Custom, Excise & Service Tax Tribunal
Shinu T M vs Cochin-Cus on 18 November, 2024
C/22060, 22042, 22043/2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 22060 of 2015
(Arising out of Order-in-Original No. 01/2015 dated 10.07.2015
passed by the Commissioner of Customs (Preventive) Cochin.)
Shinu T. M,
S/o Kunhalavi,
Appellant(s)
Raziya Manzil, Eranhikkal (PO),
Calicut - 673 303.
VERSUS
Commissioner of Customs
Custom House, Respondent(s)
Cochin - 682 009.
WITH
Customs Appeal No. 22043 of 2015
(Arising out of Order-in-Original No. 01/2015 dated 10.07.2015
passed by the Commissioner of Customs (Preventive) Cochin.)
Shri P. Shamsudeen,
S/o Late P. Moosa,
Poomakkoth House, Appellant(s)
Eranhikkal P.O,
Calicut - 673 303.
VERSUS
Commissioner of Customs
Custom House, Respondent(s)
Cochin - 682 009.
AND
Customs Appeal No. 22042 of 2015
(Arising out of Order-in-Original No. 01/2015 dated 10.07.2015
passed by the Commissioner of Customs (Preventive) Cochin.)
Shri Shamju T.M.,
S/o Kunhalavi,
Razia Manzil, Appellant(s)
Eranhikkal (PO),
Calicut - 673 303.
VERSUS
Commissioner of Customs Respondent(s)
Custom House,
Cochin - 682 009.
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APPEARANCE:
S/Shri K.P.A. Shukoor and Mohammed Zahir, Advocates for the
Appellants.
Shri K. Vishwanatha, Authorised Representative for the Respondent.
CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE MRS R BHAGYA DEVI, MEMBER
(TECHNICAL)
Final Order No. 21122 - 21124 /2024
DATE OF HEARING: 30.05.2024
DATE OF DECISION: 18.11.2024
PER : R BHAGYA DEVI
These three appeals are filed by Appellant-1 (Shri. Shinu
T.M), Appellant-2 (Shri. P. Shamsudeen) and Appellant-3 (Shri.
Shamju T.M) against the Order-in-Original No.01/2015 dated
10.07.2015 passed by the Commissioner of Customs
(Preventive), Cochin.
Brief facts of the case:
2. Based on specific intelligence, the Customs (Preventive)
intercepted Toyota Innova vehicle bearing registration number
KL-11-AN-99. Appellant-1 (Shri. Shinu T.M) was driving the
vehicle along with another passenger by name Shri Sajoob P. On
examination of the vehicle, a packet wrapped in newspaper
hidden inside the door pad on the driver's side of the vehicle was
recovered. This packet contained 35 Nos. of yellow coloured
metal bars with international markings. On the reasonable belief
that 35 gold bars weighing 4082.75 gram was smuggled into the
country without payment of customs duty, the gold bars were
seized under a Mahazar dated 17.04.2014. Thereafter,
statement was given by Appellant-1 (Shri. Shinu T.M) that he
did not have any documents to prove the that these were
brought legally. He also submitted that the 35 gold biscuits were
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given by Mohammad Ali of Kondotty and he had met Mohammad
Ali on the instruction of his elder brother Appellant-3 (Shri.
Shamju T.M) who was having a Mobile Shop in Dubai. These gold
biscuits were supposed to be handed over to Appellant-3 (Shri.
Shamju T.M), who would pay for the same and the amount paid
by him was to be handed over to Mohammad Ali. He also
informed that the gold biscuits were smuggled through Karippur
Airport without payment of customs duty and for handing over
these gold biscuits, he was given Rs. 5,00,000/-. In this
statement, it was also said that they were all related to each
other. Hence the show-cause notice was issued to absolutely
confiscate the gold biscuits along with the vehicle and to impose
penalties on Appellant-1 (Shri. Shinu T.M), Appellant-2 (Shri. P.
Shamsudeen) and Appellant-3 (Shri. Shamju T.M). Appellant-3
(Shri. Shamju T.M) denied the ownership of the seized gold and
stated he was not connected to any of these smuggled activities.
Appellant-2 (Shri. P. Shamsudeen) also denied these allegations
and stated that the gold seized was nothing to do with him and
no incriminating documents were recovered on search of his
residence or shop by the officers. Appellant-1 (Shri. Shinu T.M)
also denied the allegations and submitted that the gold
biscuits were smuggled by unidentified passengers and were
concealed and transported by him was not true and he had
retracted all the statements given by him. In their reply to show-
cause notice, it is submitted that import of gold was not
prohibited and hence, the question of confiscation of the same
did not arise. The Commissioner on verification of all the
documents and based on all the statements recorded at various
stages held that the goods were liable for confiscation and
accordingly, ordered for absolute confiscation of the 35 gold bars
along with the Toyota vehicle from where the gold was seized.
He also imposed penalty of Rs.6,00,000/- on Appellant-1 (Shri.
Shinu T.M) Rs.10,00,000 on Appellant-2 (Shri. P. Shamsudeen)
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and Rs.1,00,000 on Appellant-3 (Shri. Shamju T.M) under
Section 112(a) and (b) of the Customs Act, 1962.
3. The learned counsel for the appellants submitted that the
allegations contained in the Mahazar that while the officers were
keeping surveillance at Kolathur junction, the Innova car (driven
by the Appellant) came from Kondotty side and drove through
Kolathur junction without stopping the vehicle; that the officers
followed and overtook and intercepted the vehicle is evidently
untrue as the said allegation does not find a place in the show-
cause notice and further, there is nothing in the Mahazar to
show whether any signal was given to stop the vehicle. The
further version contained in the Mahazar that on interception the
Appellant was required to reach the Customs Preventive
Division, Kozhikode and accordingly, the Appellant reached the
Customs office voluntarily driving his vehicle is also an
unbelievable story as no officer would permit such driving of
vehicle with the gold in possession of the noticee, for obvious
reasons. There was no concealment of the seized gold as alleged
and the same were kept in the open-door pad of the Innova car
as stated in the statement dated 17.04.2014 of the Appellant.
There is nothing in the Mahazar to show that the gold was taken
out by removing any outer covering of the door pad. The
Mahazar is silent regarding the disclosure made by the Appellant
that he had collected the seized gold from a person named
Mohammed Ali of Kondotty and also regarding handing over of
the slip containing the mobile number of Mohammed Ali to the
officers at the place of interception itself. Neither any effort was
made to contact Mohammed Ali in the given mobile number nor
to locate him by taking the Appellant to his place. No
independent enquiries were also made to locate Mohammed Ali
or to record a statement from him. He was absolved without
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even issuance of a summons or making a party to the show-
cause notice.
3.1 The learned counsel further submitted that the Appellant
retracted his statement through the bail application submitted
before the Hon'ble ACJM Court, Ernakulam. Even if the
statement is accepted as true, then also, except the non-
possession of documents there is nothing therein either to
inculpate the Appellant or to show that the gold is smuggled. The
averments contained in the statement dated 17.04.2014 of the
Appellant that it was after handing over of Rs.5,00,000/- that
Mohammed Ali had given the gold biscuits to him and that the
money so given was handed over to him by Appellant-2 (Shri. P.
Shamsudeen) is nothing but a smokescreen created. From the
statement of Shri Sajoob, it was known that he came to the
house of the Appellant and from there, he accompanied the
Appellant to Kondotty in the Appellant's car, thus leaving no time
for the purported collection of Rs.5,00,000/- from Appellant-2
(Shri. P. Shamsudeen). The contents of the third statement
dated 13.08.2014 of the Appellant would fortify that the said
mobile number was written in the statement out of the memory
of the Appellant and the department absolved Mohammed Ali,
barring which the truth would have been revealed. The mobile
number of the person Kunjutty, which was admittedly available
in the incoming call list of the mobile phone of Appellant-2 (Shri.
P. Shamsudeen) was not taken and Kunjutty was neither located
nor investigated or statement recorded. He was neither issued
with any summons by making independent enquiries nor made a
party to the show-cause notice. The purported WhatsApp
message Kunjutti35 sent by Kunjutty to the mobile phone of
Appellant-2 (Shri. P. Shamsudeen) was also not taken on record
by seizing the mobile phone. If this be true, the same would
have been vital evidence.
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3.2 The learned counsel further stated that non-examination of
the 5 passengers who allegedly brought the gold through Calicut
International Airport is fatal as no efforts were made to locate
these passengers and to prove that the smuggled nature of the
gold. On suppression of the name of Mohammed Ali, it was made
to appear through the Mahazar averments that the Appellant had
the direct knowledge that the seized gold bars were smuggled by
passengers through Kozhikode Airport by concealment and
without payment of duty. However, a reading of the statement
dated 17.04.2014 purportedly recorded from the Appellant would
disclose that the Appellant's knowledge regarding the smuggling
of gold through passengers is only based on what Appellant-3
(Shri. Shamju T.M) informed him. Hence, the evidence in this
regard can only be termed as hearsay in the absence of non-
examination of Appellant-3 (Shri. Shamju T.M). The smuggled
nature of the goods is also not brought out through the
statements recorded from any other persons; thus, the said
allegation remains a bald allegation without any material to
prove the same.
3.3 The learned counsel further submitted that the Appellant
received two notices dated 28.11.2014 and 08.12.2022 issued to
him by the Revenue under Section 150 of the Customs Act, 1962
informing him of the proposed disposal of the gold. He had
replied to both the notices, which is placed on record. It is
stated that in both the replies, the Appellant had raised legally
tenable objections and further, pointed out regarding the
pendency of the appeal before this Hon'ble Tribunal and
requested to abstain from initiating action for the disposal of the
seized gold. The Appellant did not receive any response to both
the replies. By issuing a notice under Section 150 to the
Appellant, the Department admits the ownership of the gold on
the Appellant; hence he is legally entitled for outright release of
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the seized gold, especially in view of the above noted infirmities
and further, the fact that the smuggled nature of the gold has
not been proved by the Revenue. The Appellant placed reliance
on Section 125(1) of Customs Act, 1962 which says:-
"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".
