu of confiscation. The proviso to section 125 states that redemption fine shall not exceed the market price of the goods confiscated. This is the maximum penalty which can be levied. As per section 126 of the Customs Act, 1962 when any goods are confiscated, such goods shall thereupon vest in the Central Government. The officer adjudging confiscation shall take and hold possession of the confiscated goods. Whenever the confiscation of goods is authorized as per the sub-section (1) of section 125, of the Customs Act, 1962, the adjudicating authority MAY in the case of any goods where the importation or exportation is prohibited under this Act or under any other law for the time being in force, and SHALL, in the case any other goods, give to the owner of the goods (or from whose possession or custody such goods have been seized), an option to pay in lieu of confiscation such fine as the said officer / authority thinks fit. If the proceedings are deemed to be concluded under the proviso to sub-section (2) of section28 or under clause (i) of sub-section (6) of section 28 in respect of the goods which are not prohibited or restricted, the provisions of this section (redemption fine) shall not apply. 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.

9.5 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.

9.6 As per sub-section (3) of section 125 of the Customs Act, 1962, where the fine imposed under sub- section (1) is not paid within a period of 120 days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending.

10. Arrest:

10.1 To effectively tackle the menace of smuggling and other serious economic offences including commercial frauds, apart from penal action in Departmental adjudication, the Customs Act, 1962 provides for criminal prosecution in a Court of law. Prosecution action can also be taken for providing false documents/declaration to the Customs and for obstructing Customs officers in their work.

10.2 As provided under section 104(1), If an officer of customs empowered in this behalf by general or special order of the Principal Commissioner of Customs or Commissioner of Customs has reason to believe that any person in India or within the Indian customs waters has committed an offence punishable under section 132 or section 133 or section 135 or section 135A or section 136, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. Also, every arrested person arrested under sub-section (1) shall, has to be taken without unnecessary delay to the nearest Magistrate. Further, the arrested person is to be dealt with by the Magistrate, as per the provisions of the Code of Criminal Procedure, 1898. The power to remand an arrested person to judicial custody vests in the Magistrate by virtue of Section 165 of the Cr.PC.

10.3 Though under Section 104 of the Customs Act, 1962 Principal Commissioner of Customs or Commissioner of Customs are empowered to delegate to an officer of Customs by general or special order, powers of arrest of persons guilty of offence punishable under Section 135 of the said Act, extreme circumspection and care is to be exercised at senior level in exercising these powers and ordering arrests. Arrest should be resorted to only in cases of sufficient grave nature.

10.4 Persons involved in Customs related offence cases who may be liable to prosecution should not be arrested in routine unless exigencies of certain situations demand their immediate arrest. At times, prior to prosecution, arrests (s) may be necessary to ensure proper investigations and penal action against the persons (s), as otherwise the person involved in the offence may hamper investigations or disappear from the scene/area such as in cases involving outright smuggling by Sea/Air/Land route.

10.5 In all commercial fraud cases in relation to regular imports or exports, before arresting any person(s) the Principal Commissioner of Customs or Commissioner of Customs concerned should be approached by the Investigating Officer and the Principal Commissioner of Customs or Commissioner of Customs should be personally satisfied that there are sufficient grounds warranting arrest of the person(s). These grounds/reasons should also be recorded by the concerned Principal Commissioner of Customs or Commissioner of Customs in writing on file before the arrest is ordered and affected by the proper officer.

10.6 As far as possible, in other than commercial fraud cases warranting prosecution under Section 135 of the said Act, where arrest is considered necessary prior clearance and approval for arrest may be taken from Principal Commissioner of Customs or Commissioner of Customs. However, there could be situations, for example in outright smuggling cases in remote areas (and sometimes even in town seizure or international passenger clearance offence cases) where it may not be administratively possible to get prior permission of concerned Principal Commissioner of Customs or Commissioner of Customs before effecting arrest. In such cases, the decision to arrest a person in accordance with the guidelines – taking due note of the offence against the person which has come to light in investigations carried out, should be taken at the minimum level of the concerned Assistant Commissioner/Assistant Director recording the reasons in writing. Further, in such cases, the concerned Assistant Commissioner/ Assistant Director or other higher officer (lower than Principal Commissioner of Customs or Commissioner of Customs) who has ordered arrest, should immediately after arrest furnish a report incorporating reasons for arrest, to the jurisdictional Principal Commissioner of Customs or Commissioner of Customs and his satisfaction for the arrest made should also be kept on record in writing.

10.7 The guidelines for arrest are summed up as follows:

i. Offences under the Customs Act, 1962 are either (i) bailable; or (ii) non-bailable. Since arrest takes away the liberty of an individual, the power must be exercised with utmost care and caution in cases where a Commissioner of Customs or Additional Director General has reason to believe on basis of information or suspicion that such person has committed an offence under the Act punishable under the Sections 132 or 133 or 135 or 135A or 135AA or 136 of the Customs Act, 1962.

ii. Arrest of persons in terms of Section 104(1) of Customs Act, 1962 should be resorted to only where the facts and situations of a particular case demand such action. Persons involved should not be arrested unless the exigencies of certain situations demand their immediate arrest. These situations may include circumstances like ensuring proper investigation, to prevent such person from absconding, cases involving organised smuggling of goods or evasion of Customs duty by way of concealment, masterminds or key operators effecting proxy/ benami imports/exports in the name of dummy or non-existent persons/IECs, etc. The decision to arrest should be taken in cases which fulfil the requirement of the provisions of Section 104(1) of Customs Act, 1962 and after considering the nature of offence, the role of the person involved and evidence available.

