Defense to SCN is the most important document to be read through before you venture into making Brief facts of an OIO. This vital document is immensely enlightening thing to you as a law enforcement officer. Needless to say that defending oneself against incrimination is one of fundamental rights guaranteed by the constitution and hence you are likely to come across a number of pleas taken against your action of seizure & arrest and any proposal to confiscate the goods seized. At times, the defense challenges your powers under the Acts in a manner that you never imagined before. Therefore, going through a defense document is not only important to you working with adjudicating authority it also gives you insights as to how would you strategize you actions in striking units so that they are not rendered invalid at a later stage of proceedings. Defense materials on Tackling Reply to SCN and Brief facts of a Case are must see for you. Lets go through the defense material as a third example:
Vital Aspects of the Seizure of Crude Gold Item that Took Place
Let us view the matter under 05 different touch stones for proper and complete appraisement of the seizure case in an alleged attempt of gold smuggling.
1. Facts of the Incident
The passenger Mr. BAB is holding Indian passport and has arrived from Dubai. Interception has been done once the passenger cleared himself through green channel. On objective query if he is carrying anything contraband or dutiable replied in negative. Personal Search of the passenger however resulted in recovery of 2 crude gold chains, 4 crude gold bangles and 1 crude gold pendant totally weighing 373 grams valued at Rs. 10,93,405/ together having gross weight 373 grams. Bangles and pendent were kept in the pocket of the jeans pant worn by the passenger and chains were worn by him around his neck
2. Actions of Intercepting Unit
AIU seizes the recovered items after certification of the recovered gold items as crude gold (not construed as jewellery) items by a govt valuer under a seizure Panchanama and seizure memo. Recording of statements and admissions of the intercepted traveller followed on close heels. The assessed value found to be less than Rs 20 lakhs and hence, arresting of Mr. BAB was not effected in the instant case but seizure was made for the law to take its own course post seizure.
3. Observations of Investigation
(I) CONTRAVENTIONS:
i) Section 77 of the Customs Act, 1962
Explanation: Section 77 of the Customs Act, 1962, the owner of any baggage shall, for the purpose of clearing it, shall make a declaration of its contents to the proper officer of Customs, in Form-I (Indian Customs Declaration Form), prescribed under Customs Baggage Declaration Regulations, 2013.
ii) Rule 3 of the Baggage Rules 2016
Explanation: Rule 3 of the Baggage Rules 2016 prescribes the limit, terms and conditions for duty free import by the individual residents. Rule 3 ibid, provides that an Indian resident or a foreigner residing in India or a tourist of Indian origin, not being an infant arriving from any country other than Nepal, Bhutan or Myanmar, shall be allowed clearance free of duty articles in his bona fide baggage, that is to say, –
(a) used personal effects and travel souvenirs; and
(b) articles other than those mentioned in Annexure-I, upto the value of fifty thousand rupees if these are carried on the person or in the accompanied baggage of the passenger:
Further, the rule 3 excludes the articles in Annexure-I
Explanation: Annexure-I to the Baggage Rules, 2016, lists “Gold or silver in any form other than ornaments.” which means that when Annexure I to the Baggage rule 2016 is read with Rule 3 of the Baggage Rule 2016, it emerges that a major Indian individual is allowed articles up to Rupee fifty Thousand only duty free and this allowance excludes gold and silver in any form but includes ornaments of gold and silver.
iii) Rule 11 & 12 of Foreign Trade (Regulation) Rules, 1993
Explanation: As per CTH 9803 of first schedule to Customs Tariff Act, 1975, “all dutiable articles imported by a passenger in his baggage” are “restricted” as per Foreign Trade Policy 2015-20, subject to the saving clause 3(1)(h) of the Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993 as amended vide Foreign Trade (Exemption from application of Rules in certain cases) Order, 2017 dated 25.07.2017. The said saving clause 3(1)(h) says:
“3. Exemption from the application of rules-
(1) Nothing contained in the Foreign Trade (Regulation) Rules, 1993 shall apply to the import of any goods,
(h) by the person as passenger baggage to the extent admissible under the Baggage Rules for the time being in force:
Provided that in the case of imports by a tourist, articles of high value whose re-export is obligatory under Baggage Rules, 2016, shall be re-exported on his leaving India, failing which such goods shall be deemed to be goods the import of which has been prohibited under the Customs Act, 1962 (52 of 1962);”
iv) “Passenger Baggage” under Para 2.26 of the Foreign Trade Policy, 2015-20
Explanation: Gold collectively weighing 373 gms valued at Rs. 10,93,405/- are in such quantity and nature that it cannot be construed as bonafide household articles required for day-to-day use by Mr. BAB
(II) OTHER FINDINGS:
The findings of Investigation included among other things as following:
(i) Mr. BAB had failed to declare the gold items and replied in negative on being enquired about the goods subject to restrictions and duty.
(ii)it was due to efforts on the part of the Customs Officers else, the passenger would have succeeded in evading detection and smuggle out the gold without payment of Customs duty.
(ii) he misused the liberalized facilitation.
(iv) the manner of carrying gold in crude bangles form and carrying along him was with the sole intention of evading detection by Customs (iv)he failed producing any evidence in respect of purchase of the gold under seizure.
(v) He did not turn up before Investigation for giving evidence and producing documents
(vi) he failed to discharge burden of proof cast upon him by virtue of Section 123 (1) of the Customs Act, 1962.
(III) DEFINITIONS FOUND CONTRIBUTORY
i) As per Section 2(33) of the Customs Act, 1962, “prohibited goods” are defined as 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 does 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. This construes that gold being restricted goods if the conditions stipulated are not complied with, the same falls under the category of “prohibited goods”.
ii) As per section 123 of the Customs Act, 1962, burden of proof in the cases where goods are seized in the reasonable belief that they are smuggled goods lies on (i) the person from whose possession the goods were seized; and (ii) any other person who claims to be the owner thereof. The section provides the ambit of its application to gold and manufactures thereof, watches, and any other class of goods which the Central Government notifies by the Official Gazette. Under the facts on record, the passenger failed to discharge the burden of proof, proving that the gold imported by him and put under seizure are not smuggled goods.
iii) As per section 2(39) of the Customs Act, 1962 “smuggling”, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113. A conjoint reading of Section 2(33), Section 123 and section 2(39) in the backdrop of facts and circumstances of the instant case it is apparent that first, the restricted imported of gold was rendered prohibited by contravention of a host of legislations and then the passenger’s failure to discharge his burden of proof established the act of his illegal import as “smuggling”.
4. Concluding Action of Investigation
A show cause notice was issued to Mr. BAB to explain the authority as to why: the seized gold not be confiscated under Section 111(d), (l) and (m) of the Customs Act, 1962 and penalty not be imposed commensurately under section 112 (a)
5. ‘Question of Facts’ and ‘Question of Law’
Will Mr. BAB get facility of redemption in lieu of redemption fine? Is the passenger subject to Penalty? If so, how much?
CONTENTIONS of the NOTICEE in RESPECT of SEIZURE & SCN
The averments of the noticee includes among other things that SCN are predetermined, induces compulsive impression on adjudicating authority, bad in law hence needs to be quashed. He argues that Gold is not restricted item citing the foreign trade policy and requests for redemptions of the goods citing precedence in multiple case laws. The submissions are made through his advocate.