3.4 The learned counsel relied on the decisions rendered in the
case of Yakub Ibrahim Yusuf Vs. Commissioner of
Customs, Bombay: 2011 (263) ELT 685 (Tri. Mumbai) and
Sukumaran Kondedan Vs. Commissioner of Customs,
Calicut: Final Order No. 21194/2019 dated 29.11.2019
(CESTAT Bangalore). In these cases, redemption was allowed
in favour of the carrier passengers who brought the gold and
therefore, the seized gold may be ordered either for outright
release or permit the Appellant to redeem the seized gold on
payment of reasonable fine. Reliance is also placed on the
decision in the case of Leyla Mohmoodi & Anr vs. The
Additional Commissioner of Customs & Ors. in WP No.
467/2023, wherein the Hon'ble High Court of Bombay had
directed to restore to the petitioner's equivalent amount of gold
and/or to compensate the petitioner by making payment of
amounts equivalent to the market value of the said gold as on
date, since the gold seized was disposed of by the Revenue.
3.5 The learned counsel further submits that the only
allegation made against the appellant is that he has not
discharged the burden cast on him under Section 123 of the
Customs Act, 1962 and no other reasoning or findings are found
in the impugned order for ordering absolute confiscation. There
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is not even a finding in the impugned order that the seized gold
is smuggled gold. The impugned order would not legally sustain
in the absence of finding regarding the smuggled nature of the
gold. Mere quoting of Section 123 in the show-cause notice
would not suffice. Without invocation of Section 123 of the
Customs Act, 1962 in the show-cause notice without giving an
opportunity to the appellant to discharge the burden under the
said provision, the Adjudicating Authority cannot arrive at a
finding that the burden under Section 123 has not been
discharged. The order of absolute confiscation passed on the sole
finding of non-discharge of the burden cannot legally sustain. In
this regard reliance is based on decision in the case of Faze
Three Ltd vs. C.C.E & S.T. Silvasa: Final Order No. 10138-
10140/2024 dated 12.01.2024. The impugned order imposed
consolidated penalty of Rs.8,00,000/- under Section 112(a) &
112(b) of the Customs Act, 1962. The order of consolidated
penalty under two different and distinct heads without
mentioning the act or omission under the each of the subclause
and further, without quantifying the penalty under each of the
subclause under Section 112, the penalty imposed is not legally
maintainable, as has been held in a catena of judgments, hence,
is liable to be set aside.
4. The learned Authorised Representative (AR) on behalf of
the Revenue reiterating the findings of the Commissioner
submitted that the impugned goods (Foreign Origin Gold) were
seized from the appellant Appellant-1 (Shri. Shinu T.M) from his
Car when he was attempting to transport the same. He could not
provide any documents in support of licit import / possession of
foreign origin gold. His statement was recorded under Section
108 of Customs Act, 1962 wherein he had admitted that the gold
was brought from abroad by 5 passengers and that the gold was
handed over to him by one Shri Mohammed Ali after he made
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payment of Rs.5,00,000/-. The gold was to be handed over to
Appellant-2 (Shri. P. Shamsudeen) for selling and the sale
proceeds were to be handed over to his brother Appellant-3
(Shri. Shamju T.M) who was working at Dubai. The statement
given indicated that all the three persons are related to each
other and that they are involved in gold smuggling activities.
Appellant-2 (Shri. P. Shamsudeen) had also given statement
under Section 108 of Customs Act, 1962 wherein he had
admitted to have received smuggled gold on earlier occasions
and that he had paid Rs.5,00,000/- to Appellant-1 (Shri. Shinu
T.M) to collect the gold from Shri. Mohammed Ali. The
statements recorded under Section 108 of Customs Act, 1962
were never retracted until reply to the show-cause notice. The
confessional statements recorded under Section 108 of Customs
Act, 1962 are admissible as evidence as held by Hon'ble High
Court of Kerala in case of K.P. Abdul Majeed Vs
Commissioner of Customs, Cochin: 2014 (309) ELT 671
dated 03.07.2014.
4.1 The Revenue further submitted that as per Section 123 of
Customs Act, 1962, the burden of proof is on the person from
whose possession the gold was seized to prove that the gold
seized is not smuggled gold. The Hon'ble High Court of
Karnataka has affirmed the same in the case of Commissioner
of Customs, Bangalore Vs T.V. Mohammed: 2014 (304)
ELT 73 (Kar.) and Commissioner of Customs, Bangalore Vs
Syed Ahamed Khan 2018 (362) ELT 461 (Kar.). The
Appellants have not discharged the said burden cast upon them.
The gold smuggling is definitely a prohibited activity since legal
gold import itself is restricted / regulated activity as per various
Acts governing gold import. Hence, it is respectfully submitted
that the seized gold biscuits with foreign marking, the source of
which is not explained with document support, is liable for
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absolute confiscation since the same would amount to
importation of a prohibited goods.
4.2 The Revenue further submitted that the Hon'ble High Court
of Delhi, relying on the judgement of Hon'ble High Court of
Kerala in the case of Abdul Razzak vs. Union of India: 2012
(275) E.L.T. 300 (Ker.) held that "goods brought by indulging
in smuggling would amount to importation of prohibitory goods
and the appellant was not entitled as a matter of right to claim
release of gold on payment of redemption fine and duty". The
said decision of Hon'ble Kerala High Court was challenged by the
appellant in SLP (Civil) CC 5192/2012 before the Hon'ble
Supreme Court of India and the same was dismissed. Similar
view was taken by the Hon'ble High Court of Madars in the case
of Commissioner of Customs (Air), Chennai Vs P.
Sinnaswamy: 2016 (344) E.L.T. 1154 (Mad.) wherein the
Hon'ble High Court held that the redemption cannot be allowed
as a matter of right in cases of confiscation of smuggled gold
and the discretion conferred on the adjudicating authority to
decide and also that it is not open to Tribunal to issue any
positive directions to adjudicating authority to exercise option in
favour of redemption under Section 125 of Customs Act, 1962.
The said decision of the Hon'ble High Court of Madras was relied
upon by the Hon'ble CESTAT, Bengaluru in the case of V.K.
Mohammed Ali Vs Commissioner of Customs, Cochin: 2019
(369) E.L.T. 1538 (Tri.-Bang.) before dismissing the appeal
for redemption of confiscated smuggled gold.
4.3 It is further stated that in the case of Nidhi Kapoor &
others Vs Principal Commissioner and Additional
Secretary of Government of India & Others (in W.P. (C)
Nos.8902/2021;9561/2021;13131/2022;531/2022;&8083/2023)
2023 (8) TMI 1008 - Delhi High Court dated 21.08.2023,
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the Hon'ble High Court of Delhi had examined all aspects of
import/smuggling of gold in detail, including the deleterious
effects of illegal import of gold on economy of the country and
analysed the applicability / interpretation of Section 2(33) of
Customs Act, 1962 and Section 125 of Customs Act 1962. The
Hon'ble High Court at para 156 of the Order concluded as under:
"156. The Court holds that an infraction of a condition for import of goods
would also fall within the ambit of Section 2(33) of the Act and thus their
redemption and release would become subject to the discretionary power
of the Adjudging Officer............."
The aforesaid judgement in the case Nidhi Kapoor &
others (supra) has been relied upon by the Hon'ble CESTAT,
Principal Bench, New Delhi and also by the Hon'ble Dehi High
Court, in all the cases on similar issues and redemption of
confiscated smuggled gold has not been allowed in the following
cases:
• Shri. Shankar Lal Goyal vs. Commissioner of Customs, New
Delhi 2023 (12) TMI 1156 - CESTAT, New Delhi.
• Commissioner of Customs (Airport and General), IGI Airport
vs. Ms. Minakshi Sharma: 2023 (12) TMI 266 - Delhi High
Court.
• Commissioner of Customs (Export) vs. Shri. Ashwini Kumar
Alias Amanullah 2023 (9) TMI 1471 - Delhi High Court.
• Commissioner of Customs (Preventive) New Customs
House, New Delhi vs. Suresh Bhonsle and Shri Mohd. Wajid
@Bunty (Vice-Versa): 2024 (1) TMI 467 - Cestat New Delhi.
4.4 The Revenue further submitted that the impugned gold
was seized from Appellant-1 (Shri. Shinu T.M) and as no one
else claimed the ownership of said gold, it was up to Appellant-1
(Shri. Shinu T.M) to prove that the seized gold was not
smuggled gold. The onus cast upon him as per Section 123 of
Customs Act, 1962 was not discharged. He had given detailed
statement under Section 108 of Customs Act, 1962, made
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confessions of gold smuggling and the statement given in his
own handwriting was not retracted by him until reply to the
show-cause notice after over one year from the seizure. The gold
seized was not smuggled by Appellant-1 (Shri. Shinu T.M) but he
was in possession of smuggled gold, which he was transporting
to hand over it to Appellant-2 (Shri. P. Shamsudeen). Thereby,
Appellant-1 (Shri. Shinu T.M) has abetted in gold smuggling and
also was in possession of smuggled gold. He had never asserted
his innocence in smuggled gold that was seized and instead he
has claimed default ownership of smuggled gold by claiming
redemption of the same in terms of Section 125 of Customs Act,
1962. Hence, the adjudicating authority had correctly imposed
penalty in terms of Section 112(a) and 112(b) of Customs Act,
1962. Likewise, Appellant-2 (Shri. P. Shamsudeen) had also not
distanced himself from the smuggled gold seized /confiscated
and he had given confessional statement. Further, the
statements given by Appellant-1 (Shri. Shinu T.M) and
Appellant-2 (Shri. P. Shamsudeen) had implicated Appellant-3
(Shri Shamju T.M.) in the gold smuggling. The contentions of
Appellant-3 (Shri Shamju T.M.) that he was residing at Dubai
and that the Customs Act is not applicable outside India is not
acceptable, since Hon'ble High Court of Karnataka in the case of
Commissioner of Customs, Mangalore vs. Shri Imtiaz
Ahmed: 2022 (12) TMI 1341 - Karnataka High Court had
rejected such contentions. Therefore, the adjudicating authority
had correctly imposed penalty in terms of Section 112 of
Customs Act, 1962. It is therefore submitted that the impugned
smuggled gold is liable for absolute confiscation and that the
appellants who were involved in smuggling of said gold are liable
for penal action.
