Madras High Court
Commissioner Of Customs (Air) vs P.Sinnasamy on 23 August, 2016
Author: S.Manikumar
Bench: S.Manikumar
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23.08.2016
CORAM:
THE HONOURABLE MR.JUSTICE S.MANIKUMAR
and
THE HONOURABLE MR.JUSTICE D.KRISHNA KUMAR
C.M.A.No.1631 of 2008
Commissioner of Customs (Air),
Custom House,
No.60, Rajaji Salai, Chennai-1. .. Appellant
versus
1. P.Sinnasamy
2. The Customs, Excise & Service Tax Appellate Tribunal,
South Zonal Bench at Chennai,
Shastri Bhavan Annexe, 1st Floor,
26, Haddows Road, Chennai 600 006. .. Respondents
Prayer: Civil Miscellaneous Appeal is filed under Section 130(1) of the Customs Act, 1962, against the Final Order No.455 of 2007, dated 20.04.2007, on the file of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Chennai 600 006.
For Appellant : Mr.V.Sundareswaran
For 1st respondent : Mr.M.Abdul Nazeer
JUDGMENT
(Judgement of this Court was made by S.MANIKUMAR, J.) Civil Miscellaneous Appeal is directed against the Final Order No.455 of 2007, dated 20.04.2007, passed by Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Chennai 600 006. The Tribunal, while setting aside the Order-in-Original No.31 of 2000, dated 31.03.2000, passed by the Commissioner of Customs, Madras-1, directed him, to give option to the 1st respondent, for redemption of gold seized, against payment of fine.
2. Facts leading to the appeal are that on 17.09.1999, the 1st respondent, who arrived by Singapore Airlines Flight SQ 410/17.09.99, at Anna International Airport, Chennai, was intercepted by the Officers of the Directorate of Revenue Intelligence, Chennai. He showed his Customs declaration form, indicating the contents of his baggage, as 4 dozen of Martin Shirts and 12 numbers of small calculators and miscellaneous goods. When questioned, as to whether, he was carrying any gold, his answer was 'No'. However, on examination of his baggage, 111 broken bits of gold biscuits, totally weighing 2548.3 grams, were found and recovered from certain folding scissor boxes and stapler pin boxes. In addition to other miscellaneous items, they were seized. Gold was valued at Rs.10,34,355/- and other goods were valued at Rs.41,117/-. All the above, were in excess of the declared items.
3. The Commissioner of Customs (Air), Chennai, appellant, has further submitted that according to Customs Notification No.171/94 (as amended by Notification No.31/2003-Customs), the passenger eligible for import of gold should have stayed abroad for a period of six months. But in the case on hand, the 1st respondent had stayed abroad only for a week. According to the appellant, the respondent had deliberately attempted to smuggle gold, by concealment and without declaration to customs.
4. Material on record discloses that the 1st respondent was arrested on 18.09.1999 and remanded to judicial custody. A show cause notice was issued to the 1st respondent, calling upon him, to show cause, as to, (i) Why 111 broken bits of gold biscuits totally weighting 2548.3 grams valued at Rs.10,34,355/- (M.V.) should not be confiscated under Section 111(d)(i)(l) and (m) of the Customs Act, 1962.
(ii) Why the material objects such as aluminum foil, black gum tape, rose brand folding scissors packets, MAX stapler pin packets, and the suitcase used for concealing abovesaid gold bits, should not be confiscated under Section 119 of the Customs Act, 1962.
(iii) Why the other assorted goods totally valued at Rs.41,117/- (CIF) seized along with the abovesaid 111 gold bits, should not be confiscated under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, and
(iv) Why personal penalty under Section 112(a) of the Custom Act, 1962, should not be imposed on Shri.Paraman Sinnasamy.
5. Though the 1st respondent had acknowledged the show cause notice on 03.01.2000, no reply was received till 02.03.2000, and hence, the adjudicating authority granted, personal hearing on 15.03.2000. After hearing the 1st respondent and considering the material on record, Clause 3 of the Foreign Trade (Exemption from application of rules in certain cases) Order, 1993, issued under Foreign Trade (Development and Regulation) Act, 1992, r/w. Customs Notification No.171/94, dated 30.09.1994 (as amended), provisions of the Customs Act, 1962, the Commissioner of Customs, Madras-1, the adjudicating authority, has passed an Order-in-Original No.31 of 2000, dated 31.03.2000, by which, he had ordered absolute confiscation of 111 gold bits weighing 2548.3 grams, valued at Rs.10,34,355/- (MV), under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992.
6. The Commissioner of Customs, Madras-1, has further ordered confiscation of the assorted goods, valued at Rs.41,117/- (CIF), under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992.
7. However, the Commissioner of Customs has allowed the 1st respondent to redeem the same, on payment of Rs.20,500/-, within 30 days of receipt of the Order in Original, dated 31.03.2000. He has also ordered that the duty at the appropriate rate, would be chargeable, on redemption of goods, stated supra.
8. The Commissioner of Customs, Madras-1, has further ordered, absolute confiscation of the material objects, viz., folding scissors boxes, stapler pin boxes, aluminium foils, black gum tape and the suit case, used for concealing and carrying the aforesaid gold bits, under Section 119 of the Customs Act, 1962.
9. Keeping in mind, inter alia, that the 1st respondent was detained under COFEPOSA Act, for six months, the Commissioner has imposed a penalty of Rs.50,000/-, under Section 112(a) of the Customs Act, 1962.
10. Being aggrieved by the Order-in-Original No.31 of 2000, dated 31.03.2000, the 1st respondent has filed Appeal No.C/589/2000, before CESTAT, Chennai. After hearing the parties, by observing that there is no need for absolute confiscation of the goods, and under Section 125 of the Customs Act, 1962, option for redemption against payment of fine is available to the 1st respondent, in respect of gold also, and that there is no bar against such option, by reason of the goods, being an item notified under Section 123 of the Act, or for any other reasons, vide Final Order No.455 of 2007, dated 20.04.2007, CESTAT, Chennai, held that the 1st respondent ought to have been given the option to redeem gold. So saying, CESTAT, Chennai, has set aside the Order-in-Original No.31 of 2000, dated 31.03.2000, passed by the Commissioner of Customs, Madras-1 and issued positive directions to him, to give option to the 1st respondent, to redeem gold, after determining a reasonable amount of redemption fine. Being aggrieved by the same, instant Civil Miscellaneous Appeal is filed.
11. Record of proceedings shows that while entertaining the appeal, this Court has framed the following substantial question of law, Whether the Tribunal finding that under Section 125 of the Customs Act, 1962, the appellant ought to have been given the option of redemption against payment of fine, when Section 125(1) of the Act, also incorporated a word, May pertaining prohibited goods, an option of confiscation power to be exercised by the officer concern, is correct in law?
12. Supporting the substantial questions of law, Mr.V.Sundareswaran, learned counsel appearing for the appellant, reiterated the averments, extracted supra, and placing reliance on the decisions in Gyanchand Jain v. Assistant Collector of Central Excise, Madras reported in 1986 (25) ELT 163 (Mad.), Garg Woollen Mills (P) Ltd., v. Addl. Collector of Customs, New Delhi reported in 1998 (104) ELT 306 (SC) and T.Elavarasan v. Commissioner of Customs (Airport), Chennai reported in 2011 (266) ELT 167 (Mad.), submitted that, on the facts and circumstances of the instant case, when gold is attempted to be smuggled, and when violations of Notification No.171/94, dated 30.09.1994 (as amended), was apparent on the face of record, gold seized is liable to be confiscated. He further submitted that when the adjudicating authority, has considered the provisions of the Customs Act, 1962, and Notification, stated supra, order of the Tribunal, giving positive directions to the appellant, to release gold, accepting fine, is against the scheme of the Customs Act, 1962 and therefore, the order impugned before us, requires to be interfered with.
13. Learned counsel for the appellant further submitted that the observations of CESTAT that Section 125 of the Customs Act 1962 does not discriminate between gold and other goods, is not correct. He further submitted that the statute confers discretion to be exercised by the authority and the Tribunal cannot direct the said authority, to exercise discretion, in favour of the respondent, in which case, there is nothing for the competent authority to exercise his discretion. He further submitted that use of the word, may in Section 125 of the Act, confers discretion on the adjudicating authority to pass appropriate orders, depending upon the facts and circumstances of each case.
14. Placing reliance on a decision of the Calcutta High Court in Commissioner of Customs (Preventive) v. Uma Shankar Verma reported in 2000 (120) ELT 322 (Cal.), Mr.V.Sundareswaran, learned counsel for the appellant further submitted that when goods are prohibited, then discretion is with the Customs authority to confiscate the same, without giving any option, to pay fine, in lieu thereof and when the goods are not prohibited, then the Customs Authority, has no option, but to allow an option to the owner, to pay a fine in lieu of confiscation. According to him, in the case of improper importation of gold, (being prohibited), option, as to whether to release the same, on payment of redemption fine or order for absolute confiscation, is with the exclusive jurisdiction of the concerned authority and on the facts and circumstances of the instant case, when after considering Section 125 of the Customs Act, 1962, a detailed order of confiscation has been passed, on merits, it would not be appropriate to CESTAT, Madras, to remand the matter once again, to consider option.
15. Taking this Court through the impugned order of CESTAT, dated 20.04.2007, learned counsel for the appellant submitted that when statute confers discretion, on the adjudicating authority, to decide, as to whether, gold seized has to be released or not, positive directions given by the Tribunal, to the adjudicating authority to release the same, in favour of the respondent, is wholly erroneous and contrary to the scheme of the Act.
16. Learned counsel for the appellant further submitted that when it is the categorical case of the department that the intention of the 1st respondent was to smuggle gold bits, prohibited under law, besides commission of offences, directions of CESTAT, Madras, to exercise discretion under Section 125 of the Customs Act, 1962, in favour of the 1st respondent, amounts to the Tribunal, exercising the jurisdiction, which the Customs Act, 1962, has conferred on the adjudicating authority. Inasmuch as there is a categorical allegation of attempt to smuggle gold and to that effect, there are sufficient material on record, allowing the importer to redeem gold and other goods, on payment of fine, would amount to granting bonanza or profits to an illegal attempt of import, which the Tribunal has failed to consider.
17. To sustain the impugned order of CESTAT, dated 20.04.2007, Mr.M.Abdul Nazeer, learned counsel appearing for the respondent submitted that the voluntary statement, dated 18.09.1999, of the 1st respondent, narrated in the sequence of events, which led to seizure of 111 gold bits and other assorted goods, has been retracted and therefore, the same cannot be treated as admission. Referring to Section 2(33) of the Customs Act, 1962, which defines "prohibited goods", he submitted that import of gold, is not prohibited and therefore, order of CESTAT, Madras, does not require intervention.
18. Learned counsel for the 1st respondent further submitted that the observation of the Tribunal that under Section 125 of the Customs Act, 1962, option for redemption against payment of fine is available to the 1st respondent, even in respect of gold and that there is no bar, against such option, by reason of the goods, being an item, notified under Section 123 of the Act or for any other reasons, is not liable to be set aside and therefore, the direction issued by CESTAT, Madras, to the Commissioner, to give option to the 1st respondent to redeem golds seized, after determining a reasonable amount of redemption fine, is not violative of the provisions of the Customs Act, 1962 and for the abovesaid reasons, prayed for dismissal of the appeal.
Heard the learned counsel appearing for the parties and perused the materials available on record.
19. Earlier in W.A.No.377 of 2016, dated 28.07.2016, on similar lines, we have considered a case, under Section 111(d) of the Customs Act, 1962, dealing with provisional release. Instant case deals with Section 125 of the customs act, 1962. On the scope and powers of the customs authority, under the provisions of the Customs Act, 1962, we have considered relevant provisions, notifications issued and answered the issues called for. We are of the view that extract from the said judgment, would be relevant for this case also, with changes, mutatis-mutandis, 38. Before adverting to the rival contentions of both parties, it is relevant to have a cursory look at the provisions of the Customs Act, 1962. As per Section 2(33) of the Customs Act, 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.