1.0. Defense Submission of Noticee Mr BAB
At the outset, the noticee Mr BAB admits the fact of possession, carriage, non-declaration of the jewellery to Customs and his intention to save a little money by evading Customs duty.
1.1. The Show Cause Notice Dated 25.11.2019 Prejudged The Entire Issue And Thus Prejudiced The Noticee:
I. In a Show Cause Notice, the allegations and charges have to be made in a tentative manner (e.g. it appears that ……). However, in the present case the noticee avers that the impugned show cause notice is bad in law on the ground that the show cause notice has pre-judged and pre-determined the entire issue and left nothing for the Adjudicating Authority to enquire into. In the present case, the opportunity of submitting defence reply to the Show Cause Notice and hearing has become an idle formality and farce. The Show Cause Notice dated 25.11.2019 is therefore liable to be set aside.
II. The impugned paras of the SCN in question and the relevant passages are reproduced and highlighted below:
Para 10.1: The passenger, Mr BAB……………. From the above, it is evident that Mr BAB did not make a true and correct declaration……..……As the gold was not declared and was admittedly attempted to be taken out of Customs area without declaration, it has to be considered as prohibited goods in terms of section 2(33) of the Customs Act, 1962 and is therefore liable to confiscation. Once it is considered as prohibited goods, the goods are liable for absolute confiscation under section 111(d) of the 1962.
Para 10.3: Further, as per the …………………… In the instant case, he is not an “eligible passenger” as per notification no 50/2017 to import gold.
Para 10.4: The personal search of passenger, ……..…………….Hence, his intention of smuggling is apparent…..….………. Therefore, it requires exemplary punishment. Hence, the seized gold is liable for absolute confiscation.
Para 10.6: _Mr BAB opted for green channel …..…..……..…….. Under Section 77 of the Customs Act, 1962 and therefore the seized gold is liable for absolute confiscation under Section 111(1) and 111:(m) of the Customs Act, 1962.
Para 11 (i):_02 crude gold chains, 04 crude gold bangles, 1 crude gold pendant ……… should not be absolutely confiscated under Section 111(d), (1) and (m) of the Customs Act, 1962.
III. The noticee submits that from the above, it appears that the authority who issued the SCN has already made up his mind that the gold under seizure is liable for absolute confiscation and the noticee is liable for exemplary punishment for the alleged acts of omission and commission. That being so, the question of submission of defence reply to the show cause notice or holding an enquiry and giving an opportunity of hearing by the Adjudicating Authority becomes an idle formality and mere farce. It is incumbent on the part of the enquiry officer/Adjudicating Authority to keep an open mind till it comes to a decision regarding the involvement of the noticee in the illicit importation of gold into India. If it is found that they have already closed their minds in respect thereto the quasi-judicial proceeding it cannot be held to be in accordance with law or in compliance with the principles of natural justice. Reliance is placed on the decision in the case of Calcutta High Court in Raghunandan Jalan vs Collector of Central Excise And … on 16 February, 1972: 1981 (8) ELT 476 Cal.
IV. The noticee contends that the impugned show cause notice is violative of principles of natural justice as the authority had already prejudged the issue and has come to the conclusion that the noticee is not entitled to the release of the goods under seizure. He also contends that the show cause notice suffers from bias as it confronts the noticee with definitive concl He contends that although the show cause notice purports to give an opportunity to the noticee to respond to the charges against it, in fact the said opportunity offered to the noticee is illusory as it is obvious that the authority who issued the SCN has not kept an open mind. The portions of the show cause notice pointed out by the noticee supports the above contentions.
V. The above passages in the impugned notice indicate that there is a lot of substance in the contentions of the noticee. No doubt, at some of the places in the show cause notice the authority has also used the word “appears” suggesting that his conclusion is only tentative but not final or conclusive but the overall impression one gets from a reading of the show cause notice is that the authority has predetermined the issue.
VI. It is settled principle of law that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating the show cause proceeding. A show cause notice is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice. At the stage of show cause notice, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. At that stage, the authority issuing the charge sheet/show cause notice, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in the present case, the entire proceeding initiated by the show cause notice gets vitiated by unfairness and bias and the subsequent proceedings become an idle ceremony.
VII. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi-judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it.” The said principle has been followed by the Supreme Court in V.C., Banaras Hindu University v. Shrikant (2006) 11 SCC 42, stating: (SCC p. 60, paras 48 49)
“48. The Vice-Chancellor appears to have made up his mind to impose the punishment of dismissal on the respondent herein. A post-decisional hearing given by the High Court was illusory in this case. 49. In K.I. Shephard v. Union of India 1987 (4) SCC 431 this Court held: (SCC p. 449, para 16) ‘It is common experience that once a decision has been taken, there is a tendency to uphold it and a representation may not really yield any fruitful purpose.”
VIII. In Rajam Industries (P) Ltd.’s case, the Chennai High Court held that where a show cause notice quantified the amount of Central Excise duty not paid by the petitioner therein under various heads and also stated that the petitioner therein was liable to pay penalty and interest, the said show cause notice has to be set aside insofar as it relates to the quantification of the amount liable to be paid by the petitioner therein towards the difference of the excise duty and the observations made therein that the petitioner had clandestinely removed the goods. It held that when the respondents had arrived at the quantum of excise duty stated to have been evaded by the petitioner in the show cause notice by misusing the SSI exemption obtained by it, nothing remains for them to determine after the petitioner filed its response to the show cause notice. The impugned show cause notice by use of the words “it is evident”, “liable for absolute confiscation”, “is apparent”, “it requires exemplary punishment”, and “should not be absolutely confiscated” as pointed out above clearly suggests predetermination by the authority of the liability of the noticee. Reliance is placed on the decision in the case of HIGH COURT OF A:NDHRA PRADESH in SBQ Steels Ltd. Versus Commissioner of Customs, Central Excise & Service Tax.
IX. The apprehension expressed by the noticee is that the show cause notice is indicative of the basis or the prejudged conclusion as to what would be the inevitable and ultimate finding to be recorded by the Adjudicating Authority i.e Additional Commissioner of Customs and no useful purpose would be served by participating in the adjudication proceedings. Further reliance is placed on the following decisions:
(A) Poona Bottling Co. Ltd. & Anr. v. Union of India and Others
(B) 1981 (8) E.L.T. 476 (Cal.) (Raghunandan Jalan v. Collector of Central Excise, West Bengal and Ors.)
(C) 1985 (21) E.L.T. 655 (Kar.) (Union of India and Ors. v. I.T.C. Limited and Another)
(D) Mysore Acetate and Chemicals Co. Ltd. v. Assistant Collector, Central Excise, Mysore).
(E) 1981 (8) E.L.T. 565 (Mad.) (Madras Rubber Factory Ltd. v. Assistant Collector of Central Excise, Madras and Another).
(F) 1989 (24) E.L.T. 23 (Kar.) (Alembic Glass Industries Limited v. Union of India and Others).
(G) Calcutta Discount Co. Ltd. v. Income Tax Officer, Companies District I, Cal. wherein, their Lordship have expressed the view that the Court can issue a writ to prevent unnecessary harassment in appropriate cases.
X. In the impugned SCN, it has been proposed for absolute confiscation of the gold seized from noticee and exemplary punishment on the noticee. The noticee avers that the impugned show cause notice is bad in law on the ground that the show cause notice has pre-judged and pre-determined the entire issue by proposing for absolute confiscation of the seized gold and exemplary punishment on the noticee under the provisions of Customs Act, 1962. Neither Section 111 nor section 125 of the Act provides for absolute confiscation of goods which are not contrabands, and since gold is not a contraband or a prohibited item the owner or person from whom it is seized is entitled to have the goods released on payment of redemption fine and duty.
