2025 (3) TMI 1258 - AT - Customs

Confiscation of gold bangles - diversion of export consignment of gold jewellery after completion of all export formalities - levy of penalties u/s 114(iii) and 114AA of the Customs Act 1962 - quantum of redemption fine. Version of the exporters Shri Preet Kumar Agarwal and Shri Sanjay Agarwal is that as Shri Preet Kumar Agarwal was not having the boarding pass and immigration clearance therefore he was unable to board the plane whereas version of the DRI is that on an intelligence that the export consignment would be diverted the DRI caught Shri Preet Kumar Agarwal while he was proceeding to Gate No. 11 of the NSCBI Airport while boarding the flight while having no jewellery in his hand. HELD THAT - As there were twisted facts from both the sides to know the truth of the facts the CCTV footage was very much relevant in order to ascertain as to whether the exporters were correct or the DRI was correct. However admittedly the CCTV footage was not placed in the present case and are not part of the relied upon documents. However other CCTV footages have been relied upon by the DRI to establish their case. This indicates that there were some lapses in the investigation. It is the case of the DRI that after taking Shri Preet Kumar Agarwal into custody while he was boarding the flight without jewellery on his intimation that the said jewellery had been handed over to Shri Sanjay Agarwal who had booked the said jewellery in air cargo for Hyderabad the flight was stopped by the DRI and Shri Sanjay Agarwal who had boarded the plane was apprehended by taking him out of the said flight. Here the question arises that if the DRI was having prior information on 03.04.2018 that diversion of export consignment would take place then when Shri Preet Kumar Agarwal handed over the consignment to Shri Sanjay Agarwal outside the Airport why did the DRI not apprehend Shri Sanjay Agarwal who was carrying the export consignment at the time when diversion of the goods was taking place? This raises a question mark on the version that the DRI was having prior knowledge of diversion of export consignment of gold jewellery. The investigating team has heavily relied on the statements recorded during the course of investigation. However all those statements were retracted before the Additional Chief Judicial Magistrate. However the procedure prescribed under Section 138B(b) of the Customs Act 1962 that a statement relied during the course of proceedings is required to be examined in chief and thereafter be allowed for cross-examination has not been followed in the present case. Therefore in such circumstances the statements recorded by the investigating team which have been retracted before the Additional Chief Judicial Magistrate have no relevance to implicate the exporters in this case. Although COFEPOSA proceedings were initiated the proceedings against Shri Preet Kumar Agarwal were dropped vide Order of the Central Economic Intelligence Bureau COFEPOSA Wing dated 16.08.2015 who as per the allegations was the main person involved in diversion of the gold jewellery in question. When the COFEPOSA proceedings against the person who was involved in diversion of the gold jewellery in question as per the investigation have been dropped the case against the co-exporters are also not sustainable. Any goods cleared for exportation which are not loaded for exportation on account of any wilful act negligence or default of the exporter his agent or employee or which having been loaded for exportation are unloaded without the permission of the proper officer are liable for confiscation. Admittedly it is a case of negligence on the part of the exporters being the circumstances at that time the exporter was required to take more precaution but failed to do so and the goods cleared for exportation were not loaded for exportation - the goods in question are liable for confiscation under Section 113(k) of the Act. Imposition of penalties under Section 114(iii) of the Act - HELD THAT - Since the goods have been held liable for confiscation under Section 113(k) of the Act penalties under Section 114(iii) are imposable on the appellants/exporters. Imposition of penalty under Section 114AA of the Customs Act - HELD THAT - The said provisions are not attracted in this case as penalty under Section 114AA can be imposed on a person who knowingly or intentionally makes signs or uses or causes to be made signed or used any declaration statement or document which is false or incorrect in any material particular in the transaction of any business for the purposes of the Act. Admittedly in this case documents were not found to be false or fabricated. Therefore the provisions of Section 114AA are not attracted in the present case to impose penalty. Quantum of redemption fine to be imposed - HELD THAT - The appellants-exporters have submitted that the value addition is only to the extent of Rs. 43, 400.43 if making charges of the said jewellery after importation are taken into consideration. Thus the redemption fine imposed on the appellant is on the higher side. Accordingly the redemption fine imposed reduced to Rs.15, 00, 000/-. Conclusion - i) The order of confiscation of the consignment of 1194 pcs of gold bangles weighing 54096 gms. upheld having an ascertained value of Rs.16, 10, 43, 792/- cleared by diversion of the consignment in the domestic area under Section 113(k) of the Customs Act 1962. ii) Redemption fine of Rs.15, 00, 000/- imposed u/s 125 of the Act for redemption of the goods confiscated on account of diversion of the export consignment. iii) Since the goods have been held liable for confiscation under Section 113(k) of the Act penalties under Section 114(iii) are imposable on the appellants/exporters. iv) The provisions of Section 114AA are not attracted in the present case to impose penalty. v) The gold jewellery which has been seized from the possession of Shri Sanjay Agarwal is to be released to Shri Sanjay Agarwal on payment of redemption fine and penalties. vi) No proceedings are sustainable against the other noticees to the SCN issued in this case. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the gold bangles cleared for export were liable for confiscation under Section 113(k) of the Customs Act, 1962 due to alleged diversion.
• The applicability of penalties under Sections 114(iii) and 114AA of the Customs Act, 1962 on the appellants/exporters.
• Whether the redemption fine imposed under Section 125 of the Customs Act was appropriate.
• The validity of the procedural lapses and the role of customs officials in the alleged diversion.
• Whether the statements recorded under coercion were admissible.
• The impact of non-supply of Relied Upon Documents (RUDs) and violation of natural justice principles.
• Whether the proceedings against other co-noticees, including customs officials and State Trading Corporation of India Ltd., should be upheld or dismissed.