5. Heard both sides and perused the records. The issues to
be decided are, (i) whether the gold seized from the vehicle was
smuggled and is liable for absolute confiscation; and (ii) whether
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the appellants are liable for penalty under the provision of the
Customs Act, 1962.
5.1 The vehicle Toyota Innova No. KL-11-AN-99 was
intercepted by the customs officers and 35 numbers of gold bars
with foreign markings were found in the vehicle is not disputed.
The Appellant-1 (Shri. Shinu T.M) was driving the vehicle and
there was one more person by name Shri Sajoob in the vehicle,
which is also not disputed. The 35 gold bars were of foreign
origin and the markings AL EITHAD DUBAI, UAE 10 TOLA
999.0 were also found on these gold bars are also not under
dispute. The vehicle was intercepted on 17.04.2014 and Mahazar
was drawn on the same day in the presence of the Appellant-1
(Shri. Shinu T.M). Appellant-1 (Shri. Shinu T.M) had given three
statements under Section 108 of the Customs Act 1962, first one
dated 17.04.2014, second one dated 18.04.2014 and the third
one dated 22.04.2014. In all the statements, the appellant
admitted that the 35 gold bars weighing 10 TOLA each with
foreign markings were found in his vehicle but claims that it was
not concealed. He stated that the gold was procured from
Mohammed Ali, Kondotty and he did not have any documents to
prove that the gold was procured legally. He also admits that the
same was collected by him on the directions of Appellant-3 (Shri.
Shamju T.M) his brother who works in Dubai. This was to be
handed over to Shri Shamsu, the owner of Ambi Gold,
Kozhikode. He also stated that he collects the gold for payment
of Rs.5,00,000/- and hands over to the persons concerned and
he has been doing such transactions earlier also. He also stated
that the gold is smuggled by passengers coming from abroad
and each passenger used to get Rs.1,00,000/- for carrying these
without any legal documents. In the second statement
reiterating the earlier statement, he submitted that whatever he
stated in the Mahazar was true and he knew that 35 foreign
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marking gold biscuits were imported by passengers without
paying the customs duty. These statements were not retracted
except as claimed by him only at the time of bail application,
which has no implication in as much as the statements given
before the customs officers were never retracted. In his reply to
the show-cause notice on 05.05.2014, the appellant admitted
the interception of the vehicle driven by him and seizure of 35
Nos. of 10 Tola gold biscuits totally weighing 4082.750 grams.
He also admitted that the gold was collected from Mohammed Ali
from Kondotty and was to be delivered to Appellant-2 (Shri. P.
Shamsudeen) of Ambi Gold Kozhikode. He also admitted that it
was collected on the instructions given to him by a friend of his
brother Appellant-3 (Shri. Shamju T.M) who worked in Dubai. He
also submitted that he had collected the 35 gold biscuits under
bona fide belief about its licit nature from Shri Mohammed Ali
and he also stated that he could not locate the person from
whom he collected. Though consultant appeared for personal
hearing on 05.05.2015 before the Commissioner on behalf of
Appellant-2 (Shri. P. Shamsudeen) and Appellant-3 (Shri.
Shamju T.M)., there was no representation on behalf of
Appellant-1 (Shri. Shinu T.M)
5.2 The Commissioner in the impugned order held that since
there is no dispute that 35 gold biscuits seized were foreign
marked gold biscuits and no documents or evidence have been
produced by any of the noticees to indicate that the gold was
legally procured and in view of the provisions of Customs Act,
1962, the gold is liable to be absolutely confiscated. He also
submits that though the Appellant-1 (Shri. Shinu T.M) claim the
ownership, no documents were produced but claimed that the
goods are not restricted goods and hence, they cannot be
absolutely confiscated. Before us also, the Appellant-1 (Shri.
Shinu T.M) claims that the goods are not liable to be absolutely
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confiscated and the burden of proving goods are smuggled
goods lies with the Revenue and not with the appellant. In this
context, let's examine the relevant provisions.
"Section 2(33) of the Customs Act, 1962 defines "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;
Section (39) defines "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;
Section 11. Power to prohibit importation or exportation of
goods.-
(1) If the Central Government is satisfied that it is necessary so to do
for any of the purposes specified in sub-section (2), it may, by
notification in the Official Gazette, prohibit either absolutely or subject
to such conditions (to be fulfilled before or after clearance) as may be
specified in the notification, the import or export of goods of any
specified description.
(2) The purposes referred to in sub-section (1) are the following :-
(a) the maintenance of the security of India;
(b) the maintenance of public order and standards of decency or
morality;
(c) the prevention of smuggling;
(d) .....
(e) ......
(f) the prevention of injury to the economy of the country
by the uncontrolled import or export of 1 [ gold or silver
or any other goods];
(g) to (t) ...........
(u) the prevention of the contravention of any law for the time
being in force; and
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(v) any other purpose conducive to the interests of the general
public.
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;
(e) any dutiable or prohibited goods found concealed in any manner in
any conveyance;
(i) any dutiable or prohibited goods found concealed in any manner in
any package either before or after the unloading thereof;
(l) 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;
Section 123. Burden of proof in certain cases. -
1
[(1) Where any goods to which this section applies are seized under
this Act in the reasonable belief that they are smuggled goods, the
burden of proving that they are not smuggled goods shall be -
(a) in a case where such seizure is made from the possession of any
person, -
(i) on the person from whose possession the goods were seized;
and
(ii) if any person, other than the person from whose possession the
goods were seized, claims to be the owner thereof, also on such
other person;
(b) in any other case, on the person, if any, who claims to be the owner
of the goods so seized.]
(2) This section shall apply to gold, 2 [and manufactures thereof],
watches, and any other class of goods which the Central Government
may by notification in the Official Gazette specify.
Page 16 of 47
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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 1 [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:
2
[ Provided that where the proceedings are deemed to be concluded
under the proviso to sub-section (2) of Section 28 or under clause (i) of
sub-section (6) of that section in respect of the goods which are not
prohibited or restricted, 3 [no such fine shall be imposed]:
Provided further 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.
4
[(2) Where any fine in lieu of confiscation of goods is imposed under
sub-section (1), the owner of such goods or the person referred to in
sub-section (1), shall, in addition, be liable to any duty and charges
payable in respect of such goods.]
5
[(3) Where the fine imposed under sub-section (1) is not paid within a
period of one hundred and twenty days from the date of option given
thereunder, such option shall become void, unless an appeal against
such order is pending.
Explanation .-For removal of doubts, it is hereby declared that in
cases where an order under sub-section (1) has been passed before the
date** on which the Finance Bill, 2018 receives the assent of the
President and no appeal is pending against such order as on that date,
the option under said sub-section may be exercised within a period of
one hundred and twenty days from the date on which such assent is
received.]
Customs Tariff Heading 7108
Gold (including gold plated with platinum), unwrought or in semi-
manufactured forms, or in powder form.
Page 17 of 47
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71081100 - Non-monetary : -- Powder Restricted
Import is allowed only through nominated agencies as notified by RBI
(in case of banks) and DGFT (for other agencies).
Notification No. 49/2015-2020 dated 05/01/2022
7108 1200 - Non-monetary : -- Other unwrought forms Restricted
1. Import is allowed through:
(i) Nominated agencies as notified by RBI (in case of banks) or
nominated agencies notified DGFT (for other agencies)
(ii) Qualified Jeweller (as notified by IFSCA) through India International
Bullion Exchange (IIBX) ;
2. Valid India-UAE TRQ holders as notified by IFSCA can import gold
through IIBX against the TRQ and can obtain physical delivery of the
same through IFSCA registered vaults located in SEZs as per the
guidelines prescribed by the IFSCA.
3. Gold Dore can be imported by refineries against an import
Notification No.44/2023 dated 20/11/2023
"Prohibited" indicates the Import/Export policy of an item, as appearing
in ITC (HS) or elsewhere, whose import or export is not permitted.
The Export Import Policy allowed import of gold only through
nominated agencies as notified by RBI or DGFT or it was allowed
as per the Baggage Rules under the Customs Act, 1962 with
certain conditions/restrictions.
5.3 As seen from the above, definition of Section 2(33) defines
prohibited goods while Section 2(39) defines what is smuggling.
And anything that is liable to be confiscated as per Section 111
of the Customs Act, 1962 is considered to be smuggling. So also,
anything that is prohibited are also liable to be confiscated under
the provisions of Section 111. Section 111 empowers the
Government to prohibit importation of certain goods for
prevention of smuggling, the prevention of contravention of any
law for the time being in force etc. In the case of gold, the
import/export policy during the relevant period allows import of
gold only by the nominated agencies and others based on certain
Page 18 of 47
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restrictions as per the import/export policy and customs
provisions. Therefore, any import which does not satisfy these
conditions are considered to be prohibited. Moreover,
contravention of any laws as per Section 111 of the Customs
Act, 1962 makes the goods liable for confiscation. As per Section
123, if the goods are seized on the reasonable belief that they
are smuggled goods, the burden of proof that they are not
smuggled goods shall be on the person from whom goods were
seized or on the person who claims to be the owner of the
goods. In the present case, the fact that the goods (gold
biscuits) were seized from Appellant-1 (Shri. Shinu T.M) were
found to have international markings "AL EITHAD DUBAI, UAE
10 TOLA 999.0"which is not disputed and hence, the gold
biscuits were legally imported has to be proved by the appellant
from whom the same were seized. At no given point of time, the
Appellant-1 (Shri. Shinu T.M) though claimed the ownership has
proved that the gold biscuits were legally procured. In fact, even
in his reply to the show-cause notice also he submitted that Shri
Mohammed Ali was the person who handed over the gold
biscuits to him without any documents on the instructions of his
brother, clearly proves that the gold was smuggled. He also
clearly admits that he was under bona fide belief that they are
legally imported and collected the gold biscuits. Therefore,
having not proved that the gold was legally imported as per
Section 123 of the Customs Act, 1962, the same cannot be
handed over to the person from whom it was seized. Before
disposing of the gold, two letters were written to the appellant
only to give him an opportunity to prove his ownership, having
failed to do so, he cannot claim that the gold belongs to him.