Sections 111(d), 111(1) and 111(m) read as follows:
SECTION 111. Confiscation of improperly imported goods, etc. – The following goods brought from a place outside India shall be liable to confiscation: –
(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;
(1) any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;
(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54;
XI. Section 124 of Customs Act, 1962 which provides for confiscation of the seized goods reads as follows:
SECTION 124. Issue of show cause notice before confiscation of goods, etc. – No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person-
(a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;
(b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and (c) is given a reasonable opportunity of being heard in the matter:
Provided that the notice referred to in clause (a) and the representation referred to in clause (b) may, at the request of the person concerned be oral.
XII. Section 125 of Customs Act, 1962 which provides for redemption of seized goods reads as follows:
SECTION 125. Option to pay fine in lieu of confiscation. – “(1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit.”
XIII. Under Section 125 of Customs Act, 1962 a discretion has been conferred on the Adjudicating Authority to give an option to the importer/owner of the goods to pay fine in lieu of confiscation in cases of goods, the importation or exportation whereof is prohibited under the Act or under any other law for the time being in force but in respect of other goods the officer is obliged to give such an option. In a case of smuggling, having regard to the facts and circumstances in which the goods were said to be imported, only the Adjudicating Authority if he considers it appropriate to direct absolute confiscation of the goods or consider it a fit case for exercise of his discretion to give an option to pay the redemption fine under Section 125 of the Act. In view of sec. 125, the discretion rests with the adjudicating authority for either allowing the goods to be released on redemption fine or confiscate absolutely. The High Court of Calcutta in CC (Prev ) vs Uma Shankar Verma has held that where the goods are not prohibited, the authorities have no choice but to allow the option of redemption of goods on payment of fine. On the other hand, when the goods are prohibited, allowing redemption on payment of fine is wholly within the discretion of the adjudicating authority.
XIV. The law on absolute confiscation vis-a-vis option to redeem stands discussed in detail by the Tribunal in the case of Gauri Enterprises Vs. Commissioner of Customs, Pune [2002 (145) E.L.T. 706 (Tri. Bang.)]. The following is the crux of the judgement: (i)It was observed in the said judgment that resort to absolute confiscation should be an exception and not the rule. (ii) The appellant should be given an option to redeem the goods on payment of fine (iii) The matter be remanded to the Commissioner for fixing the quantum of redemption fine.
XV. The learned authority who issued the SCN dated 25.11.19 and proposed for absolute confiscation of the goods has indirectly put the Adjudicating Authority under a compulsion to confiscate the goods absolutely. This is an illegal interference of the discretionary power of the adjudicating authority. The show cause notice has thus pre-judged and pre-determined the issue. The noticee submits that it is a pre-meditated notice and it has foreclosed the material rights of the noticee for redemption of the goods on payment of fine. The noticee refers to the decision of the Hon’ble Supreme Court in the cases of Oryx Fisheries Private Limited and Siemens Ltd. He also relies on the judgement of MOHIT THAKOR Vs COLLECTOR, reported in 1994 (72) ELT 865 wherein, under similar circumstances, the Bench ordered for grant of redemption of 2 Kgs. of seized gold. It was also held that absolute confiscation was not justified in view of FER/Customs notifications and ITC order prevailing during the relevant period.
XVI. The issue of absolute confiscation of goods and option of redemption thereof has been a subject to judicial interpretation in the past with rulings of the High Court and Tribunal on the same. The High Court of Calcutta in CC (Prev) vs Uma Shankar Verma has held that where the goods are not prohibited, the authorities have no choice but to allow the option of redemption of goods on payment of fine. On the other hand, when the goods are prohibited, allowing redemption on payment of fine is wholly within the discretion of the adjudicating authority.
XVII. Further, it is the discretion of the authority to impose either the minimum or maximum penalty under the penal provision of the Act. Discretion is inevitable both in civil and criminal proceedings. It is impossible to foresee the eventualities in the judicial proceedings and for this purpose the power of discretion is conferred upon the judge to decide justly according to the facts and circumstances. It is for this reason that in every piece of legislation generally we find words like, “as the court deems proper”, “as the court thinks reasonable”, “as the court otherwise directs” and other similar expressions which confers discretionary power on the court. These expressions show that a court/adjudicating Authority has unbridled freedom to decide a case according to his subjective satisfaction. Judges/Adjudicating Authorities are perceived as wielding wide range of power because of the discretion conferred on them. The fundamental purpose of imposition of sentence is based on the principle that the accused must realise that the crime committed by him has not only created a dent in his life but also a concavity in the social fabric. The purpose of just punishment is designed so that it serves as a deterrent for the individual and the society should not also suffer from the commission of crime time and again.
XVIII. Penal laws in India generally provides for maximum extent of punishment which a criminal court can award and it is only in very few offences that a minimum punishment is provided. In the former cases court has a wide discretionary power to award punishment but while sentencing, court has to base its discretion on the principle of proportionality in prescribing liability according to the culpability of each kind of criminal conduct as laid down by Hon’ble Supreme Court in the case of State of M.P. v. Munna Chaubey. This principle allows some significant discretion to the Judge in arriving at a sentence in each case, presumably to permit sentences that reflect more subtle considerations of culpability that are raised by the special facts of each case. Judges in essence affirm that punishment ought always to fit the crime; yet in practice sentences are determined largely by other considerations. Sometimes it is the correctional needs of the perpetrator that are offered to justify a sentence. Sometimes the desirability of keeping him out of circulation and sometimes even the tragic results of his crime. Inevitably these considerations cause a departure from just desert as the basis of punishment and create cases of apparent injustice that are serious and wide spread.
XIX. In matter of sentencing though the court/Adjudicating Authority has a conferred wide discretion but the courts have to follow a pragmatic sentencing policy. So, the various factors which plays the important role in determine the awarding of sentence are the personality of the offender as revealed by his age, character, antecedents and other circumstances of tractability of the offender to reform, the nature of the offence and the manner in which offence was committed. Thus, a Judge has to balance the personality of the offender with the circumstances in which the offence has been committed and the gravity of the crime and choose the appropriate sentence to be imposed while exercising such discretion.
XX. Hon’ble Supreme Court in Modiram Vs State observed that sentence must bring home to the guilty person oonsciousness that the offence committed by him was against his own interest as also against the interest of the Society of which he happens to be a member. Hon’ble Goa and Rajasthan High Court also observed in Raghunath vs Paria, Gopishankar vs State respectively that in awarding sentence the court is to take into consideration the nature of the offence circumstances under which these were committed, degree of deliberation shown by the offender, provocation received by him, the antecedents of the offender upto the time of the sentence, all these matters being established in evidence. Hon’ble Kerala High Court in Chacko v/s State laid down important sentencing guidelines on imprisonment: The mere fact that an accused has been convicted many times is no reason for imposing heavy punishment for trivial offence.
