2022 (2) TMI 1081 - HC - Customs

Enhancement of penalty under Section 112(a) of the Customs Act - Smuggling - Gold Biscuits - prohibited or restricted goods - show-cause notice was not issued to the petitioner - HELD THAT - Having perused the documents on record what clearly emerges is that all the three authorities have concurrently come to the conclusion that petitioner had made a clear attempt of smuggling gold biscuits to evade payment of duty. As noted, as per the punchnama the petitioner had made a declaration to the customs officer however in which there was no indication of him carrying sizable quantity of gold. It was only when customs officer carried out a thorough search of his handbag that several gold biscuits were found concealed in spectacle case and camera case. These findings are thus supported by material on record. In writ jurisdiction the High Court would not interfere with findings of facts unless it is shown that the findings are perverse. Section 2(33) of the Customs Act defines the term 'prohibited goods' as to mean any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but would not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with - Import of an item which is not prohibited or restricted but is subjected to import duty and in which case duty may not have been paid is vastly different from categorising the item as prohibited or restricted so as to fall within the ambit of Section 2(33) of the Customs Act. Section 112 of the Act pertains to penalty for improper importation of goods. Section 125 on the other hand pertains to option to pay fine in lieu of confiscation. As noted sub-section (1) of Section 125 comes in two parts. Whenever confiscation of goods is authorized under the Act, as per sub-section (1) of Section 125 the adjudicating officer has a discretion to offer redemption fine in lieu of confiscation in case of goods importation or exportation whereof is prohibited. In all other cases there is a statutory mandate on the adjudicating officer to offer such redemption fine. If the interpretation of Section 112 and 125(1) is not reconciled, this latter portion of sub-section (1) of Section 125 which covers all cases except where the importation or exportation of the goods is prohibited, would become otiose. The petitions is disposed of with following directions - (i) The fine of ₹ 40 lacs under Section 112 of the Customs Act imposed by revisional authority is reduced to ₹ 30 lacs. (ii) The issue of fixing the redemption fine in lieu of confiscation requires to be decided. To avoid further delay let this issue be decided by the revisional authority. The proceedings are placed back before the said authority for the limited purpose of deciding the redemption fine that the petitioner may pay if he wishes to avoid absolute confiscation of the seized gold. Fresh order shall be passed preferably within four months from today.

Summary

Issues Involved:
1. Legality of the confiscation of gold and currency by customs authorities.
2. Imposition and enhancement of penalties under Section 112(a) of the Customs Act.
3. Applicability of Section 125 of the Customs Act regarding redemption fine in lieu of confiscation.

Issue-Wise Detailed Analysis:

1. Legality of the Confiscation of Gold and Currency:
The petitioner, upon arrival from Dubai at Jaipur International Airport, was found carrying a substantial quantity of gold biscuits and foreign currency without declaring them to customs authorities. The customs officers conducted a thorough search and discovered the concealed gold biscuits and foreign currency. A show-cause notice was issued to the petitioner, leading to the confiscation of 70 gold biscuits and foreign currency under the provisions of the Customs Act, 1962. The adjudicating authority and subsequent appellate authorities upheld the confiscation, concluding that the petitioner attempted to smuggle gold to evade duty. The High Court, in its writ jurisdiction, affirmed these findings, stating that the petitioner’s actions fell squarely under Section 111 of the Customs Act, which pertains to the confiscation of improperly imported goods.

2. Imposition and Enhancement of Penalties under Section 112(a) of the Customs Act:
The adjudicating authority initially imposed a penalty of ?30 lacs on the petitioner for improper importation and an additional ?10 lacs for mis-declaration of baggage contents. On appeal, the Commissioner of Appeals reduced the penalty to ?5 lacs and waived the penalty under Section 114AA. The revisional authority, however, enhanced the penalty to ?40 lacs under Section 112(a). The High Court found that the revisional authority erred in enhancing the penalty without issuing a specific show-cause notice to the petitioner, thus reducing the fine back to ?30 lacs.

3. Applicability of Section 125 of the Customs Act Regarding Redemption Fine in Lieu of Confiscation:
Section 125(1) of the Customs Act mandates that in cases where the importation of goods is not prohibited, the adjudicating officer must offer an option to pay a fine in lieu of confiscation. The High Court noted that all three authorities had ordered absolute confiscation without offering this option, which was incorrect. The Court cited the Andhra Pradesh High Court's decision in Shaik Jamal Basha Vs. Government of India, which held that an option to pay a fine in lieu of confiscation must be given for goods that can be imported upon payment of duty. The High Court directed the revisional authority to decide the redemption fine that the petitioner may pay to avoid absolute confiscation of the seized gold.

Conclusion:
The High Court upheld the confiscation of gold and currency, reduced the enhanced penalty to ?30 lacs, and remanded the matter to the revisional authority to determine the redemption fine in lieu of confiscation. The judgment emphasized the need for procedural fairness in enhancing penalties and the mandatory provision of an option for redemption fine under Section 125 of the Customs Act.