iii. While the Act does not specify any value limits for exercising the powers of arrest, it is clarified that arrest in respect of an offence, should be effected only in exceptional situations which may include:

a. Cases involving unauthorised importation in baggage/ cases under Transfer of Residence Rules, where the market value of the goods involved is Rs. 50,00,000/-(Rupees Fifty Lakh) or more;

b. Cases of outright smuggling of high value goods such as precious metal, restricted items or prohibited items or goods notified under section 123 of the Customs Act, 1962 or offence involving foreign currency where the value of offending goods is Rs. 50,00,000/-(Rupees Fifty Lakh) or more;

c. Cases related to importation of trade goods (i.e. appraising cases) involving wilful mis-declaration in description of goods/concealment of goods/goods covered under section 123 of Customs Act, 1962 with a view to import restricted or prohibited items and where the market value of the offending goods is Rs. 2,00,00,000/- (Rupees Two Crore) or more;

d. Cases involving fraudulent evasion or attempt at evasion of duty involving Rs 2,00,00,000/- (Rupees Two Crore) or more;

e. cases involving fraudulent availment of drawback or attempt to avail of drawback or any exemption from duty provided under the Customs Act, 1962, in connection with export of goods, if the amount of drawback or exemption from duty is Rs. 2,00,00,000/- (Rupees Two Crore) or more. In cases related to exportation of trade goods (i.e. appraising cases) involving (i) wilful mis-declaration in value / description ; (ii) concealment of restricted goods or goods notified under section 11 of the Customs Act, 1962, where market value of the offending goods is Rs. 2,00,00,000/- (Rupees Two Crore) or more.

f. Cases involving obtaining an instrument from any authority by fraud, collusion, wilful misstatement or suppression of facts and utilisation of such instrument where the duty relatable to such utilisation of the instrument is Rs 2,00,00,000/- (Rupees Two Crore) or more.

g. The above criteria of value mentioned in (a) (f) would not apply in cases involving offences relating to items i.e. FICN, arms, ammunitions and explosives, antiques, art treasures, wild life items and endangered species of flora and fauna. In such cases, arrest, if required, on the basis of facts and circumstances of the case, may be considered irrespective of value of offending goods involved.”

[Refer Circular No. 13/2022-Customs dated 16/08/2022]

iv. There is no prescribed format for arrest memo but an arrest memo must be in compliance with the directions in “D.K Basu . State of W.B.” [1997(1) SCC 416 (see para 35)].

v. Certain modalities that should be complied with at the time of arrest and pursuant to an arrest include (a) female offender should be arrested by or in the presence of woman Customs officers,

vi. medical examination of an arrestee should be conducted by a medical officer in the service of Central or State Government and in case such medical officer is not available, by a registered medical practitioner soon after the arrest is made. If an arrested person is a female then such an examination shall be made only by, or under supervision of a female medical officer, and in case such female medical officer is not available, by a female registered medical practitioner, it shall be the duty of the person having the custody of an arrestee to take reasonable care of the health and safety of the arrestee.

vii. Under Section 104(3) of the Customs Act, 1962 an officer of Customs (arresting officer) has the same powers as an officer in charge of a Police Station under the Cr.PC. Thus, a Customs officer (arresting officer) is bound to release a person on bail for offences categorized as bailable under the Customs Act, 1962 and release on bail must be offered to a person arrested in respect of bailable offence and bail bond accepted. If the conditions of the bail are fulfilled, the arrestee shall be released on bail forthwith. The arresting officer may, and shall if such a person is indigent and unable to furnish surety, instead of taking bail from such person, discharge him or her executing a bond without sureties for his appearance as provided under Section 436 of  cases where the conditions for granting bail are not fulfilled, the arrestee shall be produced before the appropriate Magistrate without unnecessary delay and within 24 hours of arrest.

[Refer Instruction F.No.394/71/97-Cus(AS), dated 22-6-1999 and Circular No. 38/2013- Cus., dated 17-9-2013, Circular 28/2015- Customs dated 23.10.2015]

11. Punishment for Customs offences:

11.1 Section 135(1) of the Customs Act, 1962 provides for imprisonment for a maximum term of 7 years and with fine to any person who is, in the context of any goods which he knows or has reason to believe are liable to confiscation under Sections 111 or 113 of the said Act: Involved, in relation to the goods, or Anyway knowingly concerned in mis-declaration of value, or In any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under the said Act or any other law for the time being in force with respect to such goods, or Acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods, or Attempts to export any goods, or Fraudulently avails of or attempts to avail of drawback or any exemption from duty provided under the said Act in connection with export of goods.

11.2 Section 135 read with circular provides the following punishments to the person held liable for offences mentioned therein:

i. Imprisonment for a term not exceeding 7 years (and in any case ordinarily not less than 1 year) in the case of an offence relating to:

a) Any goods the market price of which exceeds Rs.1 crore; or

b) The evasion or attempted evasion of duty exceeding Rs.50 lakhs; or

c) Such categories of prohibited goods as the Central Government may, by notification, specify; or

d) Fraudulently availing of or attempting to avail of drawback or any exemption from duty referred to above, if the amount of drawback or exemption from duty exceeds Rs.50 lakhs.

ii. In any other case, with imprisonment for a term not exceeding 3 years or with fine, or with both.

11.3 Section 135(2) of the Customs Act, 1962 provides that, if any person convicted of an offence under Section 135(1) or under Section 136(1) (which applies to Custom Officers) is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to 7 years and with fine.