XXI. In Partap Singh v. State of Punjab, the supreme court of India observed as follows:
“.... the court is not an appellate forum where the correctness of the order of the Government could be conversed and, indeed, it has no jurisdiction to substitute its own view... for entirely of the power, jurisdiction and discretion… is vested by law in the Government. The only question which could be considered by the court is whether the authority vested with the power has paid attention to or taken into account circumstances, events or matters wholly extraneous to the purpose for which the power was vested, or whether proceedings have been initiated malafide for satisfying a private or personal grudge of the authority. The basic principle is that the court would not interfere with, or probe into the merits of, the exercise of discretion by an authority, as it is not a forum to hear appeals from the decisions of the authority, they would not go into the question whether the opinion formed by the concerned authority is right or wrong. The court does not substitute its own views for that of the concerned authority.”
In view of the above submission, it is the discretionary power of the adjudicating authority either to absolutely confiscate the seized goods or redeem the goods on payment of fine and either to impose a minimum or maximum penalty. The prosecution cannot interfere with such a discretionary power by proposing or suggesting absolute confiscation of the goods and recommending for exemplary punishment. The authority who issued the impugned SCN interfered in the discretionary power of the adjudicating authority by proposing exemplary punishment on the noticee. If the Adjudicating Authority yields to such an interference, it will be against law.
XXII. The noticee humbly requests the Adjudicating Authority to peruse the documents on record and the statutory provisions. Though power under Sections 111 and 112 of confiscation and penalty are available, under Section 125 of the Customs Act, Authority also enjoys discretionary power to impose fine in lieu of confiscation. Therefore, the proposal made in the SCN for absolute confiscation under Section 111(d), 111(1) and 111(m) of the Act is interference of the said discretionary power and therefore the SCN dated 26-11 19 is bad in law and not sustainable.
XXIII. The noticee submits that since the authority who issued the SCN has pre judged the entire issue and the impugned proceedings, it is not a show cause notice, but in effect it is an order of adjudication except, it has been termed as a show cause notice. To support his contention that the authority has pre judged and pre-determined the issue and the noticee would not have reasonable opportunity in defending himself, reliance is placed on the decision of the Hon’ble Supreme Court in the case of Oryx Fisheries Private Limited vs. Union of India & Ors., reported in (2010) 13 SCC 427 wherein the Honorable Supreme Court observed as follows:
“Show cause notice cannot be read hyper technically and it is well settled that it is to be read reasonably. But while reading a show-cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show-cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show–cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show-cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence”
XXIV. It is further submitted that even though the show cause notice is answerable to another officer, namely, the Additional Commissioner of Customs, yet the inherent defect cannot be cured, as the show cause notice has pre-determined the issue and it is the pre-meditated in nature and in such circumstances, the SCN should be quashed. In support of such contention, reliance is placed on the decision of the Hon’ble Supreme Court in the case of Siemens Ltd., vs. State of Maharashtra & Ors., reported in (2006) 12 SCC 33. (para 9&10).
Similar observation can be seen in the case of K.I.Shephard Vs. Union of India [(1987) 4 SCC 431, wherein. the Hon’ble Supreme Court held as follows:
When notice is issued with premeditation, a writ petition would be maintainable and also held that in such an event, even if the court directs the statutory authority to hear the matter afresh, ordinarily such hearing would not yield any fruitful purpose.
Further, In the case of SBQ Steels Ltd. v Commissioner of Customs, Central Excise and Service Tax, Guntur 2013 (1) TMI 359 (Andhra HC), it was held as follows:
“While issuing such show cause the department should ensure that it does not indicate any pre-meditation or prejudgment by the Department.”
In view of the above submission, the noticee submits that the impugned SCN which pre-judged and pre-meditated the entire issue is invalid and not sustainable. The impugned SCN is therefore liable to be quashed.
1.2. Gold Is Not A Prohibited Item For Import. Therefore, Absolute Confiscation Is Not Warranted In This Case:
I. Gold is not ‘prohibited goods’, but only “restricted goods’. Import of gold is no longer prohibited and therefore, it is the duty on the part of the adjudicating authority, if he is of the view that it is liable for confiscation, to permit its redemption on appropriate fine. Many adjudicating authorities commit an error while differentiating between restriction and prohibition in import. One of the main objectives of prohibition of any import into India is that import of such goods should not weaken the economic status of the country. Restriction of import does not mean prohibition to import. If any goods are restricted to import, the Government fixes some sort of barriers to import, which an importer has to overcome such barriers which means, certain procedures have to be completed to import such restricted products. If any import of goods adversely affects the health of human, animal, plants and other species, such goods are prohibited to import by the government of importing country. The restriction to import any goods is decided by the government under foreign trade policy amended time to time.
II. In the present case a question of law arises viz. whether the expression “prohibition” contained in Section 111(d) of the Customs Act 1962 includes prohibition of imports coupled with a power to permit importation under certain conditions. The facts relevant for the purpose of deciding the point in issue is simple.
Section 111 (d) of the Act provides: “The following goods brought from a place out- side India shall be liable to confiscation: — (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force.” “Prohibited goods” is defined in Section 2(33) of the Act. That definition reads as: “prohibited goods” means 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 does 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.”
III. This takes us to the question whether by importing gold, Mr BAB contravened Section 111(d) read with Section 125 of the Act. It is urged on behalf of Mr BAB that expression “prohibition” in Section 111(d) cannot be considered as a total prohibition and that expression does not bring within its fold the restrictions imposed for import of gold. Such a restriction cannot be considered as a prohibition under Section 111 (d) of the Act. While section. 111 (d) of the Act uses the word “prohibition”, not merely prohibition of imports and exports, it also includes “restrictions or otherwise controlling” all imports and exports. According to Mr BAB restrictions cannot be considered as prohibition more particularly under the Foreign Trade Policy 2015-20. Under Export and Import Policy, laid down by the DGFT, in the Ministry of Commerce, certain goods are placed under restricted categories for import and export. Some of the goods are absolutely prohibited for import and export whereas some goods can be imported or exported against a licence.
IV. The Main Difference between Prohibitions and Restrictions is Here
Prohibited goods are never allowed to enter or exit under any circumstances restricted goods are allowed to enter or exit the Country only in certain circumstances or under certain conditions, for example on production of a permit, certificate or letter of authority from the relevant government department, institution or body.
#Examples of prohibited goods:
- Narcotic drugs, psychotropic substances and other controlled pharmaceuticals.
- Fully automatic, military and unnumbered weapons and explosives.
- Obscene matters and objects, such as videocassettes, DVDs, films, books, magazines etc.;
- Nuclear, chemical, toxic, biological weapons and similar substances;
- Counterfeit bank notes;
- Goods to which a trade description or trademark is applied in contravention of any Act (for example, counterfeit goods – see below)
- Unlawful reproductions of any works subject to copyright;
- Goods shipped or originating from countries under an embargo from the United Nations Security Council and the European Union
#Examples of restricted goods:
- Currency, gold and silver bullion.
- Endangered plants and animals. The restriction includes any parts of or articles made from them.
- Food, plants, animals and biological goods;
- Medicines.
V. According to the Law, the importation and exportation of certain goods is prohibited or restricted. Restrictions usually refer to the need for securing the authority or inspection from the appropriate Government Department. The aim of prohibitions and restrictions is the protection of society and the perpetuation of a safe environment. More specifically, such prohibitions and restrictions are essential for the safeguard of social ethics, order and security, protection of public health or the health of animals or the protection of plant-life, the protection of industrial and commercial property, archaeological treasures, cultural artefacts and others.
