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2016 (9) TMI 879 - HC - CustomsRedemption of gold seized on payment of redemption fine - Section 125 of the Customs Act 1962 - provisional release of goods under Section 111(d) of the Customs Act, 1962 - prohibited goods - discretionery power of competent authority in taking a decision - whether the competent authority correct in denying the release of goods, thereby imposing absolute confiscation in exercise of its discretionery power? Held that - The power conferred on the authority without any guidelines may likely to be abused or arbitrarily exercised and in such circumstances, the guidance and the control of exercise of such power has to be gathered from the object of conferment of such power. Non-consideration or non-application of mind to the relevant factors, renders exercise of discretion manifestly erroneous and it cause for judicial interference. The case of Global Energy Limited and another v. Central Electricity Regulatory Commission 2009 (5) TMI 904 - SUPREME COURT referred where it was held that the exercise of discretion has to be in conformity with the purpose for which, it is conferred, object sought to be achieved and reasons to be recorded. When discretion is exercised under Section 125 and if any challenge is made under Article 226 of the Constitution of India, the twin test, to be satisfied is relevance and reason . In the light of the judgments of the Hon ble Apex Court and applying the same to the facts of this case and testing the discretion exercised by the authority, on both subjective and objective satisfaction, as to why, the goods seized, cannot be released, when smuggling is alleged and on the materials on record, it is held that the discretion exercised by the competent authority, to deny release, is in accordance with law. Decided in favor of revenue.
Issues Involved:
1. Legality of the absolute confiscation of gold and other goods by the Commissioner of Customs. 2. Tribunal's authority to direct the adjudicating authority to give an option for redemption of confiscated goods. 3. Interpretation of Section 125 of the Customs Act, 1962, regarding the discretion to offer redemption of confiscated goods. 4. Determination of whether gold is considered "prohibited goods" under the Customs Act, 1962. Detailed Analysis: 1. Legality of the Absolute Confiscation of Gold and Other Goods by the Commissioner of Customs: The Commissioner of Customs ordered the absolute confiscation of 111 gold bits weighing 2548.3 grams and other assorted goods valued at ?41,117/- under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, read with Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992. The Commissioner allowed redemption of the assorted goods on payment of ?20,500/- and imposed a penalty of ?50,000/- under Section 112(a) of the Customs Act, 1962. The Tribunal, however, set aside the order of absolute confiscation and directed the Commissioner to give the respondent an option to redeem the gold on payment of a fine. 2. Tribunal's Authority to Direct the Adjudicating Authority to Give an Option for Redemption of Confiscated Goods: The Tribunal directed the Commissioner to offer the respondent an option to redeem the gold, stating there was no need for absolute confiscation. The High Court found this direction erroneous, asserting that the Tribunal overstepped its authority by compelling the adjudicating authority to exercise discretion in favor of the respondent, thereby leaving no room for the authority's independent judgment. 3. Interpretation of Section 125 of the Customs Act, 1962, Regarding the Discretion to Offer Redemption of Confiscated Goods: Section 125 of the Customs Act, 1962, confers discretion on the adjudicating authority to offer an option for redemption of confiscated goods. The High Court emphasized that the word "may" in Section 125 indicates discretion, not an obligation. The adjudicating authority must exercise this discretion based on the facts and circumstances of each case. The Tribunal's directive to mandatorily offer redemption was deemed contrary to the scheme of the Act, as it undermined the adjudicating authority's discretion. 4. Determination of Whether Gold is Considered "Prohibited Goods" Under the Customs Act, 1962: The High Court examined whether gold falls under the definition of "prohibited goods" as per Section 2(33) of the Customs Act, 1962. It concluded that even though gold is not explicitly listed as a prohibited item, its import is subject to conditions. Non-compliance with these conditions renders the import of gold prohibited. The Court cited several judgments to support the view that goods imported in violation of statutory conditions are considered prohibited and liable for confiscation. Conclusion: The High Court set aside the Tribunal's order, upholding the adjudicating authority's discretion to order absolute confiscation of the gold. It emphasized that the Tribunal cannot compel the adjudicating authority to exercise discretion in a particular manner, as this would undermine the authority's independent judgment. The Court reiterated that goods imported in violation of statutory conditions are deemed prohibited and subject to confiscation. The appeal was allowed, and the substantial question of law was answered in favor of the appellant.
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