2018 (3) TMI 284 - HC - Customs

Smuggling - Gold concealed in Zinc ingots - Case of the petitioner is that such show cause notice was never served on him. The department though fully aware that the petitioner is a resident of Sharjah, sent the notices at the address of partnership firm at Rajkot and, thereafter, proceeded exparte against the petitioner without service of notice on him - principles of Natural Justice. Held that - The petitioner cannot take a stand that the notices and summonses were not duly served. All the attempts of actual service having failed, the department had no choice but to exhibit such notices and summonses at the Customs House. Significantly, such notices and summonses were dispatched at the Rajkot address of the partnership firm, of which the petitioner was the partner. The petitioner may have been called upon in his personal capacity to answer the charges, nevertheless, he cannot disown the establishment of the partnership firm, of which he was an active partner and claim that any summons or notice dispatched at the address of the partnership firm would not amount to service on him. This would be way too technical. Even otherwise the department had sent one summons to his address at Sharjah and finally relied on exhibition of such notices and summonses at the Customs House - question of breach of principles of natural justice therefore does not arise. Whether the power of the Commissioner to impose penalty under section 112 of the Customs Act was hedged with limitation of maximum of 10% of the duty attempted to be evaded or 100% of the value of goods? - Held that - Chapter XIV of the Customs Act pertains to confiscation of goods and conveyances and imposition of penalties. Section 111 contained in the said chapter pertains to confiscation of improperly imported goods etc. The said section provides that goods brought from a place outside India in case of any of the eventualities mentioned in clauses (a) to (p) thereof shall be liable to confiscation. When clause (ii) of section 112 therefore, refers to dutiable goods other than prohibited goods, it shall necessarily have the reference to the goods, import of which is not prohibited or of which import is permissible subject to fulfillment of conditions and such conditions have been complied with. Condition of declaration of dutiable goods, their assessment and payment of customs duties and other charges is a fundamental and essential condition for import of dutiable goods within the country. Attempt to smuggle the goods would breach all these conditions. When clearly the goods are sought to be brought within the territory of India concealed in some other goods which may be carrying no duty or lesser duty, there is clear breach of conditions of import of goods though perse import of goods may not be prohibited. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Jurisdiction of the Commissioner.
2. Service of the show cause notice and notices for personal hearing.
3. Limitation of imposing penalty under section 112 of the Customs Act.

Detailed Analysis:

1. Jurisdiction of the Commissioner:
The petitioner initially argued that the Commissioner lacked jurisdiction to call upon him to answer the charges since he had masterminded the smuggling attempt from Sharjah and had not visited India during the process. However, this argument was dropped when confronted with allegations in the show cause notice and the Commissioner's conclusion that the petitioner had conspired during a trip to India. Thus, this issue was not pursued further.

2. Service of the Show Cause Notice and Notices for Personal Hearing:
The petitioner contended that the show cause notice and the notice for personal hearing were never served on him, as they were sent to the partnership firm's address in Rajkot, despite the department knowing his permanent establishment was in Sharjah. The department argued that notices were dispatched to both the office and residential addresses in Rajkot, which returned undelivered, and one was sent to Sharjah, which was not returned. Notices were also displayed at the Customs House, Mundra. The court found that sincere attempts were made to serve the notices and summonses, and the petitioner could not claim non-service. The notices sent to the partnership firm's address, where the petitioner was a partner, were deemed sufficient. Consequently, the court ruled that there was no breach of natural justice.

3. Limitation of Imposing Penalty Under Section 112 of the Customs Act:
The petitioner argued that since the import of gold was not prohibited, the maximum penalty under section 112(ii) should be 10% of the duty sought to be evaded. The department contended that the goods were prohibited as they were smuggled concealed in zinc ingots, thus violating import conditions. The court referred to the definitions of 'prohibited goods' and 'dutiable goods' under sections 2(33) and 2(14) of the Customs Act, respectively. It emphasized that goods imported contrary to any prohibition or without fulfilling conditions are considered prohibited. The court sided with the interpretation that smuggling goods by concealment breaches fundamental import conditions, making them prohibited. It upheld the Commissioner's authority to impose a penalty up to the value of the goods under section 112(i), aligning with the Madras High Court's view in Malabar Diamond Gallery Ltd. and rejecting the contrary view of the Calcutta High Court in Gopal Saha.

Conclusion:
The petition was dismissed, affirming the penalties imposed by the Commissioner under sections 112 and 114AA of the Customs Act. The court upheld the service of notice and the broader interpretation of prohibited goods, allowing penalties up to the value of smuggled goods.