VI. The World Customs Organization is the only international organization with competence in Customs matters and can rightly call itself the voice of the international Customs community. In this connection reference is invited to the Glossary Of International Customs Terms published by World Customs Organization. The WCO defines prohibition of goods and restriction of goods as follow:
PROHIBITIONS OF GOODS (Marchandises Prohibées) – Goods whose importation or exportation is prohibited by law.
RESTRICTION OF GOODS (Restriction de Marchandises) – A legal requirement by law for the submission and approval of an application or other document (other than for Customs purposes) as a prior condition to importation or exportation.
VII. The Foreign Trade Policy which is in force categorizes goods into 3 categories as free, restricted or prohibited, thus makes a distinction between prohibited goods and restricted goods. The policy says that there are two kinds of restrictions. The items which are prohibited for trade are beyond the purview of import/export. The items which are restricted can be imported with a license (with its conditions) issued by DGFT. Gold figures as a restricted item. It would, therefore, not to be correct to say that the policy prohibited import of gold. It may be seen from the latter part of the Clause 33 of Section 2 of the Act which is in the nature of a clarification that even the goods, the import of which is prohibited are not considered to be prohibited if the condition subject to which their export or import are being complied with. Therefore, even if conditions for import of gold are not fulfilled, gold cannot be considered as prohibited goods.
VIII. In this connection, the relevant paras of Foreign Trade Policy (1st April 2015 to 31st March 2020) are reproduced under to establish the contention that gold is not a prohibited item.
Para: 2.07. Principles of Restrictions:
DGFT may, through a Notification, impose restrictions on export and import, necessary for: –
(a) Protection of public morals;
(6) Protection of human, animal or plant life or health;
(c) Protection of patents, trademarks and copyrights, and the prevention of deceptive practices;
(d) Prevention of use of prison labour;
(e) Protection of national treasures of artistic, historic or archaeological value;
(f) Conservation of exhaustible natural resources;
(g) Protection of trade of fissionable material or material from which they are derived;
(h) Prevention of traffic in arms, ammunition and implements of war
(i) Relating to the importation or exportation of gold or silver.
Para 9.41. “Prohibited” indicates the import/export policy of an item, as appearing in ITC (HS) or elsewhere, whose import or export is not permitted.
Para 9.47. “Restricted” is a term indicating the import or export policy of an item, which can be imported into the country or exported outside, only after obtaining an Authorization from the offices of DGFT.
IX. In view of the above submission, Gold is not prohibited for import and therefore an option should be given to the importer for redemption of the goods, even if the importer fails to fulfill the conditions for import of gold, on payment of fine which does not exceed the market price of the goods less duty payable thereon.
1.3. The Noticee Claims Ownership of the Goods Under Seizure and Prays for Redemption of the Goods on Payment of Reasonable Fine and Penalty
I. Section 125 of the Customs Act 1962 which gives power to the Adjudicating Authority for redemption of confiscated goods reads as follows:
“125(1) Whenever confiscation of any goods is authorised by this Act, the Officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other laws for the time being in force, and shall, in the case of any other goods, give to the owner of the goods (or where such owner is not known, the person from whose possession or custody such goods have been seized) an option to pay in lieu of confiscation such fine as the said office thinks fit:
Provided that, without prejudice to the provisions of the proviso to sub section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.”
II. Thus this section provides for offer of redemption to the owner of the goods or where such owner is not known to the person from whose possession or custody such goods have been seized.
III. The word “known” in the above said provision has to be interpreted. The literal meaning of word “known in the present context is recognized, familiar, or within the scope of knowledge. The purposive construction of the word ‘known’ in the present context is that the person who is actual owner of the goods is known to the Department either through admission of the accomplice or through investigation.
IV. Section 125 of the Customs Act, 1962 provides that goods should be redeemed to the owner of the goods or to the person from whose possession the goods were seized if the owner is not known. Section 125 of the Customs Act, 1962 vests the power to grant redemption of confiscated goods. It may be seen that section 125 above divides the goods in to two categories, one category’ relates to goods which are prohibited and the second category deals with all other goods. The distinction between the categories is made on the basis of offences allegedly committed in the matter. In the case of second category of goods i.e, goods which are not prohibited, the goods have to be invariably redeemed by giving an option to the person concerned to get the same redeemed by paying the redemption fine. In the case of first category i.e. where prohibited goods are involved, the adjudicating authority is given discretion to either absolutely confiscate the goods or allow redemption.
V. It is not denied that in principle, the adjudicating authority has the power to absolutely confiscate or allow redemption of the goods. This power is vested in terms of the Customs Act, 1962. There are no specific guidelines demarcating the cases where absolute confiscation should be ordered in similar cases. In such situation the judicial precedence along with overall circumstances of the case are taken into account for adjudging the matter. It is the submission of the noticee that there are no enough grounds for ordering absolute confiscation of the gold in the present case.
A) It has been held by High Court of Bombay in the matter of Commissioner of Customs(AP) Vs Alfred Menezes {2009 (242)ELT 334 BOM} that:
“3. It is, therefore, clear that Section 125(1) deals with two situations: (1) the importation and exportation of prohibited goods and (2) the importation and exportation of any other goods. Insofar as importation or exportation of prohibited goods, the expression used is that where the goods were confiscated, the officer “may”. In the case of any other goods, which are confiscated, the officer “shall”. 4. It is, therefore, clear that insofar as the prohibited goods are concerned, there is discretion in the officer to release the confiscated goods in terms as set out therein. Insofar as other goods are concerned, the officer is bound to release the goods. In the instant case, we are concerned with prohibited goods. The officer has exercised his discretion. The Tribunal [2009 (236) E.L.T. 587 (Tri. – Mum.)] has upheld the order of the adjudicating officer.”
B) In the Case of Dhanak Madhusudan Ramii Versus Commissioner of Customs (Airport), Mumbai [2009 (237) E.L.T. 280 (Tr – Mumbai)] Hon’ble CESTAT has observed as under:
“3. After hearing the learned DR, we agree with the above contention of the learned Advocate. The law on the issue is fully settled. As such, we are of the view that the appellant should be given an option to redeem the goods on payment of redemption fine. Normally, in such cases, we would have remanded the matter to the Commissioner for fixation of quantum of fine, but we find that in the present case there is only a technical violation of non-declaration. We also note that the matter stands remanded once. , we are of the view that redemption fine can be fixed at this stage itself. 4. In view of our above discussion, redeem the goods totally valued at Rs. 20.44 lakhs on payment of redemption fine of Rs. 2.50 lakhs. We have fixed the above amount of redemption fine by keeping in view the quantum of penalty of Rs 1.00 lakh, which is not being interfered by us.”
In the cited case it has been held that assessee be given option to redeem goods on payment of redemption fine, Further, it has also been held that for fixation of quantum of fine, normally matter is remanded, but since case involves only technical violation and matter already remanded once, therefore redemption fine imposed by appellate authority itself.
