2025 (4) TMI 1200 - AT - Customs

Confiscation of the seized vehicle - redemption fine - penalty - main ground of challenge is that appellant had no prior knowledge about the smuggled nature of the goods - HELD THAT - The knowledge and mensrea can be ground for challenging the penalties imposed but cannot be the ground for challenging the confiscation of vehicle. Undisputedly the goods found in the vehicle of were of foreign origin and were illicitly imported in the contravention of the provision of the Custom Act 1962 hence were smuggled goods. Further the Appellant or the driver of the vehicle on demand was not in position to produce any documents with regards to the licit importation of the said goods - there are no merits in the submission that Appellant or his agent i.e. the driver was not aware of the illicit nature of the goods. There are no merits in the appeal filed by the Appellant challenging the order of confiscation of vehicle under Section 115 of the Customs Act 1962. However taking note of the fact that total seizure value of the smuggled goods was about Rs 3, 43, 000/- and the same have been disposed for Rs 2, 24, 800/- the redemption fine imposed for the release of confiscated vehicle to be on higher side and reduce the same to Rs 50, 000/-. Conclusion - i) Confiscation of conveyances used in smuggling is mandatory unless the owner proves lack of knowledge or connivance. ii) Mere lack of knowledge or mens rea may absolve penalty liability but does not affect confiscation liability. iii) Redemption fine must be proportionate and not exceed the market value of smuggled goods. Appeal partly allowed by reducing the redemption fine to Rs 50, 000/-.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this matter are:

(a) Whether the confiscation of the seized foreign origin dates and the vehicle used for transportation under Sections 111 and 115 of the Customs Act, 1962, respectively, was justified and sustainable in law.

(b) Whether the appellant, as the owner of the seized vehicle, had prior knowledge or connivance in the illegal importation and smuggling of the foreign origin dates, thereby attracting penalty under Section 112 of the Customs Act.

(c) Whether the redemption fine imposed for the release of the confiscated vehicle was appropriate and proportionate.

(d) Whether the penalty imposed under Section 112 of the Customs Act on the appellant was sustainable given the facts and evidence on record.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Legality and justification of confiscation of seized goods and vehicle

Relevant legal framework and precedents: The confiscation of goods and conveyances involved in smuggling is governed by Section 111 (confiscation of goods) and Section 115 (confiscation of conveyances) of the Customs Act, 1962. Section 115(2) specifically provides that any conveyance used in smuggling or carriage of smuggled goods is liable for confiscation unless the owner proves lack of knowledge or connivance. Notifications No. 9/96-CUS(N.T.) and No. 63/94-CUS(N.T.) provide further regulatory context.

Court's interpretation and reasoning: The Tribunal noted that the vehicle was intercepted carrying 1715 kg of foreign origin dates valued at Rs. 3,43,000, which were smuggled goods imported illegally from Nepal through unauthorized routes. The driver and middleman's statements confirmed the illicit nature of the goods and absence of valid import documentation. The appellant admitted ownership of the vehicle and acknowledged that the goods were loaded after purported verification of documents, though no valid invoices or import documents were produced at the time of interception.

Key evidence and findings: Statements under Section 108 of the Customs Act from the driver and the middleman established the smuggled nature of the goods and the unauthorized route of import. The appellant's own statement confirmed ownership of the vehicle and knowledge of loading the goods. No legitimate import documents were produced.

Application of law to facts: Since the goods were smuggled and found in the vehicle owned by the appellant, the vehicle was liable for confiscation under Section 115(2) unless the appellant proved lack of knowledge or connivance. The appellant failed to prove such lack of knowledge, and the vehicle was rightly confiscated. The confiscation of the goods under Section 111 was also justified due to their illicit importation.

Treatment of competing arguments: The appellant contended lack of knowledge regarding the smuggled nature of the goods and that he did not consent to loading the dates. The Tribunal rejected this argument, emphasizing that knowledge or mens rea may affect penalty imposition but does not absolve confiscation liability under Section 115(2) where smuggled goods are found in the vehicle.

Conclusion: The confiscation of the smuggled dates and the vehicle was legally valid and upheld.