39. Positively, prohibited goods are defined, as goods, import or export of which, should be subject to any prohibition under this Act or any other law for the time being in force. Negatively, Section 2(33) of the Act, also states that goods are not prohibited goods, when import or export of which, 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. The expression subject to any prohibition under this Act or any other law for the time being in force and compliance of the conditions, subject to which, the goods are permitted to be imported or exported, are the determining factors, to understand and to give effect to the meaning of the words, prohibited goods.
40. Literal interpretation of the words, prohibited goods and the contention that gold is not notified and therefore, to be released, would cut down the wide ambit of the inbuilt prohibitions and restrictions in the Customs Act, 1962 and any other law for the time being in force.
(i) In Poppatlal Shah v. State of Madras reported in AIR 1953 SC 274, the Supreme Court held that, It is settled rule of construction that to ascertain the legislative intent all the constituent parts of a statute are to be taken together and each word, phrase and sentence is to be considered in the light of the general purpose and object of the Act itself.
(ii) It is well settled that a statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act, so as to make a consistent enactment of the whole statute. Such a construction has the merit of avoiding any inconsistency or repugancy either within the statute or between a Section or other parts of the statute. [Ref. Raj Krishna v. Bonod Kanungo reported in AIR 1954 SC 202].
(iii) In The State of Bihar v. Hira Lal Kejriwal reported in AIR 1960 SC 47, the Supreme Court, at Paragraph 6, held that, To ascertain the meaning of a section it is not permissible to omit any part of it: the whole section should be read together and an attempt should be made to reconcile both the parts. ......The first part gives life to that Order, and, therefore, the acts authorised under that Order can be done subsequent to the coming into force of the Ordinance. ......The second part appears to have been enacted for the purpose of avoiding this difficulty or, at any rate, to dispel the ambiguity.
(iv) In State of W.B., v. Union of India reported in AIR 1963 SC 1241, the Apex Court held that in considering the expression used by the Legislature, the Court should have regard to the aim, object and scope of the statute to be read in its entirety.
(v) In State of Uttar Pradesh v. Dr.Vijay Anand Maharaj reported in AIR 1963 SC 946, the Hon'ble Supreme Court held as follows:
The fundamental and elementary rule of construction is that the words and phrases used by the Legislature shall be given their ordinary meaning and shall be constructed according to the rules of grammar. When the language is plain and unambiguous and admits of only one meaning, no question of construction of a statute arises, for the Act speaks for itself. It is a well recognized rule of construction that the meaning must be collected from the expressed intention of the Legislature.
(vi) In Namamal v. Radhey Shyam reported in AIR 1970 Rajasthan 26, the Court held as follows:
11. Maxwell in his book on Interpretation of Statutes (11th Edition) at page 226 observed thus:--
"The rule of strict construction, however, whenever invoked, comes attended with qualifications and other rules no less important, and it is by the light which each contributes that the meaning must be determined. Among them is the rule that that sense of the words is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the legislature. The paramount object, in construing penal as well us other statutes, is to ascertain the legislative intent and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention. They are indeed frequently taken in the widest sense, sometimes even in a sense more wide than etymologically belongs or is popularly attached to them, in order to carry out effectually the legislative intent, or, to use Sir Edward Cole's words, to suppress the mischief and advance the remedy.
(vii) In Commissioner of Sales Tax v. M/s.Mangal Sen Shyamlal reported in 1975 (4) SCC 35 = AIR 1975 SC 1106, the Apex Court held that, "A statute is supposed to be an authentic repository of the legislative will and the function of a court is to interpret it "according to the intent of them that made it". From that function the court is. not to resile. It has to abide by the maxim, ut res magis valiat quam pereat, lest the intention of the legislature may go in vain or be left to evaporate into thin air."
(viii) If the words are precise and unambiguous, then it should be accepted, as declaring the express intention of the legislature. In Ku.Sonia Bhatia v. State of U.P., and others reported in 1981 (2) SCC 585 = AIR 1981 SC 1274, the Supreme Court held that a legislature does not waste words, without any intention and every word that is used by the legislature must be given its due import and significance.
(ix) In Balasinor Nagrik Co-operative Bank Ltd., v. Babubhai Shankerlal Pandya reported in 1987 (1) SCC 606, the Supreme Court, at Paragraph 4, held as follows:
It is an elementary rule that construction of a section is to be made of all parts together. It is not permissible to omit any part of it. For, the principle that the statute must be read as a whole is equally applicable to different parts of the same section. .......It also provides for the manner of the exercise of such power. .......... Sub-section (1) of Section 36 is made subject to the fulfilment of the conditions prerequisite,
(x) In the case of Reserve Bank of India v. Peerless G.F., & Co., Ltd., AIR 1987 SC 1023, the Hon'ble Apex Court held :
"Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place."
(xi) In Balram Kumawat v. Union of India reported in 2003 (7) SCC 628, the Supreme Court held that, Contextual reading is a well-known proposition of interpretation of statute. The classes of a statute should be construed with reference to the context vis-a-vis the other provisions so as to make a consistent enactment of the whole statute relating to the subject-matter. The rule of "ex visceribus actus" should be resorted to in a situation of this nature.
(xii) In State of Gujarat v. Salimbhai Abdulgaffar Shaikh reported in 2003 (8) SCC 50, the Supreme Court held that, Broadly speaking, therefore, an appeal is a proceeding taken to rectify an erroneous decision of a Court by submitting the question to a higher Court.......
........It is well settled principle that the intention of the legislature must be found by reading the Statute as a whole. Every clause of Statute should be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole Statute. It is also the duty of the Court to find out the true intention of the legislature and to ascertain the purpose of Statute and give full meaning to the same. The different provisions in the Statute should not be interpreted in abstract but should be construed keeping in mind the whole enactment and the dominant purpose that it may express.
(xiii) In A.N.Roy Commissioner of Police v. Suresh Sham Singh reported in AIR 2006 SC 2677, the Apex Court held that, It is now well settled principle of law that, the Court cannot change the scope of legislation or intention, when the language of the statute is plain and unambiguous. Narrow and pedantic construction may not always be given effect to. Courts should avoid a construction, which would reduce the legislation to futility. It is also well settled that every statute is to be interpreted without any violence to its language. It is also trite that when an expression is capable of more than one meaning, the Court would attempt to resolve the ambiguity in a manner consistent with the purpose of the provision, having regard to the great consequences of the alternative constructions.
(xiv) In Visitor Amu v. K.S.Misra reported in 2007 (8) SCC 594, the Supreme Court held that, It is well settled principle of interpretation of the statute that it is incumbent upon the Court to avoid a construction, if reasonably permissible on the language, which will render a part of the statute devoid of any meaning or application. The Courts always presume that the legislature inserted every part thereof for a purpose and the legislative intent is that every of the statute should have effect. The legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons. It is not a sound principle of construction to brush aside words in a statute as being in apposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute.
41. In the light of the decisions and in the context of what is observed above, the expression, in section 2(33) of the Act, "prohibition under this Act" or any other law for the time being, has to be examined with the other provisions in the Customs Act, 1962. Section 2(39) of the Act, defines Smuggling in relation to any goods, which means, any act or omission which will render such goods liable to confiscation under section 111 or section 113. Chapter IV of the Act, deals with prohibition on importation and exportation of goods. Section 11 deals the power to prohibit importation or exportation of goods and the said Section is extracted hereunder:
(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) prevention of smuggling;
(d) prevention of shortage of goods of any description;
(e) conservation of foreign exchange and the safeguarding of balance of payments;
(f) prevention of injury to the economy of the country by the uncontrolled import or export of gold or silver;
(g) the prevention of surplus of any agricultural product or the product of fisheries;
(h) maintenance of standards for the classification, grading or marketing of goods in international trade;
(i) establishment of any industry;
(j) the prevention of serious injury to domestic production of goods of any description;
(k) protection of human, animal or plant life or health;
(l) the protection of national treasures of artistic, historic or archaeological value;
(m) conservation of exhaustible natural resources;
(n) protection of patents, trademarks and copyrights;
(o) prevention of deceptive practices;
(p) carrying on of foreign trade in any goods by the State, or by a Corporation owned or controlled by the State to the exclusion, complete or partial, of citizens of India;
(q) the fulfilment of obligations under the Charter of the United Nations for the maintenance of international peace and security;
(r) implementation of any treaty, agreement or convention with any country;
(s) the compliance of imported goods with any laws which are applicable to similar goods produced or manufactured in India;
(t) prevention of dissemination of documents containing any matter which is likely to prejudicially affect friendly relations with any foreign State or is derogatory to national prestige;
(u) prevention of the contravention of any law for the time being in force; and
(v) other purpose conducive to the interests of the general public.
42. Chapter IV-A deals with detection of illegally imported goods and prevention of the disposal thereof. Section 11A speaks about illegal import, intimated place, notified date and notified goods. Section 11A(a) of the Act, defines, illegal import and the same is extracted hereunder:
illegal import" means the import of any goods in contravention of the provisions of this Act or any other law for the time being in force.
43. Chapter XIII deals with searches, seizure and arrest. Section 110 of the Act, deals with seizure of goods, documents and things and the same reads as follows:
SECTION 110. Seizure of goods, documents and things. - (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods:
Provided that where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.
(1A) The Central Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification in the Official Gazette, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (1), be disposed of by the proper officer in such manner as the Central Government may, from time to time, determine after following the procedure hereinafter specified.
(1B) Where any goods, being goods specified under sub-section (1A), have been seized by a proper officer under sub-section (1), he shall prepare an inventory of such goods containing such details relating to their description, quality, quantity, mark, numbers, country of origin and other particulars as the proper officer may consider relevant to the identity of the goods in any proceedings under this Act and shall make an application to a Magistrate for the purpose of -
(a) certifying the correctness of the inventory so prepared; or
(b) taking, in the presence of the Magistrate, photographs of such goods, and certifying such photographs as true; or
(c) allowing to draw representative samples of such goods, in the presence of the Magistrate, and certifying the correctness of any list of samples so drawn.
(1C) Where an application is made under sub-section (1B), the Magistrate shall, as soon as may be, allow the application.
(2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized :
Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Commissioner of Customs for a period not exceeding six months.
(3) The proper officer may seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under this Act.
(4) The person from whose custody any documents are seized under sub-section (3) shall be entitled to make copies thereof or take extracts there from in the presence of an officer of customs. ..........
45. Chapter XIV deals with the confiscation of goods and conveyances and imposition of penalties. Section 111, dealing with confiscation of improperly goods, etc., read as follows:
"The following goods brought from a place outside India shall be liable to confiscation: -
(a) any goods imported by sea or air which are unloaded or attempted to be unloaded at any place other than a customs port or customs airport appointed under clause (a) of section 7 for the unloading of such goods;
(b) any goods imported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the import of such goods;
(c) any dutiable or prohibited goods brought into any bay, gulf, creek or tidal river for the purpose of being landed at a place other than a customs port;
(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;
(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;
(g) any dutiable or prohibited goods which are unloaded from a conveyance in contravention of the provisions of section 32, other than goods inadvertently unloaded but included in the record kept under sub-section (2) of section 45;
(h) any dutiable or prohibited goods unloaded or attempted to be unloaded in contravention of the provisions of section 33 or section 34;
(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;
(k) any dutiable or prohibited goods imported by land in respect of which the order permitting clearance of the goods required to be produced under section 109 is not produced or which do not correspond in any material particular with the specification contained therein;
(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;
(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for transhipment referred to in the proviso to sub-section (1) of section 54;
(n) any dutiable or prohibited goods transited with or without transhipment or attempted to be so transited in contravention of the provisions of Chapter VIII;
(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer;
(p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened."