11.4 The offences punishable with imprisonment for a term of less than 3 years or only fine are as follows:

a) Section 132 of the Customs Act 1962: If a person makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document in the transaction of any business relating to the customs, knowing or having reason to believe that such declaration, statement or document is false in any material particular, he shall be punishable with imprisonment for a term which may extend to 2 years, or with fine, or with both.

b) Section 133 of the Customs Act 1962: If any person intentionally obstructs any officer of Customs in the exercise of any powers conferred under this Act, such person shall be punishable with imprisonment for a term, which extend to 2 years, or with fine, or with both.

c) Section 134 of the Customs Act 1962: If any person resists or refuses to allow a radiologist to screen or to take X-Ray picture of his body in accordance with an order made by a Magistrate under Section 103 of the said Act, or resists or refuses to allow suitable action being taken on the advice and under the supervision of a registered medical practitioner for bringing out goods liable to confiscation secreted inside his body, he shall be punishable with imprisonment for a term which may extend to 6 months, or with fine, or with both.

d) Section 135 of the Customs Act 1962: In all offences under the Customs Act other than those mentioned under “non-bailable or cognizable offences” above, the punishment for imprisonment may extend to a term of three years, or with fine, or with both. However, under Section 135(1) (i) of the said Act, in the absence of special and adequate reasons to the contrary to be recorded in the judgment or the court, such imprisonment shall not be for less than 1 year.

e) Section 135A of the Customs Act 1962: If a person makes preparation to export any goods in contravention of the provisions of this Act, and from the circumstances of the case, it may be reasonable inferred that if not prevented by circumstances independent of his will, he is determined to carry out his intention to commit the offence, he shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.

f) Section 135AA of the Customs Act, 1962: if a person publishes any information, that is furnished to customs by an exporter or importer under this Act, relating to the value or classification or quantity of goods entered for export from India, or import into India, alongwith the identity of the persons involved or in a manner that leads to disclosure of such identity, unless required so to do under any law or for the time being in force or by specific authorisation of such exporter or importer, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to fifty thousand rupees or both. Nothing contained in this section shall apply to (a) any publication made by or on behalf of the Central Government (b) data sourced from any publication made by or on behalf of the Central Government for analysis of trends in India’s international trade and dissemination thereof.

12. Offences by Customs officers:

12.1 The officers of Customs also cannot escape serious action including prosecution action, if they abuse their powers or collude or connive with tax evaders. In the following cases, prosecution proceeding against a Custom officer may be initiated under Section 136 of the Customs Act, 1962:

(1) If any officer of customs enters into or acquiesces in any agreement to do, abstains from doing, permits, conceals or connives at any act or thing, whereby any fraudulent export is effected or any duty of customs leviable on any goods, or any prohibition for the time being in force under this Act or any other law for the time being in force with respect to any goods is or may be evaded, he shall be punishable with imprisonment for a term which may extend to [three years], or with fine, or with both.

(2) In cases of vexatious search,

(a) if any officer of customs, requires any person to be searched for goods liable to confiscation or any document relating thereto, without having reason to believe that he has such goods or documents secreted about his person, the said Customs Officer may be punishable with imprisonment for a term which may extend to 6 months, or with fine which may extend to Rs.1, 000/-, or with both; or

(b) if any officer of customs, arrests any person without having reason to believe that he has been guilty of an offence punishable under Section 135 of the said Act, he may be punishable with imprisonment for a term which may extend to 6 months, or with fine which may extend to Rs.1,000/-, or with both; or

(c) if any officer of customs, searches or authorizes any other officer of customs to search any place without having reason to believe that any goods, documents, or things of the nature referred to in Section 105 of the said Act are secreted in that place, he may be punishable with imprisonment for a term which may extend to 6 months, or with fine which may extend to Rs.1,000/-, or with both.

(3) If any Customs Officer, except in the discharge in good faith of his duty as such officer or in compliance with any requisition made under any law for the time being in force, discloses any particulars learnt by him in his official capacity in respect of any goods, he may be punishable with imprisonment for a term which may extend to 6 months, or with fine which may extend to Rs.1,000/- or with both.

13. Presumption of culpable mental state:

13.1 As per Section 138A of the Customs Act, 1962 in prosecution proceedings there under, the culpability (guilty conscience or mensrea) on the part of the accused person shall be presumed and it will be for the accused to prove that he had no deliberation with respect of alleged offence. The presumption of culpable mental state is drawn under this provision that presumption includes intention, motive, knowledge, belief as well as reason to believe. The presumption could be deemed as rebutted only if the proof is beyond reasonable doubt not merely when its existence is established by a preponderance of probability.

14. Cognizability and Bailability:

14.1 Cognizable Offences as per Code of Criminal Procedure, 1973 (2 of 1974) are those offences which are punishable with imprisonment for a term of more than three years. Further, as per Cr.PC, the offences punishable with imprisonment for a term of less than 3 years or with fine are covered in the category of non-cognizable offences. However, Section 104 of Customs Act, 1962 stipulates that notwithstanding anything contained in the Cr.PC any offence relating to – (a) Prohibited goods; or (b) Evasion or attempted evasion of duty exceeding fifty lakh rupees shall be cognizable and all other offences under the Act shall be Non-cognizable. However, sub-section (4) of section 104 of the Customs Act, 1962 states that, notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence relating to

(a) prohibited goods; or

(b) evasion or attempted evasion of duty exceeding fifty lakh rupees, shall be cognizable.

Further, sub-section (5) of section 104 of the Customs Act, 1962 states that, save as otherwise provided in sub-section (4), all other offences under the Act shall be non cognizable.