The Department went on filing a writ petition against the order of CESTAT in Hon’ble High Court of Bombay. There were twin issues of ownership of goods as well as redemption of the goods. Hon’ble Court considered the issue and observed as under:
“7. In our opinion, the issue whether the noticee in W.P. 1022/09 herein, has established his title to the goods is not relevant. No other person has claimed title in the goods. The noticee alone has claimed title in the goods and apart from that it is the noticee who was found in possession of the goods. In these circumstances, we cannot find any error of law in the finding recorded by the Tribunal that the application by the noticee for release was maintainable. The goods by themselves were not prohibited but became prohibited by virtue of breach of law by noticee herein. In the circumstances, we also do not find any error of law committed by the Tribunal in directing the release of the confiscated goods on payment of fine. There was discretion, which discretion has been properly exercised, (emphasis supplied) 2009 (248) E.L.T. 127 (Bom.) Government filed SLP in Supreme Court against the above said orders of High Court. Hon’ble Apex Court dismissed the SLP filed by GOI and maintained the High Court Order. [Union of India v. Dhanak M. Ramji – 2010 (252) E.L.T. A102 (S.C.) J .”
C) In the ease of A. RAJKUMARI Versus COMMR. OF CUS. (AIRPORT AIRCARGO), CHENNAI [2015 (321) ELT 540] the Hon’ble CESTAT Chennai has observed as under:
“2. Her baggage was opened and found to contain one Samsung Air conditioner, from the compressor of which 70 nos. of foreign marked Gold Bars of 10 Tolas each were recovered. Show-cause notice proposing confiscation of the gold and proposing penal action was issued on 9-4-2001; the notice was adjudicated vide order dated 17-9 2001 ordering absolute confiscation and imposing penalty of Rs. 3 lakhs: on appeal against the said order, the Tribunal vide Final Order No. 974/2007 doled 6-8-2007 upheld the penalty but remanded the case, directing the Commissioner to extend option of redemption of the gold on payment of a reasonable fine. The matter was heard afresh by the Commissioner who passed the impugned order levying a redemption fine of Rs. 18 lakhs in lieu of confiscation. Since the gold had already been sold by the department, he directed that sale proceeds of the same be released to the passenger after payment of fine, duty and penalty. Hence, this appeal by the passenger against the quantum of fine and the appeal by the Revenue for enhancement thereof.
3. We have heard both sides. The value of gold at the time of seizure was about Rs. 36 lakhs. The fine in lieu of confiscation thereof is about 50% of the above valuee, which is very excessive. Further, the gold has already been sold by the department and the sale proceeds realized in 200 Keeping the above factors in mind, we reduce the fine in lieu of confiscation to Rs. 5,00,000/- (Rupees Five lakhs only). Appeal No. C/388/08 is thus partly allowed as Above. As a consequence. Appeal No. C/383/08 of the Revenue is rejected.”
Department filed civil appeal in the supreme Court against the above said orders, Hon’ble Apex Court dismissed the appeal on the grounds of delay [Commissioner v. A. Rajkumari – 2015 (321) E.L.T. A207 (S.C.)]
D) In the case of: MOHD. ZIA UL HAQUE before Government of India T2014/314)849 GOI) redemption of the goods was allowed on payment of fine and it was observed as under:
“8.2 Applicant has pleaded for allowing redemption of gold under Section 125 ibid. In this regard case is to be decided in view of the judgment of Hon’ble High Court of Madras dated 1-4-2008 in writ appeal Nos. 1488. 1502 & 1562 of 2007 in the case of Neyveli Lignite Corporation Ltd. v. UOI – 2009 (242) E.L.T. 487 (Mad.) wherein it was held “Redemption fine – Prohibited goods, discretion – Section 125 of Customs Act. 1962 – If goods are not prohibited then adjudicating officer shall give to the owner of goods option to pay redemption fine in lieu of confiscation as officer thinks fit. It is only when it is prohibited goods that the officer has discretion and it is open to him not to give the option to pay fine in lieu of confiscation.” Government observes that such discretion is to be exercised judiciously. In the instant case, the passenger is neither a habitual offender nor carrying the said goods for somebody else. He is the owner of the goods and concealment was not is an ingenious manner. There is a merit in the pleading of applicant that goods should be allowed to be redeemed on payment of redemption fine and therefore said plea is acceptable.
8.3 9. In view of above discussions, Government allows the redemption of said gold jewellery on payment of redemption fine of Rs. 7,50,000/ (Rupees seven lakhs and fifty thousand only) in lieu of confiscation under Section 125 of Customs Act, 1962. Keeping in view the overall circumstances of the case, the penalty under Section 112 appears on higher side and therefore same is reduced to Rs: 3,00,000/- (Rupees three lakhs only). Since the ends of justice will be met by imposition of penalty under Section 112 of Customs Act, Government sets aside the penalty imposed under Section 114A ibid. The option to redeem the gold may be exercised within 2 months of the receipt of the order. The impugned Order-in-Appeal is modified to this extent.”
E) It has been observed by Hon’ble CESTAT in the matter of Yaqub Ibrahim Yusuf Vs Commr. of Customs [2011(263) ELT 685) that prohibition relates to goods which cannot be imported by any one, such as arms, ammunition, addictive substance viz., drugs. The intention behind the provisions of Section 125 is clear that import of such goods under any circumstances would cause danger to the health, welfare or morals of people as a whole. This would not apply to a case where import/export of goods is permitted subject to certain conditions or to a certain category of persons and which are ordered to be confiscated for the reason that the condition has not been complied with. In such a situation, the release of such goods confiscated would not cause any danger or detriment to public health.
F) The Hon’ble Andhra Pradesh High Court in the case of Shaikh Jamal Basha vs Government of India – 1992 (91) ELT 227(AP) has held that option to pay fine in lieu of confiscation has to be given to imported gold as the same is otherwise entitled to be imported on payment of duty.
G) In the case of Mohamed Ahmed Manu Vs Commissioner of Customs, Chennai – 2006 (205) ELT 383 (Tri-Chennai), the Chennai Bench of the Tribunal has allowed redemption of the confiscated gold on payment of redemption fine.
H) Further, the Government of India in the case of Mohd Zia Ul Haque Vs Ad Commissioner of Customs, Hyderabad vide revision order no 443/12-Cus dated 8-8-12, 2014 (214) ELT 849 (GOI) allowed the confiscated gold to be redeemed on payment of redemption fine.
VI. The intention behind the provisions of Section 125 of Customs Act, 1902 is clear that import of goods such as arms, ammunition, addictive substance viz. drugs which would cause danger to health, welfare or morals of people as a whole cannot be allowed under any circumstances and such goods have to confiscated absolutely. However, gold is not of that kind. Considering the facts and circumstance of the case and legal position as interpreted above, consequent to liberalization and various decisions of CESTAT/GOI absolute confiscation would be very harsh.
VII. It may thus be seen that as pronounced in the above judgments, absolute confiscation is warranted in cases having special circumstances as submitted above, it has not been brought out in the appeal as to how the case of the noticee can be categorized in any of the special circumstances mentioned in the GOL above referred order.
VIII. The further question that crops up is the propriety of offer of redemption under section 125 in the present case. Section 125 of the Act states that an officer adjudging may impose redemption fine in case importation or exportation has been prohibited under the Act or under any other law for the time being in force. It is clear from the language that Section 125 applies to the goods, importation and exportation of which is prohibited under the Act or under any other law for the time being in force. It applies to prohibited goods. Therefore, the Adjudicating authority should have granted redemption of even prohibited goods. The settled legal position with regard to vesting of discretion is as per the following cases.