Hence, the Commissioner has rightfully absolutely confiscated
the goods. This absolute confiscation attains validity in view of
the following decisions of the various High Courts.
Page 19 of 47
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5.4 The Hon'ble High Court of Kerala in the case of
Commissioner of Customs, Cochin vs. Om Prakash Khatri: 2019 (366)
E.L.T. 402 (Ker.) dated on 1-3-2019 held that:
"18. We have considered the decisions relied on by both sides and are
of the opinion that in case of seizure of gold, even without markings, the
burden is upon the person, who has custody of the gold, under Section
123 of the Act, to prove that the gold was legally acguired. The
statement recorded under Section 108 of the Act could be safely relied
upon in the proceedings against respondents. In K.I. Pavunny v. Assistant
Collector, (1997) 3 SCC 721 = 1997 (90) E.L.T. 241 (S.C.) the Hon'ble
Supreme Court has held that a person summoned under Section 108 of
the Act is "not the person accused of an offence" for the purpose of
Section 24 of the Evidence Act. The primary guestion for consideration in
that case was whether the retracted confession statement of the
appellant is inadmissible in evidence under Section 24 of the Evidence
Act. It is observed that even though the Customs officers have been
invested with many of the powers, which an officer-in-charge of a police
station exercises, while investigating a congnizable offence, they do not,
thereby become police officers within the meaning of Section 25 of the
Evidence Act and so the confessional statement by the admissible in
evidence against them and it was ultimately held by the Hon'ble Supreme
Court that the prosecution has proved the case based on the confession
of the appellant given in Ext.P4 under Section 108 of the Evidence Act.
19. The unmarked gold recovered from the possession of two persons
and their statements as to the source of the gold was sufficient to have a
reasonable belief that the gold is smuggled. The two persons who were
carrying the gold had nothing in their possession to prove the legitimacy
of the gold they carried. The fact that the gold bars and pieces did not
have any marking on them is suspicious and it points to a concerted
effort to erase the markings on them. The burden under Section 123
which is only of a reasonable belief; is effectively discharged by the
Department who initiated action on the basis of the seizure and the
recorded statements of the detained persons. The mere fact that the
interception and seizure was not affected in an international border or
near an airport or seaport is irrelevant, since the statements of the
Page 20 of 47
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intercepted persons clearly indicate that they were asked to avoid such
means of transport and stick to the normal modes of public transport.
There can also be no presumption drawn that the carriers of smuggled
gold after the gold reaches the country would only resort to commutation
by air or sea. The persons from whom the gold was seized disowned the
same and said that they were mere carriers of Om Prakash Khatri, who
accepted that the gold seized belonged to his Company. Then the onus to
prove that the gold was not smuggled, so as to upset the reasonable
belief entertained by the Department shifted and sguarely rested on his
shoulders. The gold bars and pieces were subjected to chemical
examination which revealed that they were of 99.8% purity. The Tribunal
ignored this aspect and referred to the purity of the ornaments; which
was not an issue before it."
5.5 The Hon'ble High Court of Calcutta in the case of
Commissioner of Customs (Preventive) vs. Rajendra
Kumar Damani: 2024 SCC Online Cal 4986 dated May 15,
2024 was looking into the following questions of law.
"2. The revenue has raised the following substantial questions of law for
consideration: -
(a) Whether the Learned Tribunal erred in law in not holding that the
statements of the Respondent was voluntary, while giving credence
to the Noticee's submission that they were retracted.
(b) Whether the Learned Tribunal erred in law in not holding that the
that the third statement, which is also in his own handwriting and in
his vernacular, is after the gap of almost a year, in which he has
reiterated his original statements.
(c) Whether the Learned Tribunal was correct in holding Noticees claim
that the gold was melted from old jewellery, since this claim was
never made at any stage of the investigation, nor any shred of
documentary evidence was produced?
(d) Whether the Learned Tribunal erred in law in the holding the claim of
the Noticee at face value in the face of overwhelming evidence
against the same and not considering Section 123 of the Customs
Act, 1956 which places the burden of proof on the Noticees?
Page 21 of 47
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(e) Whether the Learned Tribunal erred in law in not holding that
Noticee No. 1 has produced no evidence or documentary proof of
any kind to substantiate engaging any professional to carry out this
refining process?
(f) Whether the Learned Tribunal failed to appreciate that Hon'ble
Supreme Court in Judgment dated 03.04.1974 passed in Collector of
Customs, Madras v. D. Bhoormul has held that with regard to these
specified goods if seized under this Act in the reasonable belief that
they are smuggled goods, the burden of proof that they are not such
goods shall be on the person from whose possession, they are
seized. The prosecution or the Department is not required to prove
its case with mathematical precision to a demonstrable degree?
Based on the above questions the Hon'ble High Court of Calcutta
observed as follows:
"21. When the matter travelled on appeal to the learned tribunal what
was required to be seen is whether the respondent and other co noticees
were able to establish the stand taken by them that the gold was
obtained by them by purchasing old gold jewellery. Before the tribunal,
apart from reiterating the stand taken before the appellate authority, it
was contended that the respondent and the other noticees have retracted
their statements on the ground that they were not voluntary and
therefore the statement recorded under Section 108 cannot be relied on.
The department contended that in terms of Section 123 of the Act, the
burden is on the respondent and having failed to discharge the burden,
the adjudicating authority rightly ordered for absolute confiscation and
imposed penalty.
22-24. ....
25. The respondent and the other co noticees would contend that the
purity of the gold not been 99.9%, it is established that it is not smuggled
gold. Such conclusion cannot be arrived at in the absence of any proof to
show that the gold was from and out of the gold jewellery which was
purchased for cash. That apart, merely because the statement is said to
have been retracted, it cannot be regarded as involuntary or unlawfully
obtained. In this regard, the revenue has rightly placed reliance on the
Page 22 of 47
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decision of the Hon'ble Supreme Court in Vinod Solanki v. Union of
India5. If the learned tribunal was of the view that the statement
recorded under Section 108 of the Act was not admissible on account of
the retraction, that by itself cannot render the statement as involuntary.
It is the duty casts upon the court to examine the correctness of the
validity of the retraction, the point of time at which the retraction was
made whether the retraction was consistent and whether it was merely a
ruse. These aspects have not been examined by the learned tribunal
resulting in perversity. The mobile phones which were recovered and the
call details record which were obtained have all been elaborately
discussed by the adjudicating authority. This aspect has not been dealt
with by the learned tribunal. The seizure cannot be denied by the
respondent since the seizure list was drawn in the presence of two
independent witnesses and the DRI officers and copy of which was
handed over to the respondent and the other two co noticees. Further we
find there was nothing on record before the learned tribunal to hold that
mere melting of old gold jewellery will yield gold of less purity and
considering the quantity which has been seized, it can never be the case
of the respondent or the other two co noticees that they have done the
melting process at their residence as such melting requires expertise and
also use of several chemicals. Thus, the observations of the tribunal have
to be held to be without any basis or foundational facts or documents."
5.6 In the case of Shri Shankar Lal Goyal vs.
Commissioner of Customs, New Delhi: 2023 (12) TMI
1156 - CESTAT NEW DELHI dated 22.12.2023, the Tribunal
observed as follows:
"2. That on the basis of intelligence, 8 cut pieces, 01 gold biscuit marked
"AL Etihad, Dubai", 01 cut piece of gold marked "AL Etihad" and 01
melted gold piece of crude shape, total weighing 1199.550 gms which
were being melted in a smelter, were recovered from the premises of Shri
Amit Deshmukh.
....
17. Having come to the conclusion that the gold seized of which the appellant claimed to be the owner without any valid documents of purchase, has to be treated as 'prohibited goods' and gold falls under the category of 'dutiable goods' but the appellant failed to prove that the Page 23 of 47 C/22060, 22042, 22043/2015 liability to pay the customs duty was discharged and by necessary implication the seized gold are 'smuggled goods', we further hold that the seized goods are liable for confiscation under Section 111(d) whereby goods which are imported or attempted to be imported contrary to any prohibition imposed by or under the Act or any other law for the time being in force, would be liable for confiscation. Also absolute confiscation is justified in the facts of the present case where the trail of events show that the appellant is engaged in procuring gold of foreign origin in illegal manner and the multiple stands taken by him on the face of it were false as the alleged supplier M/s. Sai Buillion had denied having supplied any gold to the appellant after 08.12.2014 and also stated that on 29.01.2015, Shri Rahul son of the appellant approached his father for providing a bill for one Kg. gold, but they declined as they had not supplied any gold. We also find that in this case as per the statement of Shri Varun Jain of M/s. Kesariya Gems Pvt. Ltd. that they had purchased primary gold from M/s. Rahul Jewel vide invoice no.6 dated 22.04.2014, invoice no.24 dated 11.08.2024 and invoice no.39 dated 30.01.2015 which were paid by cheques, however the sales register did not show these transactions which also reflected that the statement submitted by the appellant was fabricated so as to justify the stock of gold. Moreover, the conduct of non-cooperation of the appellant in the investigation proceedings also cannot be ignored, which is a valid ground for not permitting provisional release of gold. We are supported by the following case laws on the issue of confiscation under section 110A and whether it has to be absolute or can be released provisionally subject to such terms and conditions as may be imposed by the adjudicating officer.
17.(i) In Abdul Razak Vs. UOI - 2012 (275) ELT 300 (Ker.), the Kerala High Court while holding that though gold is not a prohibited item and can be imported but such import is subject to lot of restrictions, including the necessity to declare the goods on arrival at the customs station and make payment of duty at the rate prescribed, however, held that appellant cannot claim provisional release of goods on payment of redemption fine and duty, as a matter of right.