Section 104 (6) of the Customs Act, 1962 provides for the categories of offences punishable under Section 135 that are non-bailable and all other offences under this Act shall be bailable as per

Section 104 of the Customs Act. The following categories of offences shall be non-bailable:

(i) evasion or attempted evasion of duty exceeding Rs.50 Lakhs; or

(ii) prohibited goods notified under Section 11 of the Customs Act, 1962 which are also notified under Section 135(1)(i)(C) of the Customs Act, 1962; or

(iii) import or export of any goods which are not declared as per the provisions of the Customs Act, 1962 and the market price of which exceeds Rs.1 Crore; or

(iv) fraudulently availing of or attempt to avail of drawback or any exemption from duty, if the amount of drawback or exemption from duty exceeds Rs.50 Lakhs. [to be replaced as under]

15. Prosecution:

15.1 No prosecution proceedings can be launched in a Court of Law against any person under the Customs Act, 1962 and no cognizance of any offence under Sections 132, 133, 134, 135 and 135A of the said Act can be taken by any Court, except with the previous sanction of concerned Commissioner of Customs. Thus, based upon the results of investigations and evidence brought on record, Commissioners of Customs shall sanction prosecution only after being satisfied that there are sufficient reasons justifying the same. Criminal complaint must thereafter be filed in appropriate Court of law and followed up with a view to get expeditious conviction.

15.2 Guidelines for Prosecution

15.2.1 Person liable to be prosecuted : As per the provisions of the Customs Act, 1962, prosecution may be launched against any person including legal person in respect of the offences covered under any of the sections namely 132, 133, 134, 135, 135A or 136 of the Customs Act, 1962.

A. The decision for launching prosecution should be taken in cases which fulfil the requirement of the provisions of any of the sections 132, 133, 134, 135, 135A or 136 of the Customs Act, 1962 after a careful consideration of the nature of offence, the role of the person concerned and evidence available to substantiate the guilty knowledge/mensrea.

15.2.2 Threshold limit for launching prosecution and exceptions has been prescribed in Circular No. 12/202- Customs dated 16.08.2022:

A. Exceptions:

The threshold limits would not apply in case of persons indulging habitually in such violations or where criminal intent is evident in ingenious way of concealment, where prosecutions can be considered irrespective of the value of goods/currency involved in such professional or habitual offenders, etc. provided the cumulative value of 3 or more such offences in past five years from the date of the decision exceeds the threshold limit (s).

B. Special Cases relating to FICN, arms, ammunitions, wild life etc.:

The threshold limits mentioned in sub para 4.2.1 would also not apply in cases involving offences relating to items i.e. FICN, arms, ammunitions and explosives, antiques, art treasures, wild life items and endangered species of flora and fauna. In such cases, launching of prosecution should be considered invariably, irrespective of value of offending goods involved.

15.2.3 Further, in respect of cases involving non-declaration of foreign currency by foreign nationals and NRIs (normally visiting India for travel/business trips etc.) detected at the time of departure from India, exceeding the threshold limits of Rs 50 lakh as prescribed above, if it is claimed that the currency has been legally acquired and brought into India but not declared inadvertently, prosecution need not be considered as a routine. The status and business standing of the foreign nationals/NRIs, the manner and place of recovery, corroborative evidence, if any to substantiate the claim of bona fide and proper acquisition but inadvertent non-declaration, and other attendant factors may be considered immediately and a decision taken whether the case involves criminal intent warranting launching of prosecution or not. Where the prosecution is not considered called for, the case can be adjudicated by the proper officer and suitable order for confiscation/fine/penalty etc. passed.

[Refer Circular No. 12/2022-Customs dated 16/08/2022]

15.2.4 It is mentioned that the quantum of punishment under section 135 of the Customs Act, 1962 is linked with the amount of imports duty/market price of offending goods/drawback amounts. However, the quantum of punishment in respect of the offences covered under remaining sections namely 132, 133, 134, 135A or 136 of the Customs Act, 1962 is not linked with the amount of imports duty/market price of offending goods/ineligible drawback amount. In these circumstances, the threshold limit for deciding on launching of prosecution under these sections may be taken as the value which is applicable for section 135 of the Customs Act, 1962 (refer to para 4.2 & 4.3

15.2.5  It is clarified that prosecution in respect of narcotic drugs and psychotropic substances may be launched as per the provisions of the NDPS Act, 1985.

 15.2.6 Except in respect of cases covered by sub paras 4.2.1.2 and 4.2.2 above, in all other cases, prosecution may be launched after due sanction by the Commissioner/Principal Commissioner (Pr. Commr.) or Additional Director General (ADGRI)/Principal Additional Director General of Revenue Intelligence (Pr. ADGRI), as the case may be. Prior approval of the Chief Commissioner/Principal Chief Commissioner (Principal CC) or Director General/Principal Director General of Revenue Intelligence (Pr. DGRI), as the case may be, will be essential for launching of prosecution in respect of cases covered under sub paras 4.2.1.2 and 4.2.2 above.

15.3 The following aspects may also be kept in view while considering launching of prosecution for offences under the Customs Act, 1962 : –

15.3.1 Prosecutions should not be launched as a matter of routine and/or in cases of technical nature, where the additional claim for duty is based solely on a difference of interpretation of the law. Before launching any prosecution, it is essential that the department should have sufficient evidence to prove that the person, individual or company, against whom prosecution is being considered, had guilty knowledge of the offence or had fraudulent intention of committing the offence, or in any manner possessed mens rea which would indicate his guilt. It follows, therefore, that in the case of Public Limited Companies, prosecution should not be launched indiscriminately against all the Directors of the Company, but should be restricted to only such persons who have taken active part in committing, or have connived at, the offence relating to either of smuggling or of customs duty evasion or of mis-declaration of value, quantity etc. For this purpose, the Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI should go through the relevant case file thoroughly and ascertain for themselves that the definite involvement of different partners/directors/executives/ officials, against whom reasonable evidence about their involvement in the offence exists and should be proceeded against, while launching the prosecution.

