2017 (8) TMI 982 - HC - Customs

Confiscation of cut Betel Nuts - penalty u/s 112(b) of the Act - misdeclaration of description and quantity of goods - concealment of readymmade garments under the consignment of betel nuts - seizure of goods - Natural Justice - Held that - The language as contained in Section 124 clearly reveals that no order confiscating any goods or imposing any penalty on any person can be made under this Chapter unless the owner of the goods has been given a reasonable opportunity of being heard in the matter. This Court is of the considered opinion that the aforementioned provision is thus mandatory and cannot be bypassed by the authority concerned. With regard to the contention advanced by the learned counsel for the Customs that the goods were of foreign origin, the findings which have been arrived at by the adjudicatory authority, clearly state that there is no evidence on record to suggest that the consignment in question had been smuggled from Nepal. Thus, in view of such finding arrived at by the authority itself, the second ground urged also fails as the onus to prove the goods to be of foreign origin lay on the Department, which has made such a seizure. So far as the violation of Sections 46 and 47 of the Act are concerned, as has been alleged against the petitioner, in view of the findings arrived at that there was no evidence that it was of foreign origin, the said provision could be attracted only in the case of goods coming in from a third country. It has been further observed in the impugned order itself that as per Notification No. 9/96-Cus., dated 22-1-1996, issued under Section 11 of the Act, the goods are freely importable on payment of applicable Customs duty after following the procedures prescribed under the Act and, therefore, it having been asserted by the Customs Department that they had no information that the consignment in question had been smuggled from Nepal, there is no scope of invocation of the provisions of Sections 46 and 47 of the Act - confiscation not sustainable. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Legality of the confiscation of betel nuts under Section 111(d) of the Customs Act, 1962.
2. Imposition of a penalty of ?2,00,000 under Section 112(b) of the Customs Act, 1962.
3. Compliance with procedural requirements under Section 110 and Section 124 of the Customs Act, 1962.
4. Violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Legality of the Confiscation of Betel Nuts:
The petitioner challenged the confiscation of 23,430 kgs of cut betel nuts under Section 111(d) of the Customs Act, 1962, arguing that the goods were not of foreign origin and thus not liable for confiscation. The Customs Department had seized the goods, suspecting illegal importation violating Sections 7, 11, 46, and 47 of the Customs Act, read with Section 3(2) of the Foreign Trade (Development & Regulation) Act, 1992. However, the adjudicating authority found no evidence to suggest that the consignment had been smuggled from Nepal, making the invocation of Notification No. 9/96-Cus. inapplicable. The Court concluded that the confiscation was not justified as the goods were not proven to be of foreign origin.

2. Imposition of Penalty:
The petitioner contested the penalty of ?2,00,000 imposed under Section 112(b) of the Customs Act, 1962. The Court noted that the adjudicating authority had imposed the penalty despite lacking sufficient evidence to support the confiscation of the goods. Consequently, the penalty was deemed without jurisdiction and automatically nullified.

3. Compliance with Procedural Requirements:
The petitioner argued that the seizure and subsequent actions violated Section 110 of the Customs Act, which requires a "reason to believe" that the goods are liable for confiscation. The Court emphasized that the belief must be reasonable and based on evidence, not mere suspicion. The Customs Department failed to meet this standard, as their actions were based on insufficient grounds. Additionally, the Court highlighted the mandatory nature of Section 124, which requires a show cause notice and an opportunity for the owner to be heard before confiscation or penalty imposition. The Customs Department did not comply with these procedural requirements.

4. Violation of Principles of Natural Justice:
The petitioner claimed that the principles of natural justice were violated as no show cause notice was served. The Customs Department argued that the notice was returned as "not found." The Court stressed the importance of adhering to the principles of natural justice, which include providing a reasonable opportunity to be heard. The failure to serve a proper notice and provide an opportunity for representation rendered the confiscation and penalty procedurally flawed.

Judgment:
The Court found the impugned order of confiscation and penalty to be wholly illegal and set it aside. The confiscation directed in Adjudication Order No. 31-Cus/ADC/FBG/2013, dated 31-5-2013, was declared void, and the fine imposed on the petitioner was nullified. The writ application was allowed, with no order as to costs.