2. ISSUE-WISE DETAILED ANALYSIS

Confiscation under Section 113(k) of the Customs Act:

• Legal Framework: Section 113(k) deals with confiscation of goods not loaded for export due to negligence or default.
• Court's Interpretation: The Court found that the goods were not loaded for export due to negligence, thus attracting Section 113(k).
• Key Evidence: The goods were cleared but not loaded, and the alleged diversion was not proven with sufficient evidence.
• Conclusion: The goods were liable for confiscation under Section 113(k) due to negligence.

Penalties under Sections 114(iii) and 114AA:

• Legal Framework: Section 114(iii) pertains to penalties for acts rendering goods liable for confiscation, while Section 114AA relates to false declarations.
• Court's Interpretation: Penalties under Section 114(iii) were applicable due to negligence, but Section 114AA was not applicable as no false declarations were found.
• Conclusion: Penalties were imposed under Section 114(iii) but not under Section 114AA.

Redemption Fine under Section 125:

• Legal Framework: Section 125 allows for redemption of confiscated goods upon payment of a fine.
• Court's Interpretation: The redemption fine was reduced to Rs. 15,00,000, considering the circumstances and value addition.
• Conclusion: The redemption fine was deemed excessive and reduced.

Procedural Lapses and Role of Customs Officials:

• Legal Framework: Examination of procedural compliance by customs officials.
• Court's Interpretation: Lapses were procedural, not indicative of connivance or intentional diversion.
• Conclusion: No penalties were imposed on customs officials due to lack of evidence of connivance.

Admissibility of Statements and Non-supply of RUDs:

• Legal Framework: Section 138B(b) of the Customs Act requires examination and cross-examination of statements.
• Court's Interpretation: Statements obtained under duress and without proper procedure were not admissible.
• Conclusion: The non-supply of RUDs violated natural justice, affecting the validity of the proceedings.

Proceedings against Co-noticees:

• Legal Framework: Examination of involvement of other parties in the alleged diversion.
• Court's Interpretation: Proceedings against co-noticees were dropped due to lack of evidence of their involvement.
• Conclusion: No proceedings were sustainable against co-noticees, including customs officials and State Trading Corporation of India Ltd.

3. SIGNIFICANT HOLDINGS

• Confiscation and Penalties: The Court upheld the confiscation of goods under Section 113(k) and imposed reduced penalties under Section 114(iii).
• Redemption Fine: The redemption fine was reduced to Rs. 15,00,000, considering the circumstances.
• Non-applicability of Section 114AA: No penalties were imposed under Section 114AA due to the absence of false declarations.
• Procedural Lapses: The lapses by customs officials were procedural and did not warrant penalties.
• Non-supply of RUDs: The violation of natural justice principles affected the proceedings, leading to the inadmissibility of certain evidence.
• Proceedings against Co-noticees: Dropped due to lack of evidence of involvement in the alleged diversion.

The appeals were disposed of with the above findings, and the order was pronounced in open court on 18.03.2025.