15.4 Stage for launching of prosecution: Normally, prosecution may be launched immediately on completion of adjudication proceedings. However, in respect of cases involving offences relating to items, viz. Gold, Foreign Currency, Fake Indian Currency Notes (FICN), arms, ammunitions and explosives, antiques, art treasures, wild life items and endangered species of flora and fauna, prosecution may preferably be launched immediately after issuance of Show Cause Notice under the Customs Act, 1962. Further, in cases involving Foreign National(s), prosecution may be launched at the earliest, even before issuance of the Show Cause Notice.”. [amended on Circular No. 12/2019-Customs dated 24-May-2019 and Circular No. 46/2016-Customs dated 04-Oct-2016]

15.4.1 Further, in following cases investigation may be completed in time bound manner preferably within six months and adjudication may be expedited to facilitate launching of prosecution. These cases are :

(a) In case where arrest has been made during investigation (for commercial fraud cases as well as outright smuggling cases) or in the case of a habitual offender.

(b) In case where arrest has not been made but it relates to outright smuggling of high value goods such as precious metal, restricted items or prohibited items notified under section 11 or goods notified under section 123 of the Customs Act, 1962 or foreign currency where the value of goods is Rs. 20, 00,000 (Rupees twenty lakh) or more.

15.4.2 In a recent judgment passed by Hon’ble Supreme Court of India in the case of Radhe Shyam Kejriwal [2011 (266) E.L.T. 294 (S.C.)], the Apex Court had, inter alia, observed that (i) adjudication proceedings and criminal proceedings can be launched simultaneously;(ii) decision in adjudication proceedings is not necessary before initiating criminal prosecution; (iii) adjudication proceedings and criminal proceedings are independent of each other in nature and (iv) the findings against the person facing prosecution in the adjudication proceedings is not binding on the proceeding for criminal prosecution. In view of aforesaid observations of Hon’ble Supreme Court, it is reiterated that if the party deliberately delays completion of adjudication proceedings, prosecution may be launched even during the pendency of the adjudication proceedings, where offence is grave and qualitative evidences are available.

15.4.3  Prosecution need not be kept in abeyance on the ground that the party has gone in appeal/revision. However, in order to ensure that the proceeding in appeal/revision are not unduly delayed because the case record are required for purpose of prosecution, a parallel file containing copies of the essential documents relating to adjudication should be maintained.

15.4.4 The Superintendent in charge of adjudication section should endorse copy of all adjudication orders to the prosecution section. The Superintendent in charge of prosecution section should monitor receipt of all serially numbered adjudication orders and obtain copies of adjudication orders of missing serial numbers from the adjudication section every month.

Procedure for launching prosecution :

15.5.1 In all such cases, where prior approval of Chief Commissioner/Principal CC or DGRI/Pr. DGRI is necessary for launching prosecution, an investigation report for the purpose of launching prosecution (as per Annexure-I), should be carefully prepared and signed by the Assistant Commissioner/Assistant Director concerned. The investigation report, after careful scrutiny (for incorporation of all relevant facts) should be endorsed by the Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI. The Chief Commissioner/Principal CC or DGRI/Pr. DGRI should ensure that a decision about launching of prosecution or otherwise, is taken after careful analysis of evidence available on record and communicated to the Commissioner/Principal CC or ADGRI/Pr. ADGRI within a month of the receipt of the proposal.

15.5.2 In all other cases, where prior approval of Chief Commissioner/Principal CC or DGRI/Pr. DGRI is not required, the decision about launching of prosecution or otherwise should be taken by the Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI after careful application of mind and analysis of evidence brought on record. This should be completed within a month of adjudication of the case (unless it is decided to go for prosecution even prior to adjudication in certain category of cases mentioned at para 6 above).

15.5.3 Prosecution should not be filed merely because a demand has been confirmed in the adjudication proceedings particularly in cases of technical nature or where interpretation of law is involved. One of the important considerations for deciding whether prosecution should be launched is the availability of adequate evidence. The standard of proof required in a criminal prosecution is higher as the case has to be established beyond reasonable doubt whereas the standard of proof in adjudication proceedings is decided on the basis of preponderance of probability. Therefore, even cases where demand is confirmed in adjudication proceedings, evidence collected should be weighed so as to likely meet the test of being reasonable doubt for recommending & sanctioning prosecution. Decision should be taken on case-to-case basis considering various factors, such as, gravity of offence, quantum of duty evaded and the nature as well as quality of evidence collected.

15.5.4 It is reiterated that in order to avoid delays, Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI/adjudicating authority should indicate, at the time of passing the adjudication order itself as to whether he considers the case fit for prosecution, so that it could be further processed for launching prosecution. Where at the time of adjudication proceedings, no view has been taken on prosecution by the adjudicating authority, the adjudication section shall resubmit the file within 15 days from the days of issue of adjudication order to the adjudicating authority/Commissioner to take a view of prosecution. Where the prosecution is proposed before the adjudication of the case, Commissioner/Pr. Commr. Or ADGRI/Pr. ADGRI shall record the reason for the same and the adjudicating authority shall be informed of the decision so that there is no need for him to examine the case subsequently from the perspective of prosecution.