46. Section 112 deals with the penalty for improper importation of goods, etc., and the same is extracted hereunder:
SECTION 112. Penalty for improper importation of goods, etc.- Any person, -
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or
(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater;
(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater;
(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees, whichever is the greater;
(iv) in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest;
(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees, whichever is the highest.
47. Smuggling in relation to any goods is forbidden and totally prohibited. Failure to check the goods on the arrival at the customs station and payment duty at the rate prescribed, would fall under the second limb of section 112(a) of the Act, which states omission to do any act, which act or omission, would render such goods liable for confisaction under Section 111 of the Act. Sub section (b) to Section 111 of the Act covers the persons involved.
48. Section 123 of the Act, deals with burden of proof in certain cases and the same is extracted hereunder:
(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, and manufactures thereof, watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify.
49. Section 125 of the Act, speaks about the option to pay fine in lieu of confiscation and the said Section is extracted hereunder:
(1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit :
Provided that, without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
(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.
50. Section 126 of the Act, deals with, on confiscation, property to vest in Central Government. The said Section reads thus, (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government.
(2) The officer adjudging confiscation shall take and hold possession of the confiscated goods. ............
53. ..........One of the important aspects to be taken note by the authorities while exercising their powers under Section 125 of the Act is whether, import of goods is prohibited, within the meaning of Section 2(33) of the Customs Act, 1962 and where, in the Customs Act or any other law for the time being in force, such prohibition is mentioned? what are all the things to be prohibited and whether the goods imported or exported are in contravention of the subject matters, enumerated in the Customs Act, 1962 or any other law for the time being in force, are prohibited goods? At this juncture, the authorities also duty bound to consider, as to whether, for the goods imported/exported, there is prohibition or restriction, in the Customs Act, 1962 or any other law for the time being in force.
.............
55. In the light of the above, let us consider the decisions, relied on by the learned counsel appearing for both parties.
56. In N.K.Bapna v. Union of India reported in 1992 (60) ELT 13 (SC), the petitioner therein was the Managing Director of Company, engaged in the business of manufacture and production of plastic compounds, plastic films and sheets and plastic chemicals. A detention order was passed, under section 3(1) of the Conservation of Foreign Exchange & Prevention of Smuggling Activities Act, 1974, with a view to prevent him from abetting the smuggling of goods. Consignment of Ethyle Hexanol (EHA) was transported to bonded warehouses, after assessment to duty in October-November, 1989 and subsequently, the goods were removed from the bonded warehouse, without the permission of the proper officer. Referring to Sections 111(J) and 243 of the Customs Act and Section 2(39), which defines, Smuggling, the Hon'ble Apex Court held that, The third point made by Sri Sen is that once goods are cleared by the customs authorities, they are not liable to confiscation unless the order granting clearance is reversed in appropriate proceedings. He places reliance for this proposition on Union of India v. Jain Shudh Vanaspathi [1992 (1) Scale 34], affirming the decision of the Delhi High Court in Jain Shudh Vanaspati Ltd., and Anr. v. Union of India & Ors., [1982] 10 E.L.T. 43 (Del.) (to which one of us was a party). There was some discussion before us as to whether this Court has confirmed the decision of the High Court on the above point or left it open in para 4 of the judgment. We do not think it is necessary for for us to enter into this controversy. That was a case where the goods had been completely cleared accepting the plea of the importer that their import was not prohibited. The High Court held that so long as this acceptance stood the goods were not liable to confiscation. We are here concerned with the question whether the goods are liable to confiscation under s.111(j) and this question has to be answered in the affirmative in view of the language of the section. The conclusion here that the goods are liable to confiscation does not go behind or ignore the effect of the order of clearance, as in that case. It accepts the fact of clearance and proceeds on the footing that the goods, rightly cleared under s.59, have been clandestinely removed from the warehouse within the meaning of s.59. The decision cited by learned counsel is, therefore, of no assistance to him. The above reported case, is relied on by the respondents, for the purpose that the goods, clandestinely imported into the country, for evading the assessment of duty, are liable for confiscation.
57. In Union of India v. Lexus Exports Pvt. Ltd., reported in 1994 (71) ELT 348 (SC), a learned single Judge directed release of the seized goods. On appeal by the revenue, a Hon'ble Division Bench directed export of the goods, during the pendency of adjudicatary proceedings. While testing the correctness of the same, the Hon'ble Supreme Court, at Paragraphs 2 and 3, held as follows:
2. We fail to appreciate how this intervention could have been made by the High Court in a matter of this kind at that particular stage. Sri Chidambaram, learned senior counsel, however, submitted that respondents would in any event be entitled to have the goods released on payment of fine in lieu of confiscation even if there was such confiscation. He said that in that view of the matter even the prospect of an order of confiscation of the goods in the statutory adjudication need not detain the export as the respondents could always pre-empt confiscation by payment of fine in lieu thereof.
3. This submission looks attractive on the face of it but on closer scrutiny it is not as sound as it is attractive. The proceedings of seizure and confiscation are proceedings in rem. Until the culmination of the adjudication it is difficult to envisage any right on the part of the respondents from whom they are seized to export them on the basis of a future title they expect to acquire by payment of fine. Learned Counsel, however, says that it would earn foreign exchange for the country. But sanctity of legal proceedings cannot be whittled down on grounds of such expediency.
4. In the circumstances, we set aside both the orders of the learned Single Judge as well as of the Division Bench. The Writ Petition before the High Court deserves to be and is hereby dismissed. The interest of the respondents will be adequately protected, if we direct the statutory adjudication to be completed within 45 days from 1st February, 1994. The first date of hearing before the statutory authority shall be 1st February, 1994, and the respondents shall appear before the authority without further notice. The authority shall call the matter on that date for further proceedings in the matter. The claim of the respondents to entitlement to redeem the goods by payment of fine in lieu of confiscation may be considered by the authority at the appropriate stage and in accordance with law. If the goods are so returned to the respondents, then respondents may become entitled to export them. Against the adjudication the respondents shall, of course, be entited to pursue their statutory appeals etc. ............
59. In Om Prakash Bhatia v. Commissioner of Customs, Delhi reported in 2003 (155) ELT 423 (SC), the Hon'ble Apex Court considered a case of over-invoicing goods and consequently, a claim of fraudulent drawback........ Rejecting the contention of the appellant therein that Section 113(D) of the Customs Act, would be applicable, as the goods were not prohibited goods and agreeing with the contention of the revenue, that over-invoicing is not permitted under the Act and therefore, it is in violation of the statutory provisions and in that context, Section 113(D) of the Act would be attracted, which states that, any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force. and with reference to the word, prohibition imposed by or under the Act or any other law for the time being in force and also taking note of Section 2(33) of the Act, which defines prohibited goods, with the opening sentence of Section, starts that, 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, the Hon'ble Supreme Court, at Paragraph 9, held as follows:
9. 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 be 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). 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 Sheikh Mohd. Omer v. Collector of Customs, Calcutta and others [(1970) 2 SCC 728], 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: " 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."
60. In Commissioner of Customs (AIR), Chennai-I v. Samynathan Murugesan reported in 2009 (247) ELT 21 (Mad.), about 7.075 Kgs gold ornaments were recovered from a T.V. Set. Goods were claimed to be prohibited, as the petitioner therein did not belong to the category of persons, who could bring gold at concessional rate of duty. Contentions were made by the Revenue that goods were imported in violation of Import (Control) Order, 1955, read with Section 3(i) of Import and Export Control Act, 1947. Though in the above case, a contention was raised by the respondent that the gold is not a prohibited item and it was only a restricted item and therefore, there is a mandatory duty, on the part of the proper officer to give option to the person, guilty of adjudicatory proceedings to pay fine, in lieu of confiscation, taking note of the judgment in Shaik Jamal Basha v. Government of India reported in 1997 (91) ELT 277 (AP), the Hon'ble Division Bench of this Court, following Om Prakash Bhatia's case (cited supra), at Paragraphs 7, 9 and 10, held as follows:
7. Section 11 empowers the Central Government to prohibit either absolutely or subject to such conditions to be fulfilled before or after clearance the import or export of the goods of any specified direction by issuing a notification in this behalf. The effect of interpretation of the words prohibited goods was considered inOm Prakash Bhatia Vs. Commissioner of Customs (2003 (6) SCC 161) and in paragraph No.10 of the said judgment the Supreme Court held as follows:
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 be 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). 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 Sheikh Mohd. Omer v. Collector of Customs, Calcutta and others [(1970) 2 SCC 728], 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:--
"...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." Therefore, if we apply this judgment to the notification, the notification contemplates import of gold subject to certain conditions. The relevant paragraphs of Import trade control order are extracted as follows:
Import of Gold permitted as Baggage.
Import of gold in any form, including ornaments but excluding ornaments studded with stones or pearls, is allowed to be imported as part of baggage by passengers of Indian origin or a passenger holding a valid passport issued under the Passport Act subject to the following conditions:
that the passenger importing the gold is coming to India after a period of not less than six months of stay abroad;
the quantity of gold imported shall not exceed 10 Kg, per passenger import duty on gold shall be paid in convertible foreign currency;
there will be no restriction on sale of such imported gold.
A person shall be deemed to be of Indian origin, if he held an Indian passport at any time, or he or either of his parents or any of his grand parents, was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); provided that the national of Pakistan or Bangladesh shall be deemed to be not of Indian origin.
A spouse (not being a national of Pakistan or Bangladesh) of a person of Indian origin shall also be deemed to be of Indian origin.
8. ............
9. In view of meaning of the word prohibition as construed laid down by the Supreme Court in Om Prakash Bhatia case we have to hold that the imported gold was prohibited goods since the respondent is not an eligible passenger who did not satisfy the conditions. The impugned order deserves to be set aside.
10. In 1992 (61) ELT 372(cited supra), the Supreme Court directed the Collector to consider the exercise of discretion. In this case, the Collector had rightly considered it and refused to give the option.
61. Decision in Samyanathan Murugesan's case (cited supra), has been confirmed by the Hon'ble Supreme Court in Samyanathan Murugesan v. Commissioner of Customs (AIR) reported in 2010 (254) ELT A15(SC).
62. In Abdul Razak v. Union of India reported in 2012 (275) ELT 300 (Ker)(DB), there was an attempt by the appellant therein to smuggle gold, weighing over 8 Kgs, by concealing the same, in emergency light, mixie, grinder and car horns, etc. The authorities seized the same. Adjudicatory proceedings ended in confiscation. Contention of the appellant therein, before the High Court, was that Section 125 of the Customs Act, 1962, does not provide for confiscation of goods, other than prohibited goods. Repelling the said contention and following Om Prakash Bhatia's case (cited supra), at Paragraph 6, after referring to Section 2(33) of the Customs Act, 1962, a Hon'ble Division Bench of Kerala High Court, held as follows:
After hearing both sides and after considering the statutory provisions, we do not think the appellant, as a matter of right, can claim release of the goods on payment of redemption fine and duty. Even though gold as such is not a prohibited item and can be imported, 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. There is no need for us in this case to consider the conditions on which import is permissible and whether the conditions are satisfied because the appellant attempted to smuggle out the goods by concealing the same in emergency light, mixie, grinder and car horns etc. and hence the goods so brought is prohibitory goods as there is clear violation of the statutory provisions for the normal import of gold. Further, as per the statement given by the appellant under Section 108 of the Act, he is only a carrier i.e. professional smuggler smuggling goods on behalf of others for consideration. We, therefore, do not find any merit in the appellant's case that he has the right to get the confiscated gold released on payment of redemption fine and duty under Section 125 of the Act.