17.(ii) In the case of Malabar Diamonds Gallery P. Ltd. (supra), the Madras High Court while interpreting the provisions of section 110A of the Act, especially the word "may" and having regard to the Page 24 of 47 C/22060, 22042, 22043/2015 prohibition/restrictions in the Act and the conditions to be complied with, provisional release of the goods liable for confiscation, is not automatic. As prohibition/ restriction is inbuilt in the Customs Act the Court rejected the prayer for provisional release of the goods, observing as under:
"93. Keeping in mind, the objects and purpose for which, Customs Act, 1962, is enacted, dealing with prohibition/restriction, this Court is of the considered view that the competent authority, has to arrive at a satisfaction, as to whether, goods seized and liable for confiscation, can be released provisionally, pending adjudication, and in that context, the role of the Courts, in exercise of the powers, under Article 226 of the Constitution of India, should be confined only to test such satisfaction, arrived at, by the competent authority, with regard to the objects of the Customs Act, 1962 and any other law for the time being in force. When the competent authority, under the Customs Act, 1962, makes a plea that there is a prima facie case of smuggling and that the appellant has failed to discharge the burden, in terms of Section 123 of the Customs Act and when the adjudication proceedings are pending, we are of the considered view that it would be appropriate to direct provisional release?
95. Under the Customs Act, 1962, the authorities are duty bound to pass orders for confiscation, impose penalty, initiate prosecution and pending conclusion of the adjudicating proceedings, may order provisional release. At the time, when discretion is exercised under Section 110A and if any challenge is made under Article 226 of the Constitution of India, the twin test, to be satisfied is "relevance and reason". Testing the discretion exercised by the authority, on both subjective and objective satisfaction, as to why, the goods seized, cannot be released, when smuggling is alleged and on the materials on record, we are of the view that the discretion exercised by the competent authority, to deny provisional release, is in accordance with law. When there is a prima facie case of smuggling, for which, action for confiscation is taken, such proceedings taken should be allowed, to reach its logical end, and not to the stiffed, by any provisional release."
17.(iii) The issue whether the goods are liable to absolute confiscation has been dealt by the Supreme Court in Union of India Vs. Raj Grow Impex LLP - 2021 (377) ELT 145 (SC) and referring to the provisions of section 125 of the Act, it was observed:
Page 25 of 47C/22060, 22042, 22043/2015 "69.1 " A bare reading of the provision aforesaid makes it evident that a clear distinction is made between 'prohibited goods ' and 'other goods'. As has rightly been pointed out, the latter part of section 125 obligates the release of confiscated goods (i.e., other than prohibited goods) against redemption fine but, the earlier part of the provision makes no such compulsion as regards the prohibited goods; and it is left to the discretion of the Adjudicating Authority that it may give an option for payment of fine in lieu of confiscation. It is innate in this provision that if the Adjudicating Authority does not choose to give such an option, the result would be of absolute confiscation."
Further, on the exercise of this power by the adjudicating authority which has to be exercised judiciously and for which all the relevant facts and factors and the implication of discretion has to be weighed to arrive at a balanced decision, the Supreme Court in the case of Union of India Vs. Raj Grow Impex LLP (supra) made observations to the following effect:
"79. As noticed, the exercise of discretion is a critical and solemn exercise, to be undertaken rationally and cautiously and has to be guided by law; has to be according to the rules of reason and justice; and has to be based on relevant considerations. The quest has to be to find what is proper. Moreover, an authority acting under the Customs Act, when exercising discretion conferred by Section 125 thereof, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The purpose behind leaving such discretion with the Adjudicating Authority in relation to prohibited goods is, obviously, to ensure that all the pros and cons shall be weighed before taking a final decision for release or absolute confiscation of goods."
17.(iv) In Nidhi Kapoor (supra), the Delhi High Court while holding that an infraction of a condition for import of goods would also fall within the ambit of section 2(33) of the Act, and thus their redemption and release would become subject to the discretionary power of the Adjudging Officer, also observed :
"136. We also take note of the significance of Section 111 of the Act which deals with the confiscation of improperly imported goods. While dealing with the circumstances in which the imported goods may become liable for confiscation, the provision firstly speaks of dutiable or prohibited goods. Section 111, apart from speaking of dutiable or prohibited goods also brings Page 26 of 47 C/22060, 22042, 22043/2015 within its net goods which have come to be imported either in violation of conditions prescribed or goods which have been concealed as well as imported articles which may have otherwise not complied with the conditions prescribed under the Act.
137. What thus clearly appears to flow from Section 111 is of the power of confiscation being extendable not just in the case of dutiable or prohibited goods but also to goods whose import may have been effected in violation of the conditions prescribed by the Act. This is clearly evident from a reading of Clauses (e), (f), (g), (h), (i), (j), (m),(n), (o) and (p) of Section 111."
5.7 The Tribunal in the above case upheld absolute confiscation of the gold which was marked as "AL Etihad, Dubai", in the present case also, the gold biscuits are marked as "AL Etihad, Dubai" hence, absolute confiscation of the gold is justified in view of the discussions above and various judgments cited supra wherein it has been clearly proved that the gold is prohibited and Section 123 only allows redemption, provided the legality of import of gold is proved. Admittedly, in this case, no documents were produced by the Appellant-1 (Shri. Shinu T.M) for justifying the legal import.
5.8 In the case of Commissioner of Customs, Bangalore vs. T.V. Mohammed: 2014 (304) ELT 73 (Kar.), the Hon'ble High Court held as follows:
"17. Now coming to the facts of this case, admittedly, 99 sets of Intel Pentium four processors and cooling fan of foreign origin valued at 7,92,000/- were found in the Mitsubishi Lancer Car which was parked in Hotel Broadway at Bangalore. It is the case of the respondents that the goods were purchased by them in Burma Bazaar, Chennai. Admittedly, they were not in possession of any documents to show that they purchased those goods from Burma Bazaar, Chennai. It is admitted that they are in the business of selling these electronic items which is for the purpose of selling them. These items were brought from Chennai to Bangalore through Mallapuram. If their statement is to be ignored, there is nothing on record to show that these goods were readily available in Page 27 of 47 C/22060, 22042, 22043/2015 plenty in the open market. The goods which were seized were not meant for their personal use. It was meant for sale. If any person is carrying on a lawful business, he should have possessed the documents showing title to the said property. If he has purchased it from a dealer or a wholesaler, there should be some documents evidencing such purchase. It is not forthcoming. Therefore, the initial presumption of innocence cannot be extended to the respondents. As the said goods are all having foreign markings, in the absence of any material to show that it is purchased from a registered dealer dealing with those goods and in the light of what they have stated in the statement under Section 108, burden of proving that they were acquired lawfully shifts on the respondents. They have miserably failed to substantiate their case. The respondents either should have produced documents showing that those goods were meant for home consumption on payment of duty, as sought to be made out in their statements or they have purchased it from the open market where it is available in plenty from Burma Bazaar, Chennai. They have failed to prove both the versions given by them. Therefore, the only irresistible conclusion that could be reached is the goods which were seized are smuggled goods. The respondents are in the business of sale of smuggled goods and as no duty is paid on these goods, they are liable for confiscation under the Act. Both the adjudicating authority as well as the Appellate Commissioner have come to the said conclusion based on the material on record. Unfortunately, the Tribunal relying on a judgment which strictly cannot be construed as a judgment, has lightly interfered with the well- considered order passed by the appellate authority which was based on the legal evidence. In that view of the matter, the order passed by the Tribunal cannot be sustained."
(Emphasis supplied) 5.9 In the case of Nidhi Kapoor (supra), the Hon'ble Delhi High Court was dealing with the following questions:
I. In respect of Scope of 'prohibited goods' under Section 2 (33) of the Customs Act, 1962 ('Act') i. Whether the definition of prohibited goods under the Act includes goods which are subject to conditions?
ii. Which category of goods will be non-prohibited but nonetheless liable to confiscation?Page 28 of 47
C/22060, 22042, 22043/2015 II. Whether Gold is a prohibited item?
III. What is the scope of redemption under Section 125 of the Act?
Referring to the definition of Section 2(33) of the Customs Act, 1962, which is reproduced below the Hon'ble High Court held:
(33) "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;
"32. A bare perusal of Section 2(33) of the Act would show that 'prohibited goods' are defined as goods, the import or export of which is prohibited by virtue of any prohibition under the Act or any other law for the time being in force. Though at first blush there appears to be a deviation to the effect that it does not include any goods which are not prohibited and such goods in respect of which certain conditions are provided thereby permitting import/ export, however, there is more to the legal text than what meets the eyes.
Referring to the Section 11 of the Customs Act 1962 partly reproduced below their Lordships held that "11. Power to prohibit importation or exportation of goods.-- (1) If the Central Government is satisfied that it is necessary so to do for any of the purposes specified in sub-section (2), it may, by notification in the Official Gazette, prohibit either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification, the import or export of goods of any specified description.
(2) The purposes referred to in sub-section (1) are the following:-
(a) the maintenance of the security of India;
(b) the maintenance of public order and standards of decency or morality;
(c) the prevention of smuggling;
(3) Any prohibition or restriction or obligation relating to import and export of any goods or class of goods or clearance thereof provided in any other law for the time being in force, or any rule or regulation made or any order or notification issued thereunder, shall be executed under the provisions of that Act only if such prohibition or restriction or Page 29 of 47 C/22060, 22042, 22043/2015 obligation is notified under the provisions of this Act, subject to such exceptions, modifications or adaptations as the Central Government deems fit.
"34. A meaningful perusal of Section 11 of the Act would show that the Central Government by notification may provide for goods the import or export of which is prohibited either absolutely or subject to such conditions that may be fulfilled before or after clearance of the goods from the customs. It empowers the Central Government to specify the goods which are subject to such conditions either absolutely or its import or export is subject to conditions to be fulfilled. The purpose for which such notifications may be issued are inter alia, the prevention of smuggling, conservation of foreign exchange and safeguarding balance of payments, for prevention of an injury to the economy of the country by the uncontrolled import of gold or silver, prevention of deceptive practices and prevention of contravention of any law for the time being in force and such other purpose conducive to the interest of the general public. However, it is pertinent to mention here that Section 11(3) of the Act which was brought by way of the Finance Act, 2018, is yet to come into force.