15.5.5 It is observed that the delays in the Court proceedings occur due to the non-availability of records required to be produced before the Magistrate. As a matter of practice, whenever a case is taken up for seeking the approval for launching prosecution, an officer should be nominated/designated, who shall immediately take charge of all documents, statements and other exhibits, that would be required to be produced before a Court. The list of exhibits etc. should be finalised in consultation with the Public Prosecutor at the time of drafting of the complaint. Such exhibits should be kept in the safe custody. Where a complaint has not been filed even after a lapse of three months from the receipt of sanction for prosecution, the reason for delay shall be brought to the notice of Chief Commissioner/Principal CC or DGRI/Pr. DGRI by the Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI, as the case may be, who are responsible in the case for ensuring the timely filing of the complaint.

15.6 Publication of names of persons convicted under Customs Act, 1962

Section 135B of the Customs Act, 1962, grants the power to publish name/place of business etc. of persons convicted under the Act by a Court of law. It is observed that this power is being exercised very sparingly. In all cases in respect of all persons, who are convicted under the Customs Act, 1962 the department should make a prayer to the Court to invoke this section.

15.7 Monitoring of Prosecution

15.7.1 It is emphasized that prosecution, once launched, should be vigorously followed. The Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI should monitor cases of prosecution at monthly intervals and take the corrective action wherever necessary to ensure that the progress of prosecution is satisfactory.

15.7.2 For monitoring of prosecution cases, a Prosecution Cell should be created in each Commissionerate under the supervision of Additional/Joint Commissioner. In case of Directorate of Revenue Intelligence, an Additional/Joint Director in headquarter/each zonal unit should supervise the prosecution work relating to headquarters or respective zonal unit, as the case may be.

15.7.3 For keeping track of prosecution cases launched by the Commissionerate, a prosecution register in the format enclosed as Annexure-II to this Circular should be maintained in the Prosecution Cell of each Commissionerate. The register should be updated regularly and inspected by the Principal Commissioner/Commissioner at least once in every quarter of the Financial Year. For keeping track of prosecution cases launched by DRI, prosecution register in the similar format as Annexure II should be maintained in the Zonal Unit/Hqrs of DRI pertaining to those prosecution cases and similar regular monitoring to be carried out by ADGRI/Pr. ADGRI concerned.

15.8 Appeal against Court order in case of inadequate punishment/acquittal :

15.8.1 Commissioner/Pr. Commr. responsible for the conduct of prosecution or ADGRI/Pr. ADGRI (in respect of cases booked by DGRI), should study the judgement of the Court and, where it is found that the accused person have been let off with light punishment than what is envisaged in the Customs Act, 1962 or has been acquitted despite the evidence being strong, the question of filing appeals under law should be considered within the time period.

 15.8.2 The case of acquittal by the Court can be appealed against in terms of section 378(4) of Cr. P.C. by the complainant. In these cases approval of the Chief Commissioner/Principal CC or DGRI/Pr. DGRI, as the case may be, should be obtained before filling appeal.

15.9 Procedure for withdrawal of prosecution

15.9.1 Procedure for withdrawal of sanction order of prosecution In cases where prosecution has been sanctioned but not filed and new facts or evidence have come to the notice of the Commissionerate or the DGRI which warrant review of the sanction for prosecution, it should be immediately brought to the notice of the sanctioning authority. After considering the new facts and evidences the sanctioning authority may recommend withdrawal of sanction order to the next higher authority. In case Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI is the sanctioning authority, the recommendation will be submitted to Chief Commissioner/Principal CC or DGRI/Pr. DGRI. The recommendation will be submitted to the Board (Member of Policy Wing concerned) in such cases where sanctioning authority is Chief Commissioner/Principal CC or DGRI/Pr. DGRI. All past cases where filing of prosecution is pending beyond three months of the sanction for prosecution shall be reviewed in the light of these instructions and necessary action taken to either file complaint expeditiously or to propose withdrawal of sanction.

15.9.2 Prosecution for withdrawal of Complaint already filed for prosecution

A. In cases where the complaint has already been filed in the Court, it will be up to the Court to decide whether or not to pursue prosecution in terms of section 257 and 321 of Cr. P.C, 1973. If the order for withdrawal has been given by a Court, the prosecution can be withdrawn by the Assistant/Deputy Commissioner or Assistant/Deputy Director after getting a formal order from the Chief Commissioner/Principal CC or DGRI/Pr. DGRI as the case may be.

B. As per decision of Hon’ble Supreme Court in the case of Radhe Shyam Kejriwal [2011 (266) E.L.T. 294 (S.C.)] :

(a) the findings in the adjudication proceeding in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceedings is on technical ground and not on merit, prosecution may continue, and

(b) in case of exoneration, however, on merit where allegation is found to be not sustainable at all and person held innocent, criminal prosecution on the same set of circumstances cannot be allowed to continue, underlying principle being the higher standard of proof in criminal cases.

C. In respect of cases covered under clause (b) above, the Chief Commissioner/Principal CC or DGRI/Pr. DGRI would ensure moving an application through Public Prosecutor in the court for withdrawal of prosecution in accordance with law.

The withdrawal can only be effected with the approval of the court.

15.10 Compounding:

Section 137 of Customs Act, 1962 provides for compounding of offences by the Chief Commissioner. The provisions regarding compounding of offence should be brought to the notice of person being prosecuted and such person be given an offer of compounding by the Commissioner/Principal Commissioner or ADGRI/Principal ADG DRI as per Circular No. 54/2005-Cus., dated 30.12.2005.