63. On the facts and circumstances, the dictum laid down by the Kerala High Court in Abdul Razak's case (cited supra), is that even though gold is not an enumerated prohibited item and thus, can be imported, but when such import is subject to restrictions, including the necessity to declare the goods on arrival at the Customs Station and make payment of duty at the rate prescribed, release of the smuggled goods cannot be ordered.
64. Dictum of the Hon'ble Supreme Court and the High Courts makes it clear that gold, may not be one of the enumerated goods, as prohibited goods, still, if the conditions for such import are not complied with, then import of gold, would squarely fall under the definition, prohibited goods, in Section 2(33) of the Customs Act, 1962, which states that, 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. When there is a violation of statutory prohibitions, mentioned in Sections 11 and 11A of the Customs Act, 1962 or any other law, for the time being in force or restrictions imposed, such restrictions would also encompass the expression, any prohibition.
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66. In Commissioner of Customs, Chennai v. Brinda Enterprises reported in 2010 (262) ELT 239 (Mad.), the company mis-declared the goods and there was no specific licence or certificate of registration. The adjudicating authority ordered for confiscation. Matter went upto the Tribunal, which remanded the same, for a decision, which ultimately landed up in the High Court. After considering the rival contentions therein, and Om Prakash Bhatia's case (cited supra), at Paragraph 20, a Hon'ble Division Bench of this Court, held as follows:
20. If we employ the meaning of the word prohibition as was done in Om Prakash Bhatia's case we have to hold that the imported druid was Prohibited goods since the respondent is not an eligible passenger as he did not satisfy the conditions. The impugned order deserves to be set aside. In view of the above decision, the order, dated 30.04.2008 consequent to the order of remand also is set aside. Since we are of the opinion that the conclusion of the Tribunal was wrong and the order of remand was also erroneous.
67. From the decisions in Samyanathan Murugesan's case (cited supra), Abdul Razak's case (cited supra) and Brinda Enterprises's case (cited supra), it is manifestly clear that the adjudicating authorities/Courts have to consider two aspects, viz., (1) eligibility of the passengers to import the goods; and (2) whether such passengers had fulfilled the conditions of import or export, any restriction on import or export, which is also to be treated as prohibition.
68. In Fast Track Traders v. Commissioner of Customs (Seaport Imports), Tuticorin reported in 2012 (286) ELT 681 (Mad.), there was mis-declaration of goods. Finding that there was a false declaration, a Hon'ble Division Bench of this Court held that when the condition is violated, the authorities can definitely have the recourse under law.
69. In Ashish Kumar Chaurasia v. Commissioner, CESTAT reported in 2015 (325) ELT 250 (All.), 79 silver ingots of foreign orgin, were recovered from the premises of the appellant therein. On the facts and circumstances of the case, the Allahabad High Court held that the appellant therein has failed to prove that the seized silver ingots were not smuggled goods and in such circumstances, upheld the levy of penalty, and ordered for confiscation. In the instant case, adjudicatary proceedings are pending.
70. In Sheik Mohammed Rafique Ahmed v. Joint/Additional C.C., Airport, Chennai reported in 2016 (331) ELT 337 (Mad.), a learned single Judge considered a case, where a passenger was carrying gold chains of 18 carat, two bangles of 24 carat purity, 12 kg of saffron, RMD Kutka, Gudang Garam Cigarette cartons, perfumes and two samsung mobiles. A search was conducted by the Officers of Directorate of Revenue Intelligence, Trivandrum, in the baggages of the petitioner therein. Thereafter, statements were recorded. On completion of the investigation, a show cause notice was issued, under Section 124 of the Customs Act, 1962, proposing as to why, the seized goods should not be confiscated and penalty should not be imposed. He sent a reply, disputing the allegations. A Writ Petition has been filed, seeking for a direction to the respondent therein to release the seized imported goods, under the Mahazar. Accepting the contention of the revenue that since the passenger had attempted to smuggle goods into India, by concealing the same in his person, as well as in his hand baggage and checked-in-baggage, without declaring the same to the Customs, in order to evade payment of Customs duty, the aforestated goods, are held liable for confiscation, under the provisions of Section 111(d) and 111(1) of the Customs Act, 1962 and hence, cannot be released provisionally under Section 110 of the Customs Act, 1962, at Paragraphs 13 and 14, a learned single Judge of this Court held as follows:
13. Further, when the goods were confiscated under Section 111(d) and 111(I) of the Customs Act, 1962, the question of provisional release under Section 110 of the Customs Act, 1962, does not arise. Therefore, this Court is of view that only after the completion of adjudication process, the adjudicating authority would decide whether the goods confiscated under Section 111(d) and 111(1) of the Customs Act, 1962, could be released or not.
14. Accordingly, the respondent, who is the adjudicating authority, is directed to complete the adjudication, after affording an opportunity of personal hearing to the petitioner, within a period of eight weeks from the date of receipt of a copy of this order. The petitioner shall cooperate with the adjudicating authority to complete the adjudication as aforestated.
71. In Commissioner of Customs (Prev.), Mumbai v. M.Ambalal & Co., reported in 2010 (260) ELT 487 (SC), after referring to the expression, dutiable goods, duty, import, imported goods, importer and smuggling, etc., the Hon'ble Supreme Court explained the object of the Act and as to how, the words, smuggled goods should be read within the definition of `imported goods' for the purpose of the Customs Act, 1962. At Paragraphs 6 to 8, 10, 13 and 14, the Hon'ble Supreme Court held as follows:
6) We may now briefly notice the scheme of the Act. The expression `dutiable goods', `duty', `import', `imported goods', `importer' and `smuggling' are defined in the following manner :-
`Dutiable Goods' means any goods which are chargeable to duty and on which duty has not been paid.
`Duty' means a duty of Customs and leviable under this Act. `Import', with its grammatical variations and cognate expressions, bring into India from a place outside India.
`Imported goods' means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.
`Importer' means in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer.
`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 of the Act.
7) Dutiable goods are goods whose import is permitted by the Act or any other law in force. Duty is the tax leviable on the goods occasioned by their import into India or their export out of India. The dutiability of the goods is covered by Section 12 of the Act which is the charging section. Under this Section, all goods imported into or exported from India are liable to Customs duty unless the Customs Act itself or any other law for the time being in force provides otherwise. The rate of duty is fixed by the Customs Tariff Act, 1975. "Import" and "Imported Goods" means that if goods are brought into India, meaning thereby into the territory of India from outside, there is import of goods and the goods become imported goods and become chargeable to duty upto the moment they are cleared for home consumption. The word `importer' has been defined in the Act as importer in relation to any goods at any time between their importation and the time when they are cleared for home consumption includes any owner or any person who holding himself out to be importer. The word `smuggling', in relation to goods, means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113 of the Act.
8) Section 11 of the Act enables the Central Government to prohibit importation or exportation of goods either absolutely or subject to conditions as specified in the notification, the import or export of the goods of any specified description. Section 11A to 11G speaks of detention of illegally imported goods and prevention of the disposal thereof. Section 12 of the Act is the charging Section. Under this Section, the duty is leviable on all imported goods. Valuation of the imported goods is done as provided under Section 14 of the Act. Section 25 of the Act empowers the Central Government to issue notifications exempting generally either absolutely or subject to such conditions as specified in the notification, goods of any specified description from the whole or any part of the Customs Act leviable thereon. The definition of imported goods has to be read along with Section 111 of the Act which deals with goods brought from place outside India. Section 111 of the Act provides for confiscation of goods and conveyances and imposition of penalties. Section 111(d) of the Act provides that any goods which are imported or attempted to be imported or are brought within Indian Custom 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, shall be liable for confiscation. Section 112 of the Act provides for penalties for improper importation of goods.
...........
10) It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. The rule regarding exemptions is that exemptions should generally be strictly interpreted but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. This composite rule is not stated in any particular judgment in so many words. In fact, majority of judgements emphasize that exemptions are to be strictly interpreted while some of them insist that exemptions in fiscal Statutes are to be liberally interpreted giving an apparent impression that they are contradictory to each other. But this is only apparent. A close scrutiny will reveal that there is no real contradiction amongst the judgements at all. The synthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances.
............
13) In short, question before us is whether goods that are smuggled into the country can be read within the meaning of the expression `imported goods' for the purpose of benefit of the exemption notification. We are of the view that `smuggled goods' will not come within the definition of `imported goods' for the purpose of the exemption notification, for the reason, the Act defines both the expressions looking at the different definitions given to the two classes of goods: imported and smuggled, and we are of the view that if the two were to be treated as the same, then there would be no need to have two different definitions.
14) In order to understand the true meaning of the term `imported goods' in the exemption notification, the entire scheme of the Act requires to be taken note of. As noted above, `imported goods' for the purpose of this Act is explained by a conjoint reading of Section 2(25), Section 11, Section 111 and Section 112. Reading these Sections together, it can be found that one of the primary purposes for prohibition of import referred to the latter is the prevention of smuggling [See Section 11(2)(c)]. Further, in the light of the objects of the Act and the basic skeletal framework that has been enumerated above, it is clear that one of the principal functions of the Act is to curb the ills of smuggling on the economy. In the light of these findings, it would be antithetic to consider that `smuggled goods' could be read within the definition of `imported goods' for the purpose of the Act. In the same light, it would be contrary to the purpose of exemption notifications to accord the benefit meant for imported goods on smuggled goods.
72. Following an earlier decision of this Court in W.P.No.21194 of 2013, dated 08.10.2014, in a decision in R.K.Enterprises v. The Commissioner of Customs reported in 2015-TIOL-2733-HC-MAD-CUS, a learned single Judge held that while considering the prayer for provisional release, the following factors have been considered, viz., (i) whether the goods are prohibited goods; (ii) whether the goods require specific licence; and (iii) whether the goods are contraband, held that, if these three factors are not available, in a case, which comes up for consideration, then, this court has to safeguard the interest of the revenue and the interest of the importer can be considered by imposing conditions. On the facts and circumstances of the instant case before us to consider the prayer for provisional release of gold, Clauses (1) and (3) of the Conditions, stated supra, require consideration.
73. In City Office Equipments v. Commissioner of Customs (Seaport-Import), Chennai-I reported in 2015 (316) ELT 199 (Mad.), a Writ of Mandamus was sought for, directing the respondents therein to assess and permit the clearance of 129 packages of the so called second hand Digital Multifunction Print and Copying Machines, forming the subject matter of the Bill of Entry dated 26.5.2014, upon payment of applicable duties of customs. Insofar as the second hand goods are concerned, Paragraph 2.17 of the Foreign Trade Policy, prior to its amendment, stipulated that Digital Multifunction Print and Copying Machines were restricted items, and that they would be allowed to be imported only as per the provisions of the Foreign Trade Policy. On the expression, prohibited goods, at Paragraphs 12 to 14, a learned single Judge, held as follows:
12. The expression " Prohibited Goods" is defined in Section 2(33) of the Customs Act, 1962 to mean "any goods, the import or export of which is subject to any prohibition under the Customs Act or any other law for the time being in force, but it 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."
13. Unfortunately, the Act does not define the expression "Restricted Goods". But the definition of the expression "Prohibited Goods" itself contains an indication as to how the expression "Restricted Goods" has to be understood.
14. A careful look at Section 2(33) would show that even prohibited goods could be permitted to be imported or exported subject to some terms and conditions. The moment those conditions are complied with, those goods would cease to be prohibited goods. This is why the exclusion clause contained in the second part of Section 2(33) uses the expression "any such goods". Therefore, it appears that the Customs Act recognizes only two types of goods namely: (1) those that are prohibited; and (2) those that are not prohibited. The Act also recognizes the fact that even prohibited goods could be imported or exported subject to certain conditions. If those conditions are fulfilled, prohibited goods would automatically become non-prohibited goods. While considering Sections 111 and 125(1) of the Customs Act, 1962, the Court held thus, 15. Section 11 of the Act empowers the Central Government, by Notification in the official gazette, to prohibit either absolutely or subject to such conditions to be fulfilled before or after clearance of the import or export of goods of any specified description. The expression "illegal import" is defined in Section 11A(a) of the Customs Act, 1962 to mean the import of any goods in contravention of the provisions of the Customs Act or any other law for the time being in force.
16. What is to be done if goods are improperly imported into or exported outside India, is spelt out in Chapter XIV. Section 111, which makes certain goods liable for confiscation, states that any prohibited goods brought into any bay or any goods which are imported contrary to any prohibition imposed or under the Customs Act, 1962 or any other law for the time being in force, are liable for confiscation. Under Section 112, the person guilty of improper importation of goods is also made liable for a penalty. But before confiscation, an adjudication is to take place in terms of the procedure prescribed under Section 122A.
74. No sooner goods are brought from outside, into the territorial waters of the country, they become imported goods. At this juncture, it has to be seen, as to whether, such goods are legally or illegally imported, whether they fall within Section 11 of the Customs Act, 1962, which defines, an illegal import as, import of any goods in contravention of the provisions of the Customs Act, 1962 or any other law for the time being in force. Goods imported, contrary to the enumerated subject matters in chapters IV and IV-A of the Customs Act, 1962, which deal with prohibition on importation and exportation goods and detection of illegally imported goods prevention and disposal thereof, morefully described in Sections 11 and 11A of the Act, are also to be treated as prohibited. Goods imported from outside of the territory waters of the country, against any prohibition or restriction under the Customs Act, 1962 or any other law, time being in force, are to be treated as prohibited goods.
75. There is one thing to state that gold is not one of the enumerated prohibited goods and another, to state that goods are not permitted to be brought into the country, by smuggling, which, means any act or omission which would render such goods liable to confiscation under section 111 or section 113. There may not be total prohibition for import of goods, but if import is not done lawfully, in other words against any prohibition or restriction, which are inbuilt in the Customs Act, 1962 or any other law for the time being in force, then such goods should fall within the definition of Section 2(33) of the Act.
76. A conjoint reading Sections 2(33), 11 or 11A of the Act and other provisions in the Customs Act, 1962, and any other law, for the time being in force, would also make it clear that importation of goods, defined as illegal or prohibited or without complying with the conditions, or in violation of statutory provisions in the Customs Act, 1962 or any other law for the time being in force and in all cases, whether there is either total prohibition or restriction, in the light of the judgmnet of the Apex Court in Om Prakash Bhatia's case, such goods should fall within the definition of Prohibited goods. When import is in contravention of statutory provisions, in terms of Sections 11 or 11A of the Customs Act, 1962 or any other law, for the time being in force and when such goods squarely fall within the definition illegal import, or the other provisions in the statute, dealing with prohibition/restriction, the same are to held as, "prohibited goods" and liable for confiscation.
77. .........under Section 123 of the Customs Act, 1962, if the importer fails to discharge the burden that the goods seized from him, were not smuggled, then there is a strong reason for the proper officer to seize such goods. Smuggling is nothing but importing goods clandestinely, without payment of duty and such goods would squarely fall within the definition of Prohibited goods, under Section 2(33) of the Act.
78. The expression, subject to the prohibition under the Customs Act, 1962 or any other law for the time being in force, in Section 2(33) of the Customs Act, has to be read and understood, in the light of what is stated in the entirety of the Act and other laws. Production of legal and valid documents for import, along with payment of duty, determined on the goods imported, are certainly conditions to be satisfied by an importer. If the conditions for import are not complied with, then such goods, cannot be permitted to be imported and thus, to be treated as prohibited from being imported.
79. In Om Prakash Bhatia v. Commissioner of Customs, Delhi reported in 2003 (155) ELT 423 (SC), the Hon'ble Apex Court held that if there is intentional over-invoicing of the goods imported, then such goods imported, fall under the category, prohibited goods, as per Section 2(33) of the Customs Act, 1962. Smuggling under the Customs Act, 1962, in relation to any goods, means any act or omission which will render such goods liable to confiscation, under section 111 or section 113 of the Act and therefore, those goods, would also fall under the definition of prohibited goods, in terms of Section 2(33) of the Customs Act, 1962.
..............
84. Reading of Section 125 of the Act, also makes it clear that the language employed by the Legislature is only, may. Few decisions on the aspect of usage of words, shall or may, in the context, in which, such words appear in an enactment, are reproduced hereunder:
(i) In P.T.Rajan v. T.P.M.Sahir reported in 2003 (8) SCC 498, the following conclusions are relevant, 45. A statute as is well known must be read in the text and context thereof. Whether a statute is directory or mandatory would not be dependant on the user of the words shall or may. Such a question must be posed and answered having regard to the purpose and object it seeks to achieve.
46. ..
47. The construction of a statute will depend on the purport and object for which the same had been used. ...
48. ..
49. Furthermore, a provision in a statute which is procedural in nature although employs the word shall may not be held to be mandatory if thereby no prejudice is caused.
(ii) In Ashok Lanka v. Rishi Dixit reported in 2005 (5) SCC 598, para No.53 is relevant, which reads as under:-
53. The question as to whether a statute is mandatory or directory would depend upon the statutory scheme. It is now well known that use of the expression shall or may by itself is not decisive. The court while construing a statute must consider all relevant factors including the purpose and object the statute seeks to achieve. (see P.T.Rajan v. T.P.M.Sahir and U.P.SEB v. Shiv Mohan Singh).
85. If Section 125 of the Customs Act, 1962 has to be interpreted in the manner, as contended by the learned counsel for the appellant, to confer powers on the proper officer to release of the goods, pending orders of the adjudicating authority, then the Legislature would have used the word, shall, instead of word, may. In the case on hand, considering the material on record, the respondent-adjudicating authority, has decided not to order provisional release, pending adjudication.
86. If there is a fraudulent evasion of the restrictions imposed, under the Customs Act, 1962 or any other law for the time being in force, then import of gold, in contravention of the above, is prohibited. For prohibitions and restrictions, Customs Act, 1962, provides for machinery, by means of search, seizure, confiscation and penalties. Act also provides for detection, prevention and punishment for evasion of duty.
87. The expression, subject to prohibition in the Act and any other the law for the time being in force. in Section 2(33) of the Customs Act, has wide cannotation and meaning, and it should be interpreted, in the context of the scheme of the Act, and not to be confined to a narrow meaning that gold is not an enumerated prohibited good to be imported into the country. If such narrow construction and meaning have to be given, then the object of the Customs Act, 1962, would be defeated.
88. Provisions in the Customs Act, 1962, dealing with prohibition/restriction or any other law for the time in force, have to be read into Section 2(33) of the Act. Section 11A of the Act, as to what is illegal import, cannot be thrown to winds, while interpreting, what is prohibited goods, in terms of Section 2(33) of the Customs Act, 1962. To add, while interpreting Section 2(33) of the Customs Act, 1962, as to what is prohibition, imposed in other laws, for the time being in force, one cannot ignore, the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, rules framed by way of delegated legislation, like the Baggage Rules, 1998, framed in exercise of the powers conferred under Section 79 of the Customs Act, 1962 or for the matter, Section 77 of the Customs Act, 1962, which mandates, the owner of the baggage for the purpose of clearing the goods, to make a declaration of the contents of the baggage to the proper office and also the customs Notification No.3/2012, dated 16.01.2012, that only passengers of Indian origin or a passenger in possession of a valid passport, issued under the Passport Act, 1967, who have stayed abroad for six months and above alone are eligible to import gold of foreign origin and clear the same on payment of customs duty, at the rate prescribed.
...............
92. Objective satisfaction, at the stage of provisional release or on culmination of adjudication proceedings, casts a duty on the authority, to consider, as to whether, there are prohibitions/restrictions in the Customs Act, 1962, or any other law for the time being in force and whether he is bound to exercise his discretion, satisfying principles of fairness, reasonableness and whether, it is in accordance with the objects sought to be achieved. At the time of provisional release or while passing order in original, it is also to be seen as to whether subjective satisfaction is based on valid materials, and not on whims and fancies of the authority.
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 or after 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.
94. Though the argument of the learned counsel for the appellant is that since gold is not notified, as one of the prohibited goods, by way of any notification, in the official gazette and therefore, .....release can be ordered, we are not inclined to accept the said contention, as prohibition/restriction, is inbuilt in the Customs Act, 1962.
20. In Hargovind Das K.Joshi v. Collector of Customs and others reported in AIR 1987 SC 1982, relied on the learned counsel for the 1st respondent, the Hon'ble Apex Court considered a case, where consignment of goods (zip fasteners), were seized. On adjudication, the Additional Collector of Customs ordered for confiscation and imposed a penalty on the appellants therein. The said order was confirmed by the Tribunal. Before the Hon'ble Apex Court, three questions were raised by the appellant, as to the (1) Validity of the order confiscating the goods.
(2) Validity of the order imposing penalty.
(3) Failure to give option to the appellants for redeeming the goods on payment of such fine as may be determined by the Collector of Customs in lieu of confiscation.
Placing reliance on Section 125(1) of the Customs Act, 1962, a contention has been made in the reported case that when the Additional Collector of Customs has the discretion to give option for redemption, he should have addressed himself to the said issue and passed orders.
21. Reading of the abovesaid judgment shows that at that point of time, zip fasteners were imported freely. Having regard to the said fact, prevalent at that point of time, the Hon'ble Supreme Court, by observing that presumably the Additional Collector of Customs had assumed that he was bound to confiscate the goods and because of that, he had not adverted to the aspect of exercising his discretion to give an option to the appellant's therein, to pay a fine, in lieu of confiscation. On the facts and circumstances of the reported case, the Hon'ble Supreme Court ordered as hereunder:
4. We therefore direct that the matter be remitted to the Collector of Customs for this limited purpose to this limited extent as to whether or not to give an option to the importers (appellants) to redeem the confiscated goods on payment of such fine as may be considered appropriate by him in lieu of confiscation. It will be open to the concerned officer to take a decision one way or the other in accordance with law as is considered appropriate in the circumstances of the case after hearing the appellants. We have no doubt that the concerned officer will take into consideration all the relevant circumstances including the submission urged on behalf of counsel for the appellants that the goods in question, zip fasteners can at present be imported freely, for whatever it is worth.
22. Though in Hargovind Das K.Joshi's case, the Hon'ble Apex Court has remitted the matter to the Commissioner of Customs, for the limited purpose, as to whether or not, to give an option to the appellant therein, to redeem the confiscated goods on payment of such fine, as may be considered appropriate by him, in lieu of confiscation and further directed that it would be open to the concerned officer to take a decision one way or the other, in accordance with law, considered appropriate on the circumstances of the case, after hearing the appellants therein, in the instant case, if we may say so, usurping the powers of the adjudicating authority, the Tribunal has observed that there is no need for absolute confiscation of the goods. As rightly contended by the learned counsel for the appellant, the Tribunal has arrogated the powers of the adjudicating authority, directed the adjudicating authority, to release gold, by exercising option in favour of the respondent.
23. When it is the case of the appellant that 2548.3 grams of gold were concealed and not declared, in contravention of Section 77 of the Customs Act, 1962 and that there was a violation of Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992 and when reference has been made to the Custom Notification No.117/92-Cus., dated 01.03.1992, as amended from time to time and when there was a categorical finding of the adjudicating authority that the respondent had deliberately attempted to smuggle 2548.3 grams of gold, by concealing and without declaration of Customs, for monetary consideration and that gold bits seized were liable for confiscation, under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development & Regulation) Act, 1992 and when the 1st respondent was also detained under the COFEPOSA Act, for six months and when the Commissioner of Customs (AIRPORT), had imposed a penalty of Rs.50,000/- (Rupees fifty thousand only), with Section 112(a) of the Customs Act, 1962, it is unfortunate that without due consideration to the above facts and statutory provisions and the categorical finding of the adjudicating authority, the Tribunal has observed that there is no need for absolute confiscation of the goods. At this juncture, we deem it fit to extract the opening sentence of Paragraph 3 of the order, impugned before us, After considering the grounds of this appeal and the submissions of learned SDR, we are not convinced of the need to have ordered absolute confiscation of the goods.
24. In Garg Woollen Mills (P) Ltd., v. Addl. Collector of Customs, New Delhi reported in 1998 (104) ELT 306 (SC), the department contended that serviceale garments were concealed, amongst multilated garments and they were seized. Confiscation was ordered. Referring to Section 125 of the Customs Act, 1962, release of goods was sought for. After considering the manner, in which, goods were sought to be imported, at Paragraph 5, the Hon'ble Supreme Court held as follows:
"Under Section 125 a discretion has been conferred on the officer to give the option to pay fine in lieu of confiscation in cases of goods, the importation or exportation whereof is prohibited under the Act or under any other law for the time being in force but in respect of other goods the officer is obliged to give such an option. In the present case, having regard to the facts and circumstances in which the goods were said to be imported and the patent fraud committed in importing the goods, the Additional Collector has found that the goods had been imported in violation of the provisions of Import (Control) Order, 1955 read with Section 3(i) of the Import and Export (Control) Act, 1947. In the circumstances he considered it appropriate to direct absolute confiscation of the goods which indicates that he did not consider it a fit case for exercise of his discretion to give an option to pay the redemption fine under Section 125 of the Act. The Tribunal also felt that since this was a case in which fraud was involved, the order of the Additional Collector directing absolute confiscation of the goods did not call for any interference. We do not find any reason to take a different view."
25. In Commissioner of Customs (Preventive) v. Uma Shankar Verma reported in 2000 (120) ELT 322 (Cal.), the Commissioner of Customs (Preventive) challenged the order of a trial Judge, who allowed release of gold on payment of redemption fine. Reading of the above judgment shows that the said order has been passed, on the suggestion of the learned counsel for the department, appellant therein. While testing the correctness of the same, a Hon'ble Division Bench of the Calcutta High Court, at Paragraph 23, held as follows:
"23. It is only on the suggestion of the learned Counsel appearing on behalf of the appellant that the learned Trial Judge passed the said order although no affidavit-in-opposition had been filed by them. In fact the writ application was disposed of with the consent of the parties. The learned Trial Judge was given the impression by the counsel for the appellant that the gold is not a prohibited item. Had the intention of the appellant been that no discretion should be exercised in favour of the writ petitioner/respondent in terms of Section 125 of the Customs Act, the appellant could not state the quantum of fine, as also the amount of Customs duty to be levied upon the writ petitioner by the authority concerned."
26. Uma Shankar Verma's case (cited supra), cannot be made applicable to the case on hand, to the assessee, for the reason that, release of goods, in the said case, has been made, on consent. One of the contentions raised before us, in the instant case, is that gold is not a prohibited item and therefore, there can be an order to release the same, on payment of redemption fine. In the above reported case, while adverting to the substantial question of law, "Whether gold is a prohibited item within the meaning of the provisions of the Customs Act, 1962?" and after considering the statutory provisions under the Customs Act, 1962 and Foreign Trade (Development and Regulations) Act, 1992 and public notices in No.51, dated 27.10.1997 and No.54, dated 04.09.1997, the Hon'ble Division Bench of Calcutta High Court has categorically held that gold is a prohibited item, which comes within the first part of Section 2(33) of the Customs Act. While considering the contention of the 1st respondent herein that gold is not a prohibited item, it is worthwhile to extract Paragraphs 5 to 19 of the judgment in Uma Shankar Verma's case (cited supra), as follows:
"5. The matter relating to export and import of goods is covered by the Foreign Trade (Development and Regulation) Act, 1992. Section 3 of the said Act reads thus -
"3. (1) The Central Government may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports.
(2) The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the order, the import or export of goods.
(3) All goods to which any order under Sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under Section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly."
6. Section 5 of the said Act provides that the Central Government may from time to time formulate and announce by notification in the Official Gazette the export and import policy and may also in like manner amend that policy. Pursuant to and in furtherance of the said provisions Export Import Policy for the year 1997-2000 had been taken, Clause 4.1 whereof reads thus -
"4.1 Exports and Imports shall be free except to the extent they are regulated by the provisions of this Policy or any other law for the time being in force. The itemwise export and import policy shall be, as stated in columns 3 to 5 of the book, titled "ITC (HS) Classifications of Exports and Import Items" published and notified by the Director General of Foreign Trade and as amended from time to time."
Item 2 provides for ITC (HS) Classification of Import and Export which contained as under -
710812.00 Other Unwrought forms Restricted Not permitted to be imported except against a licence or in accordance with a Public Notice issued in this behalf.
Import permitted against Special Import Licence (SIL)
7. Section 11 of the Customs Act, 1962 empowers the Central Government to prohibit importation and exportation of goods.
8. Section 111 which deals with the power of the Commissioner to confiscate the goods inter alia provided for confiscation of improperly imported goods. Section 111(d) of the Customs Act, 1962 reads thus -
"111. 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 water 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."
9. Section 125 of the Customs Act, 1962 provides for option to pay fine in lieu of confiscation which is to the following effect :-
"125. (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods an option to pay in lieu of confiscation such fine as the said officer thinks fit:
Provided that, without prejudice to the provisions of the proviso to subsection (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 therein.
(2) Where any fine in lieu of confiscation of goods is imposed under subsection (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."
10. A bare perusal of the said provision leaves no manner of doubt that if the goods are prohibited then the option is with the Customs Authority to confiscate without giving any option to pay fine in lieu thereof but when the goods are not prohibited then the Customs Authority has no other option but to allow grant of an option to the party to pay a fine in lieu of confiscation.
11. The principal question which, thus, arises for consideration is as to whether gold is a prohibiited item ? A Public Notice No. 51, dated 27th October, 1997 was issued which reads thus -
"Attention is invited to Public Notice No. 214/(PN)/92-97, dated 1st June, 1994 vide which import of gold and silver was allowed without licence by Reserve Bank of India or any other agency to be designated by the Ministry of Finance (Deptt. of Economic Affairs). In exercise of the powers conferred under paragraph 4.11 of the Export and Import Policy 1997-2002 read with Col. 4 of the ITC (HS) Classification in Chapter 71, the Director General of Foreign Trade hereby notifies that these disignated agencies as mentioned in the Notification 80/97 referred above may import gold and silver for sale in the domestic market also without a licence or without surrender of SIL in respect of following entries of ITC (HS) Classifications of Export and Import Items 1997-2002 :-
Gold:
710812 00 Other unwrought forms."
12. The same was further amended by a Public Notice No. 54 dated 4th November, 1997 which is to the following effect :-
"Attention is invited to Public Notice No. 51/(PN)/97-02 dated 27th October, 1997 on the above subject. In partial modification of the above Public Notice, it is hereby notified that the import of gold and silver shall be permitted to the nominated and authorised agencies by the Reserve Bank of India (RBI)/Ministry of Finance. It is further notified that payment of Customs duty for import of gold and silver by such agencies without surrender of Special Import Licence (SIL) and by other importers against surrender of SIL shall also be made in Indian Rupees on payment of such Customs duties as may be notified by the Deptt. of Revenue from time to time.
This issues in public interest."
13. It is, therefore, evident that the gold could be imported only against a Special Import Licence or by the agencies authorised by the Reserve Bank of India.
14. The entire case of the writ petitioner/respondent is that they have purchased gold from Standard Chartered Bank which was meant for sale. The said question is essentially a question of fact and as such we need not consider the same in this proceeding as such a question will have to be determined by the statutory authority.
15. Having regard to the provisions of the Customs Act as also the 1992 Act, we are of the opinion that keeping in view the fact that a legal fiction has been created in terms of Section 3(3) of the said 1992 Act, there cannot be any doubt whatsoever, that gold would come within the purview of a prohibited item. A legal fiction as is well known must be giving its full effect. In Gajraj Singh and Ors., v. State Transport Appellate Tribunal and Ors., [1997 (1) SCC 650], it has been held as under -
"Legal fiction is one which is not an actual reality and which the law recognises and the court accepts as a reality. Therefore, in case of legal fiction the court believes something to exist which in reality does not exist. It is nothing but a presumption of the existence of the state of affairs which in actuality is non-existent. The effect of such a legal fiction is that a position which otherwise would not obtain is deemed to obtain under the circumstances."
16. In Commissioner of Income Tax, Madras v. Urmila Ramesh [1998 (3) SCC 6], the Apex Court observed :-
"Even though the word "deemed" is not used in Section 41(2) of the Act, as has been used in Section 10(2)(vii) second proviso of the 1922 Act, nevertheless this provision creates a legal fiction whereby an amount received in excess of the written-down value is firstly treated as income and secondly regarded as income from business or profession and thirdly it is considered to be the income of the previous year in which the money payable became due. That this section creates a legal fiction has been held by this Court in Cambay Electric case where (at ITR p. 93) it was observed as under : (SCC p. 654, para 7) "It is true that by a legal fiction created under Section 41(2) a balancing charge arising from sale of old machinery or building is treated as deemed income and the same is brought to tax; in other words, the legal fiction enables the Revenue to take back what it had given by way of depreciation allowance in the preceding years since what was given in the preceding years was in excess of that which ought to have been given. This shows that the fiction has been created for the purpose of computation of the assessable income of the assessee under the head 'Business Income'. It was rightly pointed out by the learned Solicitor General that legal fictions are created only for a definite purpose and they should be limited to the purpose for which they are created and should not be extended beyond their legitimate field. But, as indicated earlier, the fiction under Section 41(2) is created for the purpose of computation of assessable income of the assessee under the head 'Business Income' and under Section 80-E(1), in order to compute and allow the permissible special deduction, computation of total income in accordance with the other provisions of the Act is required to be done and after allowing such deduction the net assessable income chargeable to tax is to be determined; in other words, the legal fiction under Section 41(2) and the grant of special deduction in case of specified industries are so closely connected with each other that taking into account the balancing charge (i.e. deemed profits) before computing the 8% deduction under Section 80-E(1) would amount to extending the legal fiction within the limits of the purpose for which the said fiction has been created."
We are unable to agree with the submissions of Shri Ranbir Chandra that reference to the language of Section 41(2) in Cambay Electric case was only incidental. It is evident from the meaning and effect of Section 41(2) of the Act in that case, which it did. The two provisions namely Section 10(2)(vii) second proviso of the 1922 Act and Section 41(2) of the Act both create a legal fiction, difference in language notwithstanding."
17. In Aluminium Industries Ltd., v. Collector of Central Excise [1998 (99) ELT 486 (SC) = 1998 (9) SCC 404, it has been held as under: -
"4. By virtue of this proviso a legal fiction has been created. The price fixed under any law for time being in force has to be taken as the normal price of the goods. In that view of the matter, in the instant case, the price fixed by the notification dated 18-10-1978 will have to be taken as the normal price of the aluminium rods manufactured by the appellant."
18. In this view of the matter the definition of prohibited goods contained in Sub-Section 2(33) of the said Act pales into insignificance.
19. For the reasons aforementioned there cannot be any doubt whatsoever that gold is a prohibited item which comes within the first part of Section 125 of the Customs Act."
27. In Punnilathu Bappu Navas v. Union of India reported in 2006 (202) ELT 430 (Bom.), 10,144.20 gms. of gold was seized under Panchanama. Statement under Section 108 of the Customs Act, 1962, was recorded. Taking note of the policy adopted by the Central Government that import of gold beyond 5 Kgs., was not permissible, revisional authority therein, under the Customs Act, 1962, while exercising discretion, allowed gold, weighing 5 Kgs., on payment of redemption fine, amounting Rs.5,00,000/- plus duty, at the normal baggage and that the balance gold was ordered to be confiscated. He also imposed penalty. When the said order was tested, by way of a Writ Petition, under Article 226 of the Constitution of India and though the revenue, before the Writ Court contended that the entire gold ought to have been confiscated, taking note of the policy of the Central Government, permitting import gold of 5 Kgs., a Hon'ble Division Bench of the Calcutta High Court, has negatived the challenge of the petitioner therein.