Referring to the definition of Smuggling reproduced below the Hon'ble High Court observed as follows:
"Section 2 (39) of the Act which defines "smuggling" as under: "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;
36. Again, a careful perusal of the definition would show that 'smuggling' means any act or omission which would render any goods liable to confiscation under Section 111 or 113 of the Act. The words 'act' or 'omission' are not defined under the Act. However, such words are reflected upon under Section 33 of the Indian Penal Code to denote acts meaning a series of 'acts' or as also 'omissions' denoting series of omissions".Page 30 of 47
C/22060, 22042, 22043/2015 "37. Section 2 (39) of the Act read in conjunction with sub clauses (e) (f)
(i) (j) & (m) to Section 111 of the Act clearly bring out that import of any 'dutiable'; or 'prohibited' goods which are not declared at the customs when imported, would be an act or omission amounting to smuggling, and would therefore subject the goods to confiscation. As much is canvassed as to whether 'smuggling' of goods can be read or not into the definition of "prohibited" goods, and further that its confiscation and release/redemption are severable course of actions, we reach to the crucial issue of interpreting Section 125 of the Act, which provides as under:-
"111. Confiscation of improperly imported goods, etc.--The following goods brought from a place outside India shall be liable to confiscation:--
-----
(e) any dutiable or prohibited goods found concealed in any manner in any conveyance;
(f) any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which are not so mentioned;
(i) any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof;
(j) any dutiable or prohibited goods removed or attempted to be removed from a customs area or a warehouse without the permission of the proper officer or contrary to the terms of such permission;
(m) 1[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 2[in respect thereof or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to subsection (1) of section 54];
Referring to the Baggage Rules it was clearly that the import of gold was restricted and their Lordships held as follows:
"41. For the purpose of a decision in the instant matters, suffice it to point out that by virtue of Section 81 (a) of the Act, the Central Board of Excise and Customs [CBIC] framed the Baggage Rules, 1998 (as amended up to date) that initially allowed an individual passenger coming Page 31 of 47 C/22060, 22042, 22043/2015 from abroad to be free from levy of custom duty if carrying jewelry upto an aggregate value of Rs. 10,000/- in case of a gentleman and Rs. 20,000/- in case of a lady passenger. However, in a later Notification:
12/2012-Cus. dated 17 March 2012 the Government relaxed the conditions as to enable 'eligible passengers' to carry gold not exceeding 10 kgs provided declaration is filed in the prescribed form before the proper officer at Customs at the time of arrival in India but directing the customs officials to rigorously follow the following guidelines:
(i) The engraved serial number of gold bars must be invariably mentioned in the baggage receipt issued by Customs.
(ii) In case of gold in any other form, including ornaments, the eligible passenger must be asked to declare item wise inventory of the ornaments being imported. This inventory, duly signed and duly certified by the eligible passenger and assessing officer, should be attached with the baggage receipt.
(iii) Wherever possible, the field officer, may, inter alia, ascertain the antecedents of such passengers, source for funding for gold as well as duty being paid in the foreign currency, person responsible for booking of tickets etc. so as to prevent the possibility of the misuse of the facility by unscrupulous elements who may hire such eligible passengers to carry gold for them.
42. The CBEC then brought the Customs Baggage Declaration Regulations, 2013 vide notification dated 10 September, 2013, whereby the customs duty-free allowance is made applicable to an individual passenger where such individual has been residing abroad for over a year bringing gold jewellery: for a gentleman up to Rs. 50,000/-and for a lady up to Rs. 1,00,000/-.
43. There came further Notification No. 520 of 2004/2014-Cus.VI dated 06 March 2014, whereby 'eligible passengers' were allowed import of gold in the form of gold bars and ornaments on payment of 10% custom duty, provided that the 'eligible passenger' is of an Indian origin or passenger holding a valid Indian passport coming to India after staying abroad for a period not less than six months.
Page 32 of 47C/22060, 22042, 22043/2015 Referring to the FTDR Act the Hon'ble High Court Observed as follows:
"47. Thus, Section 3 of the FTDR Act empowers the Central Government with a discretion to make provisions for the development and regulations of Foreign Trade by facilitating imports and increasing exports. The Central Government by order published in official gazette, may make provisions for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to just exception, any orders for the import or export of goods, services or technology. Section 3(3) of the FTDR Act stipulates that any order of prohibition made under the Act shall apply mutatis mutandis as deemed to have been made under Section 11 of the Customs Act. Sub-Section (4) to Section 3 starts with a non obstante clause thereby putting provisions for import or export under the FTDR Act as enforceable notwithstanding anything contained in any other law, rules, regulations, notifications or order. Section 18-A of the FTDR Act states that the provisions of the Act are in addition to and not in derogation of other laws. It is also pertinent to mention that Sections 11(8) and (9) read with Rule 17(2) of the Foreign Trade (Regulation) Rules, 1993 provide for confiscation of goods in the event of contravention of the Act, Rules or Orders but which may be released on payment of redemption charges equivalent to the market value of the goods. However, it again begs the question as to whether such relaxation would apply to importation of gold in the nature of smuggling?
Referring to various notifications issued by the DGFT the Hon'ble High Court held that:
"49A careful perusal of the aforesaid DGFT notifications brings out that the government policy for import has been by and large in "restricted "category and import of gold has been highly regulated with it being allowed through nominated banks and agencies only.
50. The aforesaid circulars leave no iota of doubt that the RBI has also been stepping in from time to time regulating the importation of gold. While winding up this part of the narrative, there is no gainsaying that the rate of customs duty on import of gold has been modified from time to time under Customs Tariff Act, 1975, and it is but obvious that Page 33 of 47 C/22060, 22042, 22043/2015 smuggling of gold is undertaken not only to profit from the price difference in gold items as also to avoid payment of customs duty.
51. Without further ado, we have no hesitation in holding that smuggling of gold is per se restricted by virtue of Section 111 as also in terms of various notifications issued under the FTDR Act and under the RBI Act discussed herein above. The aforesaid discussion raises a strong disposition to the effect that the importation of gold into India is highly regulated and bulk importation of gold item could only be affected by the nominated banks, agencies or business houses in the manner laid down by various DGFT regulations as well as the RBI circulars or by the "eligible passengers" in the manner provided by the relevant Regulations discussed hereinabove. There is no gainsaying that one of the main objects of the Customs Act is to prohibit smuggling of goods and sternly deal with the same, as could be plainly gathered on a conjoint reading of Sections 2(25), 11(2)(c), 111 and 112 of the Act. In the cited case of Commissioner of Customs (Preventive) v. M. Ambalal & Co. (supra), it was categorically observed that the Customs Act "aims to counter the difficulties that have emerged over the years due to the changing economic and financial conditions; amongst them it proposes to tackle the increasing problems of smuggling both in and out of the country. The Act aims to sternly and expeditiously deal with smuggled goods, and curb the dents on the revenue thus caused. In order to deal with the menace of smuggling, the authorities are enabled to detect, conduct search and seizure, and if necessary, confiscate such smuggled goods, within the territory of India." A fortiori, smuggled goods can never be categorised as "imported goods" as observed in the case of M. Ambalal and Co. (supra), and it would be antithetical to consider that "smuggled goods" could be read within the definition of "imported goods" for the purpose of the Act. As an inevitable corollary, it would be contrary to the purpose of exemption notifications to accord the benefit meant for imported goods on 'smuggled' goods.
55. In reaching our conclusions, we derive support from the case law relied upon by the learned counsel for the respondents. In the cited case of Sheikh Mohd. Omar v. Customs (supra), the petitioner was a dealer in horses and was breeding out Mares owned by him, who imported two Stallions and the Customs confiscated the Mare 'Jury Maid'. In the Page 34 of 47 C/22060, 22042, 22043/2015 decision rendered by the Hon'ble Three Judges of the Supreme Court, referring to Section 111(d) read with Section 2(33) of the Act besides Section 3(1) of the Imports and Exports (Control) Act, 1947, promulgated w.e.f. 07 December 1955, it was held that import of live stocks and animals was prohibited and the word 'any prohibition' in Section 111(d) of the Act meant complete as well as partial prohibition and merely because Section 3 of the Imports and Exports (Control) Act, 1947 used three different expressions "prohibiting", "restricting" or otherwise "controlling"
was not to cut down the amplitude of the word "any prohibition" in Section 111(d) of the Act, and therefore, the decision by the Adjudicating Authority not permitting release/redemption was upheld.
56. In the case of Om Prakash Bhatia v. Commissioner of Customs (supra), the petitioner attempted to export prohibited goods under Section 113(d), who was found guilty of intentional over-invoicing of the exported goods in violation of Section 18(1) (a) of the FERA, 1973, Section 14 of the Act read with Rule 11 of the Foreign Trade (Regulation) Rule, 1993 read with Section 11(1) of the FT(D&R) Act, 1992. The crux of the matter is that the exporter failed to fully disclose the true sale consideration. Examining the scope and ambit of section 2(33) read with section 11 & 113 of the Act, it was observed as under:
10. From the aforesaid definition, it can be stated that:
(a) if there is any prohibition of import or export of goods under the Act or any other law for the time being in force, it would be considered to be prohibited goods; and
(b) this would not include any such goods in respect of which the conditions, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either "absolutely" or "subject to such conditions" to be fulfilled before or after clearance, as may he specified in the notification, the import or export of the goods of any specified description. The notification can be issued for the purposes specified in sub-section (2).Page 35 of 47
C/22060, 22042, 22043/2015 Hence, prohibition of importation or exportation could be subject to certain prescribed conditions to be fulfilled before or after clearance of goods. If conditions are not fulfilled, it may amount to prohibited goods. This is also made clear by this Court in Sk. Mohd. Omer v. Collector of Customs, wherein it was contended that the expression "prohibition" used in Section 111(d) must be considered as a total prohibition and that the expression does not bring within its fold the restrictions imposed by clause (3) of the Import Control Order, 1955. The Court negatived the said contention and held thus: (SCC p. 732, para 11) "What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to 'any prohibition imposed by any law for the time being in force in this country' is liable to be confiscated. 'Any prohibition' referred to in that section applies to every type of 'prohibition'. That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression 'any prohibition' in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947, uses three different expressions `prohibiting', 'restricting' or 'otherwise controlling', we cannot cut down the amplitude of the word 'any prohibition' in Section 111(d) of the Act. `Any prohibition' means every prohibition. In other words all types of prohibitions. Restriction is one type of prohibition. From Item (I) of Schedule I Part IV to Import Control Order, 1955, it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But nonetheless the prohibition continues."