A) In the case of COOF CUS.& C. EX., DELH1-1V Versus ACHIEVER INTERNATIONAL 2012 (286) E.L.T. 180 (Del.) Hon’ble HIGH COURT OF DELHI has observed as under:
“We are aware that this court is not a court of fact which can examine or re-consider the factual findings recorded by the Tribunal. We have, therefore, carefully elucidated and examined the order of the Tribunal and reasoning given therein to examine and consider whether the order imposing redemption fine of Rs. 40 lacs can be treated as perverse i.e. an order passed excluding and ignoring admissible and relevant material and takes into account and consideration extraneous material and proceeds on assumptions (See Dhirajlal Girdharilal v. CAT- (1954) 26 ITR 736, (AI v. Daulatram Raw at mull – (1964) 53 ITR 574 and Commissioner of Customs v. Abdulla Kayioth – (2010) 13 SCC 473) ~ 2010 (259) E.L.I. 481 (S.C.). Reasoning stated and the inferences drawn by the Tribunal for reaching the said finding can, to this limited extent, be examined to decide whether the Tribunal has acted without evidence or upon a view of facts which could not have been reasonably entertained. We have not attempted to appreciate the factual matrix and the findings recorded but have exercised our jurisdiction to examine existence of circumstances which is the condition fundamental for making an opinion and they at least prima facie exist. The essence of the circumstances relevant to inference is the sine qua non and must be demonstrable. Section 125 no doubt gives discretion to release the goods on payment of redemption fine but the discretion must be exercised in a just and fair manner and on the basis- of facts and has to be exercised after recording cogent and relevant reasons. There should not be failure of justice or grave injustice. Statutory discretion is not usually absolute. It is qualified by express or implied legal duty to comply with the substantive and procedural requirement before the decision is taken.”
B) The Supreme Court in the case of Shri Rama Sugar Industries Ltd. v. State oj’A.P.,(1974) 1 SCC 534, has held;
“11. It is, therefore, clear that it is open to the Government to adopt a policy not to make a grant at all or to make a grant only to a certain class and not to a certain other class, though such a decision must be based on considerations relevant to the subject-matter on hand. Such a consideration is found in this case. Halsbury (Vol. I, 4th Edn. para 33 at p. 35) puts the matter succinctly thus; A public body endowed with a statutory discretion may legitimately adopt general rules or principles of policy to guide itself as to the manner of exercising its own discretion in individual cases, provided that such rules or principles are legally relevant to the exercise of its powers, consistent with the purpose of the enabling legislation and not arbitrary or capricious. Nevertheless, it must not disable itself from exercising a genuine discretion in a particular case directly involving individual interest hence, it must be prepared to consider making an exception to the general rule the circumstances of the case warrant special treatment. These propositions, evolved mainly in the context of licensing and other regulatory powers, have been applied to other situations for example, the award of discretionary investment grants and the allocation of pupils to different classes of schools. The amplitude of a discretionary power may, however, be so wide that the competent authority may be impliedly entitled to adopt a fixed rule never to exercise its discretion in favour of a particular class of persons; and such a power may be expressly conferred by statute.” ( emphasis supplied)
C) In the case of RAJARAM BOHR A Versus UNION OF INDIA 2015 (322) E.L.T. 337 (Cal.) honourable High Court of Calcutta has observed as under:
“We have considered the submissions. The object of the legislature appears to be that option shall be given under Section 125 in all those cases where the goods are not within the prohibited list. 15. With respect to the prohibited goods, the officer has a discretion. It is well settled that discretion has to be exercised according to rules of reason and justice.”
D) The Apex Court in the case of P.S.R.T.C. v. Md. Ismail, reported in 1991 (3) SCC 239, opined in this regard as follows:
“The discretion allowed by the statute to the holder of an office, as Lord Halsbury observed in Sharp v.: Wakefield (1891) AC 173 at 179 is intended to be exercised according to the rules of reason and justice, not according to private opinion; according to law and not humor. It is to be, not arbitrary, vague and fanciful but legal and regular. And it must be exercised within the limits to which an honest man competent to the discharge of his office ought to confine himself.” Every discretion conferred by statute on a holder of public office must be exercised in furtherance of accomplishment of purpose of the power. The purpose of discretionary decision making under Regulation 17(3) was intended to rehabilitate the disabled drivers to the extent possible and within the above said constraints. The Corporation therefore, cannot act mechanically. The discretion should not be exercised according to whim, caprice or ritual. The discretion should be exercised reasonably and rationally, it should be exercised faithfully and impartially, there should be proper value judgment with fairness and equity. Those drivers would have served the Corporation till their superannuation but for their unfortunate medical unfitness to carry’ on the driver’s job. Therefore, it would not be improper if the discretion is exercised with greater and sympathetic outlook to the disabled drivers subject of course the paramount consideration of good and enhances administration.” (emphasis supplied)
IX. The noticee is the owner of the gold jewellery totally weighing 373 grams seized on 3-6-19. He prays that the gold jewellery may be released to him on payment of reasonable fine and penalty as provided by Section 125 of Customs Act, 1962. In terms of section 125 ibid the discretion is vested with the Adjudicating Authority to grant redemption even in the cases of violations in respect of confiscated prohibited goods. It may be also seen that in number of cases of similar circumstances higher forums have ordered release of confiscated gold. Therefore, the adjudicating authority has to follow precedents.
A) In Hargovind Das K, Joshi v. Collector of Customs when considering the scope of Section 125 of the Act, and when an order of absolute confiscation was made, the Supreme Court has held as follows (Para 3, pages 233-234 of [1987] 14 ECC):
“We are of the view that in so far as the order directing confiscation of the goods is concerned, it is unassailable in facts or in law. So also the order levying penalty is justified by facts and warranted by law. There is, however, substance in the last contention urged on behalf of counsel for the appellants. The Collector of Customs has passed an order for absolute confiscation of the imported goods without giving the appellants an option to redeem the same on payment of such fine as may be considered appropriate by him. Reliance has been placed by learned Counsel for the appellant on Section 125(1) Customs Act, in support of the plea that the Collector had the discretion to pass such an order and he should have addressed himself to the question whether or not the discretion should be so exercised having regard to the facts and circumstances of the case. The Additional Collector of Customs who passed the order of confiscation undoubtedly had the discretion to give an option to the appellant to pay a fine in lieu of confiscation. Presumably the Additional Collector of Customs assumed that he was bound to confiscate the goods because he has not adverted to this aspect in his order. He had undoubtedly the authority under law to give an option to the importers to pay such fine as was considered appropriate by him (not exceeding the full market value of the goods in question) in lieu of confiscation of the goods. We are of the opinion that since the Additional Collector of Customs who passed the order for absolute confiscation had the discretion to give the option for redemption, it was but just, fair and proper that he addressed himself to this question…”
The adjudicating authority had failed in its authority as pointed out by the Apex Court with regard to the giving up of an option to redeem and the impugned orders was directed to reconsider the contention of the apeallant. In the cited case, the matter should have been evaluated with regard to: # Prohibitions involved; # Power under section 125 to grant redemption of confiscated goods; # Interpretation and scope of discretion in the matter; # Case laws on the issue as mentioned in the Order-in-Original; # To whom the redemption can be offered in the circumstances of the case; # Correctness of the order;
B)The Chennai Bench of Custom, Excise, Service Tax Appellate Tribunal (CESTAT) in the case of Ahamed Gani Natchiar recently set aside the confiscation made by the Commissioner of Custom Sea on the ground that the jewellery imported was not prohibited, even if the permissible limit for importation of jewellery has been exceeded, it is unlawful to deny the option to redeem goods on payment of fine after confiscation. The appellant, Ahmed Gani Natchai is a citizen of Malaysia and intends to return to her country of domicile. She was unable to carry into, and wear the gold jewellery in, India and it is her request that she should be allowed to carry it back with her on the return trip to Malaysia.