28. Facts of the reported case is inapposite to the case on hand. That was a case, where the discretion was exercised, having regard to the policy prevailed, at that point of time. Whereas, in the case on hand, the appellant has contended that there was a deliberate attempt to smuggle gold. Merely because, discretion has been exercised by the revisional authority, in the reported case, it cannot be contended that in every case, where there is seizure of gold imported, in contravention of the provisions of the Customs Act, 1962, or any other law for the time being in force, redemption should be allowed, as a matter of right.
29. In Commissioner of Customs (AP), Mumbai v. Alfred Menezes reported in 2009 (242) ELT 334 (Bom.), the only question raised before the Bombay High Court, was whether, exercise of jurisdiction by the adjudicating authority, who had given option to the 1st respondent therein, to redeem prohibited goods, even though they were liable for confiscation, was right or not? The Tribunal upheld the order of the adjudicating authority. By observing that there is discretion on the authority and as the Tribunal had upheld the same and taking note of the word, May under Section 125(1) of the Customs Act, the Bombay High Court, declined to interfere with the discretion exercised by the adjudicating authority.
30. On the facts and circumstances of the instant case, besides testing the correctness of the Order-in-Original, as to whether, the adjudicating authority has exercised his discretion, satisfying the twin test, which we have extracted in the foregoing paragraphs of the judgment, we are also called upon to answer, as to whether the Tribunal can issue any positive directions to the adjudicating authority to exercise discretion, under Section 125 of the Act, in favour of the 1st respondent herein, to give option to redeem the gold, after determining the redemption fine amount. When exercise of discretion is conferred on the adjudicating authority to decide, as to whether, such discretion should be exercised in favour of the importer or any other person, falling under Section 112(b) of the Customs Act, 1962 and when in the case of smuggling or attempted smuggling, goods have been imported, in contravention of the provisions of the Customs Act, 1962 or any other law, for the time being in force, and when a prima facie case of attempt to smuggle the goods, is made out, it is not open to the Tribunal to issue any positive directions to the adjudicating authority, to exercise option in favour of the 1st respondent.
31. In Suresh Bhosle v. Commissioner of Customs (Preventive), Kolkata reported in 2009 (246) ELT 77 (Cal.), adjudicating order was passed on 07.04.2007. Assailing the correctness, contentions have been made that import of gold was allowed free, under the Export-Import Policy 2002-07, as amended and hence, gold was not prohibited goods, within the meaning of the Customs Act, 1962 but was only dutiable goods, within the meaning of the said Act, and under such circumstances, the adjudicating authority ought to have exercised his discretion, to allow redemption of the gold seized, upon payment of redemption fine, to be fixed by the adjudicating authority, in terms of Section 125 of the Customs Act, 1962. On the above facts and submissions, the Calcutta High Court, having found that the adjudicating authority has not offered any reasons in the order of confiscation, as to why, discretion was not exercised, set aside the order of confiscation, and remanded the matter to the competent authority.
32. Going through Suresh Bhosle's case (cited supra), it could be deduced that there was no argument advanced by the revenue, as to what are prohibited goods, in terms of Section 2(33) of the Customs Act, 1962 and therefore, with due respect, we are of the view that the Hon'ble Division Bench only considered the Export-Import Policy 2002-07, during the relevant period that import of gold was allowed free and answered the issue.
33. In T.Elavarasan v. Commissioner of Customs (Airport), Chennai reported in 2011 (266) ELT 167 (Mad.), a learned single Judge of this Court considered a case, where gold chain was brought from Singapore, without due declaration. Contending inter alia that the gold was not a prohibited item, provisional release was sought for. Writ Court directed release of gold, on payment of custom duty and redemption fine, subject to adjudication proceedings.
34. When T.Elavarasan's case, was tested in W.A.No.582 of 2011, a Hon'ble Division Bench of this Court, vide order, dated 01.04.2011, while modifying the order of the learned single Judge, directed the respondent therein to deposit 50% duty of the value of the goods, instead of depositing the entire customs duty and redemption fine and on such deposit being made, the goods shall be released forthwith, in favour of the respondent therein. Review filed against the Division Bench order, came to be dismissed on 25.04.2011. With due respect, in the decision of the Hon'ble Division Bench, the issue, as to whether, prohibited goods and other miscellaneous goods, attempted to be smuggled, can be released or not, has not been argued in the light of Section 2(33) of the Customs Act, 1962 and decided.
35. In Aiyakannu v. Joint Commissioner of Customs reported in 2012 (281) ELT 223, holder of a Srilankan Passport, was found to have concealed 10 gold bars with foreign markings, each weighing 1165 grams, valued at Rs.4,78,081/-. There was an attempt to smuggle gold into India, by way of concealing the same, inside the zip bag covered with black colour adhesive carbon tapes. The adjudicating authority came to the conclusion that the gold bars so imported are liable for confiscation, under Section 111(d),(l) and (m) of the Customs Act, 1962 and accordingly, passed an Order-in-Original. The Joint Commissioner rejected the same. Thereafter, a writ petition was filed. Following the decision of the Hon'ble Division Bench of this Court in Commissioner of Customs v. Samynathan Murugesan reported in 2009 (247) ELT 21 (Mad.), a learned single Judge, at Paragraphs 8 and 9, held as follows:
"8. In the present case, the petitioner being a foreign national is not entitled to import the gold in terms of the 1993 order as it will apply only to the passenger of Indian origin or a passenger holding a valid passport issued under the Passport Act, 1967. The petitioner does not satisfy the above condition. Further, the attempt to smuggle the goods by green channel without payment of duty justifies the order of absolute confiscation as has been held by the Division Bench of this Court and upheld by the Supreme Court referred to above.
9. Petitioner's plea for redemption cannot be justified as he attempted to misuse the facility which does not apply to a foreign national. This is revealed by the petitioner's statement given to the Customs Officer referred to supra."
36. In Fortis Hospital Ltd., v. Commissioner of Customs, Import reported in 2015 (318) ELT 551 (SC), show cause notice issued under Section 124 of the Customs Act, 1962 was for confiscation and penalty. Nothing was stated about the payment of duty. But ultimately, final order was passed, including a direction to pay the customs duty. The department attempted to justify the order under Section 125 of the Customs Act, 1962, On the said facts, the Hon'ble Supreme Court held that direction for payment of customs duty, could not be issued under Section 124 of the Customs Act, 1962 and more so, as it was not proposed in the show cause notice. Fortis Hospital Ltd.,'s case (cited supra), would not lend any support to the case on hand.
37. In Rajaram Bohra v. Union of India reported in 2015 (322) ELT 337 (Cal.), the question considered by the Hon'ble Division Bench of Calcutta High Court, was whether, the adjudicating authority has exercised his option under Section 125 of the Customs Act, 1962, according to the rules of reasons and Justice. After considering the decision of the Hon'ble Supreme Court in UPSRTC v. Md. Ismail reported in 1991 (3) SCC 239 and on the facts and circumstances of the reported case, the Hon'ble Division Bench of Calcutta High Court, held that whenever discretion is vested, the administrative authority shall do well to atleast briefly record the reasons, why they have chosen to exercise the discretion, in one way or the other.
38. In the case on hand, before the adjudicating authority, the appellant, inter alia, has contended that, 8. Shri M.Abdul Nazeer, Advocate on behalf of Shri P.Sinnasamy submitted that his client has not committed the offence and that at Chennai Airport the baggage of another passenger Shri Babu Chinnasamy got mixed with his baggage; that the mahazar was in English which he did not know; that he was not explained about the contents of the mahazar and he wanted cross-examination of mahazar witnesses and Officers who recorded his statement.
9. On 21.03.2000 Shri Abdul Nazeer, counsel for the accuscd cross-examined Shri.A.Elumalai, Mahazar witness, who interalia staled that there was only one passenger by name Shri.Sinnasamy alongwith the baggage at the Table; that he did not remember the passenger disowning the goods; that the mahazar was read over to him and he has not affixed his signature out of fear. Shri.K.P.H.Paul Mohamed, Senior Intelligence Officer, Directorate of Revenue Intelligence stated that he had recorded the statement of Shri.P.Sinnasamy who said that he had gone to Singapore to see his son, who was studying there; that the baggage containing gold was given to him by one Shri.Mustafa to be handed over to someone who will identify him at Chennai Airport; that the accused did not say that the baggage did not belong to him and it was not true to state that the statement was given under duress. Shri.Thomas Augustian, Intelligence Officer, Directorate of Revenue Intelligence, Chennai stated that he identified Shri.P.Sinnasamy when the passengers were coming out after immigration clearance; that none of the officers brought any person by name Shri Babu Chinasamy; that the Officers were looking for Shri.P.Sinnasamy only and nobody else. The counsel submitted that Shri.P.Sinnasamy is undergoing COFEPOSA detention and is very poor and requested for leniency.
39. After careful consideration of the entire records, the adjudicating authority, vide order, dated 31.03.2000, in Order-in-Original No.31 of 2000, has recorded the findings as hereunder:
10. I have carefully gone through the records of the case. In this case the passenger Shri. P. Sinnasamy was intercepted by the Officers of Directorate of Revenue Intelligence and on being questioned about the contents of his baggage, he produce the customs declaration form indicating the contents as Martin Shirts, calculators anti miscellaneous goods whereas thorough search of his baggage in the presence of witnesses has resulted in the recovery of 111 gold bits totally weighing 2548.3 Grams valued at Rs.10,34,355/- (MV) and other assorted goods valued at Rs.41.117A (CIF).
11. In his voluntary statement dated 18-09-99 Shri.P.Sinnasamy narrated the sequence of events that subsequently led to the seizure of 111 gold bits and other assorted goods and he admitted having committed the offence knowingly only for the monetary consideration and this statement was given in his own handwriting without any force, coercion or threat. The retraction dated 15.03.2000 that his earlier statement was obtained by force, threat and coercion is an after thought. His contention that his baggage got mixed with the baggage of another Babu Chinnasamy also appears to he unacceptable as he has not stated so in his voluntary statement dated 18.09.1999 and also it is evident from the cross-examination of mahazar witness and the Officer who effected the seizure that there was only one passenger viz., Sinnasamy at the Table and the officers did not bring any other passengers. In view of the above, the contention that he is innocent is not acceptable. It is therefore clear that Shri P.Sinnasamy was knowingly concerned in the import of the aforesaid goods without any valid permit/licence and by way of concealment and non-declaration in violation of Section 77 of the Customs Act 1962 with a view to evade Customs Duty.