15.11 Prosecution Register and dissemination of information

15.11.1 A Prosecution Register in the form as Annexed to this circular should be maintained in the prosecution cell of the Commissionerate headquarters/Custom House/DRI formations. Wherever the prosecution is compounded under section 137 of CA’ 62 by the Chief Commissioner, suitable endorsement may be kept in the prosecution register.

15.11.2 It may be mentioned that offences under section 132 and 135 of the Customs Act, 1962 are scheduled offences under the Prevention of Money Laundering Act, 2002(PMLA). In Customs’ prosecution cases warranting action under PMLA, instructions have been issued vide F. No. 394/51/2009-Cus (AS), dated 14-9-2009 for monthly reporting of such cases to the Directorate of Enforcement in the prescribed format. Once cognizance of complaint in respect of offence under section 132 and 135 of CA’ 62 filed by the Department is taken by the court, and reference has been made to the Directorate of Enforcement for taking action under PMLA, suitable remarks should be made in the prosecution register. In case, the prosecution under PMLA is separately proposed to be launched by the Directorate of Enforcement, and intimation is received to that effect in the prosecution unit of the Commissionerate/DRI, suitable entry should be kept in the register for appropriate liaison with the Directorate of Enforcement and further action as per the direction of Special Court.

15.11.3 Further instructions have been issued vide F. No. 394/124/2011 -Cus (AS), dated 17-7-2012 clarifying that all offences under Customs Act, 1962 shall be within the ambit of ‘Plea Bargaining’ and any application for the same shall be dealt with as per the provisions in Chapter XXIA of Code of Criminal Procedure. Wherever ‘Plea Bargaining’ as per the provisions of chapter XXIA of Cr Pc is permitted by the competent court, necessary endorsement may be made in the prosecution register for proper record and monitoring. Similar record may be kept in respect of appeal against court order and/or withdrawal of prosecution as detailed in paras 10 to 12 above.

15.11.4 The field formations should upload/update the information regarding prosecution initiated in the Management Information System (MIS) under prescribed Proforma.

15.12 Inspection of prosecution work :

Director General (Inspection) and Chief Commissioners/Principal CCs, while carrying out inspection of the Commissionerates/Custom Houses, should specially check all the above mentioned points, and make a mention about implementation of the guidelines in their Inspection Reports.

15.13 Transitional Provisions :

All cases, where sanction for prosecution is accorded after the issue of this circular, shall be dealt in accordance with the provisions of this circular irrespective of the date of the offence. Cases where prosecution has been sanctioned but no complaint has been filed before the magistrate shall also be reviewed by the prosecution sanctioning authority in light of the provisions of this circular.

15.14 Where a case is considered suitable for launching prosecution and where adequate evidence is forthcoming, securing conviction largely depends on the quality of investigation. It is, therefore, necessary for senior officers to take personal interest in investigations of important cases of smuggling/duty evasion and also in respect of cases having money laundering angle and to provide guidance and support to the investigating officers.

15.15 It has also been noticed that the officers posted for prosecution work do not have proper training. The Director General, National Academy of Customs Excise and Narcotics (NACEN), Faridabad, should therefore, organize separate training courses on prosecution/arrests etc. from time to time and also should incorporate a series of lectures on this issue in the courses organized for anti-smuggling. The Commissioner/Pr. Commr. or ADGRI/Pr. ADGRI should judiciously sponsor officers for such courses.

[Refer Circular No. 27/2015-Customs dated 23/10/2015]

16. Issue of Summons:

16.1 Power to summon persons to give evidence and produce documents in Customs Act flows through section 108 of the Customs Act, 1962 which prescribes as follows: Any Gazetted Officer of customs shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under this Act. (2) A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (3) All persons so summoned shall be bound to attend either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents and other things as may be required: (4) Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code, 1860 (45 of 1860).

16.2 On issue of summons in Customs matters, the following guidelines have been issued by Central Board of Indirect Taxes and Customs:

(i) Power to issue summons is generally exercised by Gazetted Officers (Appraiser / Superintendent), though higher officers also issue summons. Summons by Appraiser/ Superintendent should also be issued after obtaining prior written permission from an Officer not below the rank of the Assistant Commissioner with the reasons for issue of summons to be reduced in writing.

(ii) Where for operational reasons it is not possible to obtain such prior written permission oral/telephonic permission from such officer must be obtained and the same should be reduced to writing and intimated to the officers according such permission at the earliest opportunity.

(iii) In all such cases, where summons are issued, the officer issuing summons submit a report or should record a brief of the proceedings in the case file and submit the same to the officer who has authorized to issue the summons.

(iv) Further senior management officials such as CEO, CFO General Manager of large Company or PSU should not generally be issued summons at the first instance They should be summoned only when there are indications in the investigation of their involvement in the decision making process which led to revenue of loss.

(v) An officer who has issued summons for recording of statement in such case where summons is issued to senior functionaries should be available in the office and record the statement as per schedule given in summons. However, if for some operational reason the officer is not available to attend the proceedings as per schedule, this may be informed to the person summoned in advance.

[Reference F.No. 394/05/2015-Cus (AS) dated 04.02.2015]

17. Compounding of Offences:

17.1 The Central Government has brought into force the Customs (Compounding of Offences) Rules, 2005 and Central Excise (Compounding of Offences) Rules, 2005 with effect from 30th December, 2005, the date of publication of these rules in the Official Gazette. Notification No. 114/2005-Customs (N.T.) and No. 37/2005 Central Excise (N.T.) both dated 30-12-2005 have been issued in this regard. Compounding Rules under Customs has been amended by Customs (Compounding of Offences) Amendment Rules, 2022 published vide the Gazette Notification No. 69/2022-Customs (N.T.) dated 22.08.2022.