X. In the impugned SCN, allegation was made that the noticee was not entitled to import the gold in India in terms of notification no 50/2017 -Cus dated 30-6-17. In terms of Section 2(33) of Customs Act, 1962 if any goods are imported in violation of the conditions for such importation, such goods shall be treated as “Prohibited Goods”. There is no dispute regarding the fact that the noticee had an intention to smuggle the gold, however he abandoned the gold in the bus before reaching the arrival hall. The Authority who issued the said SCN proposed for confiscation of the gold on the ground that the noticed not eligible passengers to bring any quantity of gold as per notification 50/2017-Cus dated 30-6-17. The noticee submits that Notification no 50/2017-Cus dated 30-0-1 only an exemption notification and it does not stipulate anywhere that gold is a prohibited goods and the eligibility of the noticee for concessional rate on any given in respect of gold under the said notification is not an issue at all in this case as the noticee never claimed it. Thus, notification no 50/2017-Cus dated 30-6-17 is not relevant at all in the present case. The relevant provision in context of prohibited goods is Section 11 of Customs Act and it is not for the use of the Department that gold has been notified as prohibited goods either absolutely or subject to some conditions. No other legal provision is also mentioned in the Show Cause Notice by which import of gold has been prohibited. Even Baggage Rules do not prohibit the importation of gold and its purpose is only to extend the facility of exemption from duty by way of providing free allowances in respect of bonafide baggage goods which are generally household goods and the goods of personal use by a passenger. Therefore, non-coverage of any goods under Baggage Rules such as gold only means that free allowance and exemption from duty is not allowed on such goods.
XI. The Hon’ble Supreme Court of India in the case of Om Prakash Bhatia vs Commissioner of Customs, Delhi 2003(155) ELT 423 (S.C) held in reference to Section 2(33), 11 and 113(d) of Customs Act, 1962 that prohibition of importation or exportation can be subject to certain prescribed condition to be fulfilled before or after clearance of goods and if conditions are not fulfilled it may render the goods as prohibited goods. The said case was decided in the context of over invoicing of exported readymade garments.
XII. In the instant case against the notice, a case of absolute prohibition of imported gold has been made out in the SCN because of which the gold brought by the noticees can be termed as prohibited goods as defined in Section 2 (33) of the Customs Act, 1962 as enunciated by the Supreme Court in the above referred case (Om Prakash Bhatia vs Commissioner of Customs, Delhi 2003(155) ELT 423 (S.C)). No other concrete basis has been revealed in the SCN to consider the gold as prohibited goods. It is not elaborated as to how we eligibility of a passenger under notification 50/2017-Cus dated 30-6-17 would mean that the gold is prohibited. Instead, the Government has noticed that we Notification No. 50/2017-Cus dated 30-6-17 provided concessional rate of duty of customs on fulfilment of specified conditions and did not prohibit the importation of gold by specifying any condition. Therefore, the impact of non-availability of exemption from customs duty on account of not being eligible was only that the person would be liable to pay customs duty at tariff rate. but despite of the fact that the said notification 50/2017-Cus dated 30-6-17 did not declare ‘the gold as prohibited goods, it cannot be held that the imported gold became prohibited goods in the event of the concerned passenger was not eligible to import the gold.
XIII. Accordingly, Hon’ble- Madras High Court’s and subsequently the Apex court’s conclusion in the case of Samynathan Murugesan [2010 (254) EL.T held that the gold ornaments are Prohibited goods is not actually founded in notification no 31/2003-Cus or any other legal positions. Further, the Hon’ble Madras High Court in its later decision in the case of T. Elavarasan vs CC (Airport), Chennai, 2011 (266) ELT 167 (Mad), has held that gold is not prohibited goods and a mandatory option is available to the owner of the goods to redeem the gold on payment of fine under Section 125 of Customs Act, 1962. Even, the Hon’ble High Court of Andhra Pradesh in the case of Shaikh Jamal Basha vs GOI, 1997 (91) ELT 277 (AP) has also held that as per Rule 9 of Baggage Rules, 1979 read with Annexure-B, gold in any form other than ornament could be imported on payment of Customs Duty only and if the same was imported unauthorizedly the option to owner of the gold is to be given for redemption of the confiscated gold on payment of fine. The Hon’ble High Court of Bombay in the case of Union of India Vs Dhanak M Ramji (2003(248) ELT 128 (Bom)] and the Apex Court in the case of Sapna Sanjiv Kohli Vs Commissioner of Customs, Mumbai [2010(253) ELT A52 (SC)) has also held that gold is not prohibited goods and accordingly the gold jewellery was allowed to be redeemed on payment of fine and duties.
XIV. In view of the above submission, gold imported by the noticee considered as prohibited goods as the Notification 50/2017-Cus dated 30-6-17 does not prohibit the importation of goods in any manner and it only specifies the eligibility criteria only for the purpose of exemption from customs duty. Hence, the noticee prays that the gold jewellery under seizure may be released to him on payment of reasonable fine, penalty and applicable duty.
1.4. Final Submission and Prayer
I. It was a single and solitary incident of an alleged act of smuggling of goods, which can never be justifiable ground for absolute confiscation invoking the provisions of Section 111 of Customs Act, 1962. The noticees submits that a complete and comprehensive appreciation of all vital features of the case and the entire evidence on record with reference to broad and reasonable probabilities of the case as carefully scanned and the contentions raised by the noticees may be taken into consideration while adjudicating the case. In view of all the abovesaid submissions, allegations made against the noticees are not proved. The allegations made under the impugned SCN is seen severely prejudiced with contradictory recording of facts. Considering the infirmities brought forth by the noticee, the SCN cannot be said to be free from elements of malice and incorrect portrayal of facts. The contradictions in the SCN need to be addressed, following principles of Natural Justice.
II. The noticee respectfully submits that a complete and comprehensive appreciation of all vital features of the case and the entire evidence on record with reference to broad and reasonable probabilities of the case as carefully scanned and the contentions raised by the noticee may be taken into consideration while adjudicating the case. In view of all the abovesaid submissions, allegations made against the noticee are not proved. The allegations made under the impugned SCN is seen severely prejudiced with contradictory recording of facts. Considering the infirmities brought forth by the noticee, the SCN cannot be said to be free from elements of malice and incorrect portrayal of facts. The contradictions in the panchnama and SCN need to be addressed, following principles of Natural Justice. Non-production of invoice or documents for licit possession cannot be a ground for confiscation of seized gold.
III. The noticee submits that he is from a respectable family and a law abiding citizen/ businessman and he has never come under any adverse remarks. The noticee humbly prays that the gold under seizure may be released on payment of reasonable fine, penalty and applicable duty. He further submits that further proceedings against him.
IV. The noticee craves leave to add, alter or amend any of the foregoing submissions.
V. Opportunity to be heard in person may be given.
Advocate for Mr. B.A. B.
This post is given a pause for you to think, deliberate and refer the extant provisions of the law to counter such a defense. Any insightful comment will be highly appreciated. Please comment over the defense points you have seen for the first time over and the ones you usually come across.
Disclaimer: Any similarity with an actual incident could be a coincidence!
Important Reads on this Blog: