2009 (7) TMI 408 - HC - Customs

Import of rough diamonds using forged REP licenses to save premium amount payable on licence available in market - Statements initially retracted but admission again in another statement indicating knowledge about forged licences Contents of statements corroborated by voluminous documentary evidence Statements ignored by tribunal before concluding that mens rea absent Facts and circumstances pointing to knowledge of licences being forged - Held that the importation of restricted goods under forged REP licences is invalid and void ab initio and liable for absolute confiscation under Section 111(d) of the Customs Act 1962 Redemption fine to be sufficient so that persons should not find it profitable to import without proper license - The Tribunal imposed redemption fine at about 3% of the value of the diamonds while Commissioner had directed absolute confiscation of the same. In our considered opinion ends of the justice would be served if redemption fine is equivalent to 20% of the value of the diamonds. Diamonds not available for confiscation in case of certain importers and penalty of 2 lac imposed by adjudicating authority sustainable Seizure and confiscation assailed on the ground that bills of entry not submitted - In fact admittedly parties had submitted replenishment licence of Rs. 32 crore but genuineness of the same was never verified and those licences were not even returned to him. In such circumstances we find no fault with the findings of the Tribunal that these consignments could not be confiscated. Further held that Means rea may not be necessary for imposing penalty for contravention of provisions of Custom Act 1962

Issues Involved:
1. Validity of the importation of restricted goods under forged REP licenses.
2. Justification for the reduction of penalties imposed under Section 112(a) of the Customs Act, 1962.

Issue-Wise Detailed Analysis:

1. Validity of the Importation of Restricted Goods Under Forged REP Licenses:
The primary issue addressed was whether the importation of restricted goods (rough diamonds) using forged REP licenses is invalid and void ab initio, making the goods liable for absolute confiscation under Section 111(d) of the Customs Act, 1962. The court examined the provisions under the Foreign Trade Development Regulation Act, 1992, and the Export and Import Policy, which necessitate a valid license for importing restricted items like rough diamonds.

The court referred to several precedents, including the Supreme Court's observation in *Sheikh Mohd. Omer v. Collector of Customs, Calcutta and Others*, which clarified that the term "prohibition" in Section 111(d) includes restrictions. The court also cited *S. Mohammed v. Assistant Collector of Customs* and *New India Assurance Co., Shimla v. Kamla and Others*, establishing that a forged license is equivalent to having no license at all, thus making the import unlawful.

The court concluded that the forged REP licenses used by the importers rendered the imports invalid, making the goods liable for confiscation under Section 111(d) of the Customs Act.

2. Justification for the Reduction of Penalties Imposed Under Section 112(a) of the Customs Act, 1962:
The second issue was whether the Tribunal was justified in reducing the penalties imposed by the Commissioner of Customs on the respondents for importing rough diamonds using forged licenses. The court reviewed the penalties imposed by the Commissioner, which included absolute confiscation and significant monetary penalties for the firms involved.

The Tribunal had reduced the penalties and set aside some confiscations, arguing that the proprietors of the firms had no mens rea or knowledge of the forgery. However, the court found sufficient evidence, including statements and documentary evidence, to establish that the proprietors were aware of the forgery and had intentionally used forged licenses to import diamonds.

The court emphasized that for imposing penalties under the Customs Act, establishing mens rea is not necessary, citing *Chairman, SEBI v. Shriram Mutual Fund and Another*. The court also referred to *Commissioner of Customs (Preventive) v. Aafloat Textiles (I) P. Ltd.*, which applied the principle of "Caveat Emptor" (buyer beware) to imports under forged licenses.

The court modified the penalties, reinstating the penalties imposed by the Commissioner of Customs and setting a redemption fine at 20% of the value of the seized diamonds. The court also restored the penalties on M/s. Kiran Exports, M/s. Munjani Brothers, and M/s. D.S. Brothers, which had been set aside by the Tribunal.

Conclusion:
The court allowed the appeals, modifying the penalties and fines imposed by the Tribunal. The court upheld the confiscation of diamonds imported using forged licenses and reinstated the penalties imposed by the Commissioner of Customs. The court also maintained the Tribunal's decision regarding the four consignments seized without submitted bills of entry, allowing the Customs Authority to verify the licenses upon submission and take appropriate action. The writ petition was disposed of accordingly.

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