57. Thus, it was categorically held that wherever the conditions prescribed for import or export of goods are not complied with, such goods shall fall in the category of 'prohibited' goods withing the scope and meaning of section 2(33) of the Act. At this stage there is a twist in the tale since it is relevant to take note that the ratio in the aforesaid two cases (the latter decided by the two Hon'ble Judges of the Supreme Court) was not referred to or perhaps overlooked in a decision by three Hon'ble Judges of the Supreme Court in the cited case of Commissioner of Customs v. Atul Automation (P) Ltd. (supra). Atul Automation was a case where the appellant in October November, 2016 imported MFDs Page 36 of 47 C/22060, 22042, 22043/2015 without requisite permission viz., Multi-Function Device, Digital Photocopiers and Printers, which incidentally were also classified as 'other wastes' under Rule 3 (1) (23) of the Hazardous Waste Management Rules, and the goods were confiscated with penalty imposed, declining relief of release/redemption. The challenge was upheld observing that: -
"8. Unfortunately, both the Commissioner and the Tribunal did not advert to the provisions of the Foreign Trade Act. The High Court dealing with the same has aptly noticed that Sections 11(8) and (9) read with Rule 17(2) of the Foreign Trade (Regulation) Rules, 1993 provide for confiscation of goods in the event of contravention of the Act, Rules or Orders but which may be released on payment of redemption charges equivalent to the market value of the goods. Section 3(3) of the Foreign Trade Act provides that any order of prohibition made under the Act shall apply mutatis mutandis as deemed to have been made under Section 11 of the Customs Act also. Section 18-A of the Foreign Trade Act reads that it is in addition to and not in derogation of other laws. Section 125 of the Customs Acts vests discretion in the authority to levy fine in lieu of confiscation. MFDs were not prohibited but restricted items for import. A harmonious reading of the statutory provisions of the Foreign Trade Act and Section 125 of the Customs Act will therefore not detract from the redemption of such restricted goods imported without authorization upon payment of the market value. There will exist a fundamental distinction between what is prohibited and what is restricted. We, therefore, find no error with the conclusion of the Tribunal affirmed by the High Court that the respondent was entitled to redemption of the consignment on payment of the market price at the reassessed value by the Customs Authorities with fine under Section 112(a) of the Customs Act, 1962."
176. As noticed, the exercise of discretion is a critical and solemn exercise, to be undertaken rationally and cautiously and has to be guided by law; has to be according to the rules of reason and justice; and has to be based on relevant considerations. The quest has to be to find what is proper. Moreover, an authority acting under the Customs Act, when exercising discretion conferred by Section 125 thereof, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The purpose behind leaving such discretion with the Adjudicating Authority in relation to prohibited goods Page 37 of 47 C/22060, 22042, 22043/2015 is, obviously, to ensure that all the pros and cons shall be weighed before taking a final decision for release or absolute confiscation of goods.
179. The sum and substance of the matter is that as regards the imports in question, the personal interests of the importers who made improper imports are pitted against the interests of national economy and more particularly, the interests of farmers. This factor alone is sufficient to find the direction in which discretion ought to be exercised in these matters. When personal business interests of importers clash with public interest, the former has to, obviously, give way to the latter. Further, not a lengthy discussion is required to say that, if excessive improperly imported peas/pulses are allowed to enter the country's market, the entire purpose of the notifications would be defeated. The discretion in the cases of present nature, involving far-reaching impact on national economy, cannot be exercised only with reference to the hardship suggested by the importers, who had made such improper imports only for personal gains. The imports in question suffer from the vices of breach of law as also lack of bona fide and the only proper exercise of discretion would be of absolute confiscation and ensuring that these tainted goods do not enter Indian markets. Imposition of penalty on such importers; and rather heavier penalty on those who have been able to get some part of goods released is, obviously, warranted.
68. The plea by the learned counsel for the appellants that RBI has never issued any circular under Section 58 of RBI Act12, 1934 regulating import of gold goes down the drain as it has been amply demonstrated that import of gold into India has been subject to various restrictions and mandatory requirements. It is no argument that restrictions to bring gold in a certain quantity falls under Section 25 of the Act and there is no notification under Section 11 of the Act. We are of the firm opinion that one has to construe the entire scheme of the Act to ascertain if there are other restrictions regulating importation of gold. We find no merit in the plea that restrictions or prohibition could only be issued by way of notification and cannot be issued by way of circulars.
69. There is no gainsaying that as per Section 123 of the Act, the burden of proving that the goods are not 'smuggled' goods is placed upon the person from whom the goods are seized or the person who claims to be Page 38 of 47 C/22060, 22042, 22043/2015 owner. Further, the legislative intention could also be deciphered from the fact14 that "smuggling" in goods albeit 'gold' in particular, is also made punishable under Chapter in XVI under the titled 'offences and prosecutions' of the Act and Section 132 inter alia makes punishable "any false declaration made knowingly or having reasons to believe that such declaration, statement or document is false15.....". Section 135 of the Act further makes punishable "acquiring of possession of or in any way involved in carrying, removing, concealing or in any other manner dealing with goods, which he knows or has reasons to believe liable to be confiscation under Section 111 or 113 of the Act"16. Section 138 of the Act further raises the presumption of "culpable mental state" in the matter of prosecution under this Act and it is upon the accused to prove that he had no such mental state with respect to the act charged as an offence in any prosecution. The explanation to Section 138 of the Act further provides that 'culpable mental state' "includes intention, motive, knowledge of a fact and belief in, or reason to believe, a fact". As we noted at the beginning this judgment, smuggling of gold into India causes a cascading effect on the economy of the country, and we cannot overlook the fact that smuggling of gold into India is obviously preceded by payment of consideration either in Indian or foreign currency, which is another aspect of alarming levels of actionable money laundering, venturing into generation of black money and other unlawful activities including financing terrorism.
70. In view of the foregoing discussion, we answer the issues framed to the effect that Section 2(33) of the Act shall also include importation of such goods within the scope of 'prohibited category' with regard to which the mandatory condition under the Act as also in other relevant notifications/circulars issued by the DGFT, the RBI or the any other authority have not been complied with, or in other words the restrictions imposed by the concerned authorities have not been adhered to. We further have no hesitation in holding that the importation of the gold is a prohibited item within the meaning of Section 2(33) of the Act; and that redemption in case of importation of gold which is brought into India illegally in the form of "smuggling" does not entitle the owner or importer for automatic release/redemption of such item, and therefore, as a necessary Page 39 of 47 C/22060, 22042, 22043/2015 corollary a decision to allow release/redemption of the goods confiscated with or without imposition of fine in addition to payment of requisite duty is vested in the discretion of the Adjudicating Officer, who needless to state is duty bound to exercise his discretionary powers not only after considering the facts and circumstances of each case before it, but also in a transparent, fair and judicious manner under Section 125 of the Act.
142. -----The concept of prohibition spoken of in Section 3(4) of the FTDR would thus have to be understood and interpreted on a conjunctive reading of Section 2(33) read with Section 11 of the Act together with Section 3(2) of the FTDR as explained hereinabove.
143. We further find that sub-section (4) of Section 3 also uses the expression "prohibited". Forming part of the larger umbrella of the policy making power as well as the authority to regulate foreign trade and which is the subject of Section 3 itself, the word as appearing therein cannot possibly be read or interpreted in a manner distinct or different from what we have noted hereinabove.
144. For the purposes of reiteration, we step back to Section 3(2) and the power of the Union Government to prohibit, restrict, or regulate the import or export of goods and the said order resulting in the goods covered therein being placed by way of a statutory fiction in the category of prohibited goods under Section 11 of the Act. In our considered opinion, Sheikh Md. Omar has clearly enunciated the meaning to be assigned to "prohibited goods" and as defined by Section 2(33). The enunciation of the legal position as appearing in Sheikh Md. Omar cannot be said to have been diluted in any manner by the introduction of sub- section (4) of Section 3 of the FTDR. In any view of the matter, the dictum laid down in Sheikh Md. Omar or Om Prakash Bhatia cannot be said to have fallen under a cloud of doubt by the mere introduction of sub-section (4) in Section 3 of the FTDR.
145. In summation, we note that Section 2(33) of the Act while defining prohibited goods firstly brings within its dragnet all goods in respect of which a prohibitory notification or order may have been issued. That order could be one promulgated either under Section 11 of the Act, Page 40 of 47 C/22060, 22042, 22043/2015 Section 3(2) of the FTDR or any other law for the time being in force. However, a reading of the latter part of Section 2(33) clearly leads us to conclude that goods which have been imported in violation of a condition for import would also fall within its ambit. If Section 2(33) were envisaged to extend only to goods the import of which were explicitly proscribed alone, there would have been no occasion for the authors of the statute to have spoken of goods imported in compliance with import conditions falling outside the scope of "prohibited goods".