17.2 The purpose of compounding of offences against payment of compounding amount is to prevent litigation and encourage early settlement of disputes. Considering the wide range of offences listed in the relevant Chapter of the Customs Act/Central Excise Act, Board has decided to classify these offences as (i) technical offences; and (ii) substantive or non-technical offences for the purpose of compounding. ‘Technical offences’ are those offences that can be compounded more than once and would be accorded a more liberal treatment. However, ‘Substantive or non-technical offence’ are offences, where it has been decided not to allow compounding for the second time. For the purpose of compounding, ‘Substantive or non-technical offence’ would mean offences covered under Section 135 and 135A of the Customs Act. Similarly under Central Excise Act this would refer to offences covered under sub-section (1)(a), (1)(b), (1)(bb), (1)(bbb), (1)(bbbb) and (1)(c) of Section 9. On the other hand ‘Technical offence’ would mean offences covered under Section 132, 133 and 134 of the Customs Act and Section 9(1)(d) of the Central Excise Act. Accordingly compounding for substantive offence shall be allowed only once.

17.3 It has also been decided by the Board, that considering the serious implications of certain offences mentioned below, these shall not be considered for compounding and any applications received from one or more categories of the following persons should be rejected.

(i) Any person who along with offence under Customs Act, has also committed or has also been accused of committing an offence under any of the following Acts :-

(a) Narcotics Drugs and Psychotropic Substances Act, 1985;

(b) Chemical Weapons Convention Act, 2000;

(c) Arms Act, 1959;

(d) Indian Penal Code;

(e) The Wild Life (Protection) Act, 1972.

(ii) Any person who is involved in cases of smuggling of goods falling under any of the following categories, –

(a) Special Chemicals, Organisms, Materials, Equipments & Technologies (SCOMET), as specified in Appendix-3 to Schedule 2 of ITC (HS);

(b) Prohibited items for import or export as specified in the ITC (HS) Classifications of Export and Import items, 2004-09 issued under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992;

(c) Any other goods or a document, which is likely to affect friendly relations with any foreign state or is derogatory to national prestige.

(iii) Any person who has already exercised the option of compounding of an offence in respect of goods of value exceeding rupees one crore in the past.

(iv) Any person who has been convicted under the Act by an order issued subsequent to the date of publication of the Customs/Excise (Compounding of Offences) Rules in the Official Gazette.

(v) Any person who has applied for compounding of offence in a case, where there are apparent contradictions or inconsistencies or incompleteness. [amended on Circular: 20/2008-Cus. dated 2-Dec-2008]

17.4 While the Compounding of Offence Rules have been made as simple and unambiguous as possible, it would be worthwhile to clarify a few provisions as follows :

(i) Offence committed by officers of Customs/Central Excise does not merit compounding as it is a matter between the State and its employee. Accordingly the definition of the applicant excludes the departmental officers.

(ii) As the Chief Commissioner has to decide about the eligibility of the applicant and allow compounding in respect of an application filed before him on the basis of certain facts given by the applicant, it is provided for verification of such facts and call for any other facts or information available on record from the reporting officer.

17.5 The Chief Commissioners have been empowered to compound offences before or after filing of the complaint subject to the above general guidelines. While there would be no difficulty in cases where complaint has not been filed by the department, as regards existing cases pending in the Court, the following procedure may be followed. No such application for compounding shall be processed unless the applicant within 30 days of filing such application, files an affidavit before the Court before whom such prosecution is pending undertaking to comply with the provisions of these rules and submit a copy of such affidavit to the compounding authority. On receipt of such affidavit, the compounding authority shall examine the application in accordance with the above guidelines and pass an appropriate order under sub-rule (3) to Rule 4. A copy of such order shall also be forwarded to the Court. After payment of compounding amount as per the above order, the reporting authority shall move an application before the said Court informing about the compounding of offence and requesting the Court to dispose of the case accordingly. If the Court accepts the order of compounding of offence and disposes of the case, then the order of compounding authority becomes final. However, in cases where the Court rejects the request of the department for grant of immunity from prosecution by compounding of offences, then the compounding amount paid by the applicant as per order of the compounding authority shall be refunded to the applicant.

17.6 In order to make best of use of compounding of offence, assesses at the time of intimation/initiating action for launching of prosecution should be given an offer of compounding. It may however be clarified that the application for compounding shall be decided on merits and in the absolute discretion of the Chief Commissioner. The cases where the Chief Commissioner is not inclined to accede to applicant’s request for compounding as detailed in para 3 above, may be rejected informing the grounds accordingly.

17.7 Adequate publicity may be given to the Compounding of Offence Rules and these guidelines so that large numbers of cases are compounded resulting in reduction in number of cases pending in the Courts. All the applications for compounding of offences must be disposed of within 6 months. The performance of the zone in realisation of compounding amount also may be indicated suitably in the monthly report to the Directorate of Data Management. These Compounding of Offences Rules and guidelines may be brought to the notice of all concerned. In case of any doubt regarding any provision of the guidelines, rules reference may be made to the Board. The receipt of these guidelines may be acknowledged. The guidelines shall be implemented with immediate effect. [Refer Circular No. 54/2005- Customs dated 31.12.2005 as amended by Circular No. 29/2007 dated 21.08.2007, Circular No. 20/2008 dated 2.12.2008, Circular No. 29/2009-Customs dated 15.10.2009, and Circular No. 15/2022-Customs dated 23.08.2022]

Source – Custom Duty Manual 2023

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