Issue (b): Knowledge or connivance of the appellant regarding smuggling and penalty under Section 112

Relevant legal framework and precedents: Section 112 of the Customs Act imposes penalty on persons involved in smuggling or related offenses. The principle that mens rea or knowledge is essential for penalty imposition is well established. The Tribunal relied on precedent from Ashiq Ali (Delhi Bench) which held that mere ownership of the vehicle without knowledge of smuggling does not attract penalty under Section 112.

Court's interpretation and reasoning: The Tribunal found that the appellant was apparently unaware of the illicit nature of the goods, relying on the driver's assurance about the documents. There was no active involvement or direct evidence implicating the appellant in smuggling. Accordingly, the penalty imposed by the original authority was set aside by the Commissioner (Appeals), and the Tribunal concurred with this view, holding that penalty under Section 112 was not sustainable.

Key evidence and findings: The appellant's statement, driver's statement, and absence of direct evidence of appellant's involvement or knowledge.

Application of law to facts: Lack of mens rea or knowledge negated the penalty liability under Section 112, although it did not affect confiscation liability.

Treatment of competing arguments: The appellant challenged the penalty on grounds of no involvement or knowledge. The revenue argued for penalty imposition. The Tribunal favored the appellant on penalty but not on confiscation.

Conclusion: Penalty under Section 112 against the appellant was rightly set aside.

Issue (c): Appropriateness of redemption fine imposed for release of the vehicle

Relevant legal framework: Section 125 of the Customs Act allows for redemption of confiscated conveyances on payment of a fine not exceeding the market value of the smuggled goods.

Court's interpretation and reasoning: The original redemption fine was Rs. 1,46,000, which the Tribunal found to be on the higher side given the seizure value of Rs. 3,43,000 and actual auction proceeds of Rs. 2,24,008. The Tribunal reduced the redemption fine to Rs. 50,000 as a more reasonable amount.

Key evidence and findings: Market value of seized goods, auction sale price, and statutory limit on redemption fine.

Application of law to facts: The redemption fine must be proportionate and not exceed statutory limits. The Tribunal exercised discretion to reduce the fine accordingly.

Treatment of competing arguments: The appellant sought reduction of fine; revenue supported original fine. The Tribunal balanced interests and reduced fine.

Conclusion: Redemption fine reduced to Rs. 50,000 and order upheld with this modification.

3. SIGNIFICANT HOLDINGS

"I find that the recovery of the Foreign origin Dates from the vehicle No. UP78-FT-0421 is not disputed... I can safely deduce that the adjudicating authority has rightly confiscated the said goods along with said vehicle for violating the provisions of Section 11 of the Act read with Notification No.9/96-CUS(N.T.) dated 22.01.1996 Section 7(1)(c)of the Act & Notification No.63/94-CUS(N.T.) dated 21.11.1994."

"Section 115 (2) of the Customs Act, 1962 provides as follows:... Any conveyance or animal used as a means of transport in the smuggling of any goods or in the carriage of any smuggled goods shall be liable to confiscation, unless the owner of the conveyance or animal proves that it was so used without the knowledge or connivance of the owner himself... Thus I do not find any merits in the submission that Appellant or his agent i.e. the driver was not aware of the illicit nature of the goods."

"As regards the penalty imposed on the Appellant under Section 112 of the Act... I find that his active involvement in the illegal importation of the said consignment does not come out in the case. In view of that I do not fit this case to be fit to impose any penalty on the Appellant and thus, I vacate the penalty imposed on the Appellant."

"In view of the above I do not find any merits in the appeal filed by the Appellant challenging the order of confiscation of vehicle under Section 115 of the Customs Act, 1962. However... I find the redemption fine imposed for the release of confiscated vehicle to be on higher side and reduce the same to Rs 50,000/-."

Core principles established include:

- Confiscation of conveyances used in smuggling is mandatory unless the owner proves lack of knowledge or connivance.

- Mere lack of knowledge or mens rea may absolve penalty liability but does not affect confiscation liability.

- Redemption fine must be proportionate and not exceed the market value of smuggled goods.

Final determinations:

- Confiscation of the smuggled goods and vehicle upheld.

- Penalty under Section 112 set aside for the appellant due to lack of knowledge.

- Redemption fine reduced from Rs. 1,46,000 to Rs. 50,000.