146. Our conclusion is further fortified when we move on to Section 11 and which while principally dealing with the power to prohibit again speaks of an absolute prohibition or import being subject to conditions that may be prescribed. It is thus manifest that a prohibition could be either in absolutist terms or subject to a regime of restriction or regulation. It is this theme which stands reiterated in Section 3(2) of the FTDR which again speaks of a power to prohibit, restrict or regulate. It becomes pertinent to bear in mind that in terms of the said provision, all orders whether prohibiting, restricting or regulating are deemed, by way of a legal fiction, to fall within the ambit of Section 11 of the Act. This in fact reaffirms our conclusion that Section 2(33) would not only cover situations where an import may be prohibited but also those where the import of goods is either restricted or regulated. A fortiori and in terms of the plain language and intent of Section 2(33), an import which is effected in violation of a restrictive or regulatory condition would also fall within the net of "prohibited goods".
Thus, it was held that import of gold was considered to be a prohibited goods and hence, it is a discretionary power vested with the Commissioner whether to release the goods on payment of redemption fine or not and accordingly, taking into consideration the various factors, absolute confiscation of the gold was upheld.
6. With regard to the reliance placed on the various decisions by the appellant, we find that in the case of Union of India and Commissioner of Customs (Revenue) vs. Imtiaz Iqbal Pothiwala and others: dated 16.10.2018, the Hon'ble High Page 41 of 47 C/22060, 22042, 22043/2015 Court had clearly held that the respondent who had claimed the gold had discharged the burden of proof under Section 123 of the Customs Act, 1962 by providing the source of the purchase of gold. The decision in the case of Faze Three Ltd. (supra) is not at all relevant as facts of the case are entirely different.
6.1 In the case of Leyla Mohmoodi & Anr vs. The Additional Commissioner of Customs & Ors in WP No. 467/2023, the facts are regarding disposal of gold at the stage seizure, which was held to be illegal which is not the case in the present proceedings; hence not relevant to the facts of the present case.
6.2 In the case of Yakub Ibrahim Yusuf Vs. Commissioner of Customs, Bombay 2011 (263) ELT 685 (Tri. Mumbai) the Tribunal observed as follows:
"From the above, it follows that the 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. Admittedly, import of gold is permitted in case of certain category of persons, subject to certain conditions in terms of Notification No. 117/92-Cus., as amended, therefore, it would not fall under the prohibited category as envisaged under the said provisions. The above view is also supported by Hon'ble High Court of Calcutta's decision in the case of Commr. of Customs (Preventive), West Bengal v. India Sales International reported in 2009 (241) E.L.T. 182 (Cal.). Hon'ble High Court while deciding whether 'prohibited' has to be read as 'prohibited absolutely', held that the Court cannot insert any word in the statute since it is in the domain of the legislators. The Hon'ble High Court has also held that option given Page 42 of 47 C/22060, 22042, 22043/2015 under Section 125 of the said Act in respect of prohibited goods and right given to authorities for redemption of the confiscated goods cannot be taken away by Court by inserting a particular word therein. The Hon'ble High Court further held that power has been given by legislators to a particular authority to act in a particular manner and the said authority must act accordingly and not otherwise at all. Therefore, the redemption of confiscated gold, on an option to pay fine in lieu of confiscation is not against the provisions of Section 125 of the Customs Act.
5.6 The Department has also contended that the appellant has never claimed the ownership of the gold. Therefore, gold cannot be redeemed to the appellant. In support they have placed reliance on Hon'ble Bombay High Court's decision in the case of Mohammed Aijaj Ahmed (supra). In that case the owner of gold was known still the redemption was allowed to the carrier. In the instant case the five persons are not the owner of the gold as already discussed (supra). The Department's entire case is based on the statement of the appellant wherein he has deposed that he had brought the gold to earn profit and the profit is not to be shared with five persons. Therefore, the above-cited case is not applicable to the facts of the case. The department has also placed reliance on Tribunal's Order No. 1980 to 1995/09 (supra) which in turn relied upon above-cited decision of Hon'ble Bombay High Court, hence the decision is not applicable to the case. The issue in the High Court of Madras in the case of Bansal Industries (supra) related to whether mens rea is required for imposition of punishment which is not in dispute in the instant case, hence the cited case by department is not also relevant. A plain reading of sub-section (2) of Section 125 of CA, 1962, shows that an option has to be given to the owner of the goods or where the owner is not known, the person from whose possession or custody such goods have been seized. Undoubtedly, the gold has been seized from the possession of the appellant. Therefore, the aforesaid contention of the Department is not sustainable".
This case is also not relevant because the Appellant-1 (Shri. Shinu T.M) had repeatedly submitted that the gold belonged to Shri Mohammed Ali and he was only a carrier and at no point of time this was retracted except at the time of filing reply to the Page 43 of 47 C/22060, 22042, 22043/2015 show-cause notice on 03.12.2014 i.e., nearly after 270 days. In the case of referred above Yakub Ibrahim Yusuf (supra) is not relevant because in that case the ownership was claimed by the persons from whom the gold was recovered.
7. The statement of Appellant-2 (Shri. P. Shamsudeen) was recorded on 22.04.2014 under Section 108 of the Customs Act, 1962. In his statement, he had submitted that he has a firm by name Ambi Gold, Calicut, he was engaged in the gold business and stated that he did not know anyone by name Mohammed Ali. He was related to Appellant-1 (Shri. Shinu T.M) that he had gone to Dubai to meet his daughter who was married to Appellant-3 (Shri. Shamju T.M) who was having Mobile shop at Dubai. Appellant-3 (Shri. Shamju T.M) had introduced him to Shri Kunjutty who had discussion with the regard to gold being bought and sold. He also informed that 35 gold biscuits were to be sent, for which Shri Shinu was to get Rs.5,00,000/- for which a message 'Kunjutty35' was received from Dubai from his son- in-law and further which were corroborated with the statements of others. This statement was not retracted until the reply to the show-cause notice was filed nearly after 270 days, hence the retraction is not a valid retraction. In the case of K.P. Abdul Majeed vs. Commissioner of Customs, Cochin: 2014 (309) E.L.T. 671 (Ker.) dated 03.07.2014, the Hon'ble High Court of Kerala observed as follows:
"It is clear that confession statement of co-accused can be treated as evidence, provided sufficient materials are available to corroborate such evidence. As far as retraction statement is concerned, it is for the person who claims that retraction has been made genuinely to prove that the statements were obtained under force, duress, coercion, etc., otherwise, the materials indicate that statements were given voluntarily. When the statute permits such statements to be the basis of finding of guilt even as far as co-accused is concerned, there is no reason to depart from the said view".Page 44 of 47
C/22060, 22042, 22043/2015 In view of the above, since Appellant-2 (Shri. P. Shamsudeen) had not retracted the statements and his statements being corroborated with the statements of Shri Shinu.T.M, (Appellant-1), the involvement of the Appellant-2 (Shri. P. Shamsudeen) in entertaining the smuggling activities cannot be ruled-out, hence, he is liable for penalty. Same is the case with the Appellant-3 (Shri. Shamju T.M) who had also given statement that he had introduced Appellant-2 (Shri. P. Shamsudeen) to Shri Kunjutty and communicated messages from Dubai to Calicut to facilitate smuggling attempt. He also did not retract any of the statements except while filing the reply to the show-cause notice. hence, he is liable for penalty.
8. With regard to confiscation of the vehicle, the relevant provisions of Section 115 of the Customs Act, 1962 regarding 'Confiscation of Conveyances' is reproduced below:
"(2) 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, his agent, if any, and the person in charge of the conveyance or animal 1 Provided that where any such conveyance is used for the carriage of goods or passengers for hire, the owner of any conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine not exceeding the market price of the goods which are sought to be smuggled or the smuggled goods, as the case may be.
Explanation - In this section, "market price" means market price at the date when the goods are seized."
With regard to confiscation of the vehicle, the Commissioner in the impugned order at Para 34 had observed as follows:
Page 45 of 47C/22060, 22042, 22043/2015 "that 35 foreign mark gold biscuits recovered from the Toyota Innova vehicle bearing No. KL-11-AN-99 fall under the category of smuggled goods. The Mahazar drawn on 17.04.2014 has described in detail all the events that took place on that day from the interception of the vehicle at Aikkarapady, Malappuram to the recovery of gold biscuits which were kept concealed within the door pad of the said vehicle. The said Mahazar has been signed by Shri. T.M. Shinu, owner of the vehicle as well as vehicle independent witness. Thus, it emerges unchallenged that the said Toyota Innova vehicle was used for transporting smuggled goods. Since, the said vehicle was driven by the owner himself, who had taken by himself the task of collecting the said smuggled goods from Shri. Mohammed Ali and delivering them to Shri. Shamsudeen, the vehicle would stand liable to confiscation under provisions of Section 115 (2) of the Customs Act, 1962."
Since, we have held that the gold biscuits found in the vehicle are smuggled goods and admittedly Appellant-1 (Shri. Shinu T.M) who was the owner had driven the vehicle; the confiscation of the vehicle is upheld. However, in view of the above provisions, the absolute confiscation of the vehicle is set aside and the matter is remanded to the Commissioner to release the vehicle on payment of necessary redemption fine based on the market price of the vehicle at the relevant point of time.
9. Since, we have held that the gold biscuits are rightly confiscated absolutely and all the persons involved in this activity of smuggling are liable for penalty, however, considering the circumstances, the penalty is reduced to Rs.1,00,000/- each (Rupees One Lakh Only) on Appellant-1 (Shri. Shinu T.M) and Appellant-2 (Shri. P. Shamsudeen) and Rs.50,000/- (Rupees Fifty Thousand Only) on Appellant-3 (Shri. Shamju T.M) under Section 112 of the Customs Act, 1962.
Page 46 of 47C/22060, 22042, 22043/2015
10. In view of the above we uphold absolute confiscation of the 35 gold biscuits. The confiscation of Toyota Innova Vehicle bearing Registration No.KL-11-AN-99 is also upheld but allowed to be redeemed on payment of redemption fine to be determined by the Commissioner.
Appeals are disposed of on above terms.
(Order pronounced in Open Court on 18.11.2024.) (D.M. MISRA) MEMBER (JUDICIAL) (R. BHAGYA DEVI MEMBER (TECHNICAL) Page 47 of 47