12. As per Clause 3 of Foreign Trade (Exemption from application of rules in certain case) order, 1993, issued under Foreign Trade (Development and Regulation) Act, 1992, read with Customs Notification No. 171/94 dated 30-09-94 (as amended) the import of gold in any form including ornaments (but excluding ornaments studded with stones or pearls) will be allowed as part of baggage by a passenger of Indian origin or a passenger holding a valid passport issued under the Passport Act, 1957, subject interalia, to the condition that the passenger importing the gold is coming to India after period of not less than six months of stay abroad and the import duty on the gold shall be paid in convertible forcing currency. In this case, the passenger stayed abroad a week only. Further he had deliberately attempted to smuggle in 2548.3 gms of gold by concealing and without declaration to Customs, for a monetary consideration. Therefore the said gold bits are liable for confiscation under section 11 l(d),(i),(l) and (m) of the Customs Act, 1962 read with section 3(3) of the Foreign Trade(Development & Regulation) Act, 1992. The material objects used for concealing and carrying the aforesaid gold bits under seizure are also liable for confiscation under Section 119 of the Customs Act, 1962. As per para 5.6 of the Exim Policy 1997-2002, only bonafide household goods and personal effects may be imported as part of passenger's baggage. In this case, the assorted goods viz., 18 Nos. Aiwa Walkman, 120 Nos. Citizen calculators etc., totally valued at Rs.41,117/- (CIF) are clearly in commercial quantity. Moreover the passenger himself confessed in his voluntary statement that he brings electronic goods from Singapore for sale in India. Hence the aforesaid assorted goods cannot be considered as items of his bonafide baggage. Further the passenger had not made a proper declaration of the goods as required by Section 77 of the Customs Act, 1962 and his intention to evade payment of Customs duty is evident. In view of the above, the assorted goods brought by the passenger in excess of the declared goods, valued at Rs.41,117/- (CIF) are also liable for confiscation under Section 111(d) (l) & (m) of the Customs Act, 1962 read with Section 3 (3) of the Foreign Trade (Development & Regulation) Act 1992. Besides Shri P.Sinnasamy is also liable for penal action under Section 112(a) of the Customs Act 1962.
ORDER Taking into account the facts of the case and the submissions made, I order absolute confiscation of the 111 gold bits weighing 2548.3 grams value Rs.10,34,355/- (MV) under Section 111 (d), (i), (1) and (m) of the Customs Act, 1962, read with Section 3(3) of the Foreign Trade (Development & Regulation) Act 1992.
I also order confiscation of the other assorted goods valued at Rs.41,117/- (CIF) under Section 111 (d), (1) & (m) of the Customs Act 1962 read with the Foreign Trade (Development & Regulation) Act 1992. However, under Section 125 of the Customs Act, 1962, I allow the passenger to redeem the same on payment of a redemption fine of Rs.20,500/- (Rupees Twenty Thousand Five Hundred Only ) within 30 days of receipt of this order. Duty at the appropriate rate is chargeable on redemption of the goods.
I order absolute confiscation of material objects viz., folding scissors boxes, stapler pin boxes, aluminium foils, black gum tape and the suit case used for concealing and carrying the aforesaid gold bits under Section 119 of the Customs Act 1962.
Keeping in mind intcralia the submission that the passenger has been detained under the COFEPOSA Act for 6 months, I impose on Shri P.Sinnasamy & penalty of Rs.50,000/- (Rupees Fifty Thousand Only), under Section 112(a) of the Customs Act, 1962.
40. Thus, after recording a categorical finding of attempted smuggling of 2548.3 gms., of gold, by concealment and without declaration to the customs, the adjudicating authority has exercised his discretion to order absolute confiscation of gold, and some of the material objects used for concealing and carrying gold bits, under Section 119 of the Customs Act, 1962. The mere fact that the adjudicating authority has allowed to redeem other assorted goods, on payment of redemption fine of Rs.20,500/- and charged duty, at the appropriate rate and at the same time, ordered absolute confiscation of gold and other material objects used for concealing, itself is the indicative, as to how, the adjudicating authority has exercised his discretion in the matter of release of goods seized, and liable for confiscation. Moreover, while exercising the discretion in the abovesaid manner, for two sets of goods, the adjudicating authority, in the forgoing paragraphs, in the Order-in-Original No.31 of 2000, dated 31.03.2000, has given reasons, as to why, gold seized is liable for confiscation. On the facts and circumstances of the case, we are of the view that it cannot be contended that there is any failure on the part of the adjudicating authority to exercise his discretion, under Section 125 of the Customs Act, 1962.
41. In the case on hand, when discretion is conferred on the adjudicating authority, under Section 125 of the Customs Act, 1962, as to whether, gold and other goods seized, should be confiscated absolutely or be permitted to be redeemed on payment of fine, on the facts and circumstances of the case, and considering the statutory provisions and notification, he has ordered absolute confiscation of gold and other goods, used for import and released certain goods on payment of fine and duty. Exercise of discretion has been interfered with by the Tribunal, with a specific direction to give option for redemption, in which event, there is no choice left to the adjudicating authority to act. He has no freedom or liberty to act, according to own will and that he has been compelled to exercise discretion and his power, without control, other than his own judgment and in this context, let us consider, what the Hon'ble Apex Court has said on exercise of discretion,
42. Explaining as to how, discretionary power has to be exercised, the Hon'ble Supreme Court in Sant Raj and another v. O.P.Singla and others reported in (1985) 2 SCC 349, held that "whenever, it is said that something has to be done, within the discretion of the authority, then that something has to be done, according to the rules of reason and justice and not according to private opinion, according to law and not humour. It is to be not arbitrary, vague and fanciful but legal and regular and it must be exercised within the limit to which an honest man to the discharge of his office ought to find himself. Discretion means sound discretion guided by law. It must be governed by rule, not by humour, it must not be arbitrary, vague and fanciful.
43. In Fasih Chaudhary v. Director General, Doordarshan and others reported in 1989 1 SCC 89, the Hon'ble Supreme Court held that exercise of discretion should be legitimate, fair and without any aversion, malice or affection. Nothing should be done which may give the impression of favouritism or nepotism. While fair play in action in such matters is an essential requirement, free play in the joints is also a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere as the present one.
44. While considering, a litigation arising out of Bangalore Development Authority Act, 1976, the Hon'ble Supreme Court in Bangalore Medical Trust v. B.S.Muddappa and others reported in (1991) 4 SCC 54, held that "discretion is an effective tool in administration. It provides an option to the authority concerned to adopt one or the other alternative. But a better, proper and legal exercise of discretion is one where the authority examines the fact, is aware of law and then decides objectively and rationally what serves the interest better. When a statute either provides guidance or rules or regulations are framed for exercise of discretion then the action should be in accordance with it. Even where statutes are silent and only power is conferred to act in one or the other manner, the Authority cannot act whimsically or arbitrarily. It should be guided by reasonableness and fairness. The legislature never intends its authority to abuse the law or use it unfairly. Where the law requires an authority to act or decide, 'if it appears to it necessary' or if he is 'of opinion that a particular act should be done' then it is implicit that it should be done objectively, fairly and reasonably. In a democratic set up the people or community being sovereign the exercise of discretion must be guided by the inherent philosophy that the exercise of discretion is accountable for his action. It is to be tested on anvil of rule of law and fairness or justice particularly if competing interests of members of society is involved. Decisions affecting public interest or the necessity of doing it in the light of guidance provided by the Act and rules may not require intimation to person affected yet the exercise of discretion is vitiated if the action is bereft of rationality, lacks objective and purposive approach. Public interest or general good or social betterment have no doubt priority over private or individual interest but it must not be a pretext to justify the arbitrary or illegal exercise of power. It must withstand scrutiny of the legislative standard provided by the statute itself. The authority exercising discretion must not appear to be impervious to legislative directions. The action or decision must not only be reached reasonably and intelligibly but it must be related to the purpose for which power is exercised. No one howsoever high can arrogate to himself or assume without any authorisation express or implied in law a discretion to ignore the rules and deviate from rationality by adopting a strained or distorted interpretation as it renders the action ultra virus and bad in law.
45. In Shiv Sagar Tiwari v. Union of India and others reported in 1997 1 SCC 444 the Hon'ble Supreme Court held that the discretionary power has to be exercised to advance the performance, to subserve for which the power exists.
46. In A.P. Aggarwal v. Govt. of NCT of Delhi reported in (2000) 1 SCC 600, the Hon'ble Supreme Court held as under:
"The conferment of power together with a discretion which goes with it to enable proper exercise of the power and therefore it is coupled with a duty to shun arbitrariness in its exercise and to promote the object for which the power is conferred which undoubtedly is public interest and not individual or private gain, whim or caprice of any individual."
47. In Indian Railway Construction Co. Ltd. v. Ajay Kumar reported in (2003) 4 SCC 579, at paragraph 13 to 15, the Hon'ble Supreme Court explained the manner in which discretionary power has to be exercised, while discharging administrative function. In the above judgment, the Hon'ble Supreme Court held that in matters relating to administrative functions, if a decision is tainted by any vulnerability as such illegality, irrationality and procedural impropriety, Courts should not hesitate to interfere, if the action falls within any of the categories stated supra.
"14. The present trend of judicial opinion is to restrict the doctrine of immunity from judicial review to those class of cases which relate to deployment of troops, entering into international treaties etc. The distinctive features of some of these recent cases signify the willingness of the courts to assert their power to scrutinize the factual basis upon which discretionary powers have been exercised. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is illegality, the second irrationality, and the third procedural impropriety. These principles were highlighted by Lord Diplock in Council of Civil Service Unions v. Minister for the Civil Service (commonly known as CCSU case). If the power has been exercised on a non-consideration or non-application of mind to relevant factors, the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administrative) is exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. (See CIT v. Mahindra and Mahindra Ltd.) The effect of several decisions on the question of jurisdiction has been summed up by Grahame Aldous and John Alder in their book Applications for Judicial Review, Law and Practice thus:
There is a general presumption against ousting the jurisdiction of the courts so that statutory provisions which purport to exclude judicial review are construed restrictively. There are, however, certain areas of governmental activity, national security being the paradigm, which the courts regard themselves as incompetent to investigate, beyond an initial decision as to whether the Governments claim is bona fide. In this kind of non-justiciable area judicial review is not entirely excluded, but very limited. It has also been said that powers conferred by the Royal Prerogative are inherently unreviewable but since the speeches of the House of Lords in Council of Civil Service Unions v. Minister for the Civil Service this is doubtful. Lords Diplock, Scarman and Roskill appeared to agree that there is no general distinction between powers, based upon whether their source is statutory or prerogative but that judicial review can be limited by the subject-matter of a particular power, in that case national security. Many prerogative powers are in fact concerned with sensitive, non-justiciable areas, for example, foreign affairs, but some are reviewable in principle, including the prerogatives relating to the civil service where national security is not involved. Another non-justiciable power is the Attorney-Generals prerogative to decide whether to institute legal proceedings on behalf of the public interest.
15. The court will be slow to interfere in such matters relating to administrative functions unless decision is tainted by any vulnerability enumerated above: like illegality, irrationality and procedural impropriety. Whether the action falls within any of the categories has to be established. Mere assertion in that regard would not be sufficient.
17. Before summarizing the substance of the principles laid down therein we shall refer to the passage from the judgment of Lord Greene in Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. (KB at p.229 : All ER pp.682 H-683 A). It reads as follows:
It is true that discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology used in relation to exercise of statutory discretions often use the word unreasonable in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting unreasonably. Similarly, there may be something so absurd that no sensible person could even dream that it lay within the powers of the authority. ... In another, it is taking into consideration extraneous matters. It is unreasonable that it might almost be described as being done in bad faith; and in fact, all these things run into one another. Lord Greene also observed: (KB p.230 : All ER p.683 F-G) ... it must be proved to be unreasonable in the sense that the court considers it to be a decision that no reasonable body can come to. It is not what the court considers unreasonable. ... The effect of the legislation is not to set up the court as an arbiter of the correctness of one view over another. (emphasis supplied)
18. Therefore, to arrive at a decision on reasonableness the court has to find out if the administrator has left out relevant factors or taken into account irrelevant factors. The decision of the administrator must have been within the four corners of the law, and not one which no sensible person could have reasonably arrived at, having regard to the above principles, and must have been a bona fide one. The decision could be one of many choices open to the authority but it was for that authority to decide upon the choice and not for the court to substitute its view.
48. In National Insurance Co. Ltd., v. Keshav Bahadur reported in 2004 (2) SCC 37 = AIR 2004 SC 1581, the Hon'ble Supreme Court held that, The word discretion standing single and unsupported by circumstances signifies exercise of judgment, skill or wisdom as distinguished from folly, unthinking or haste; evidently therefore a discretion cannot be arbitrary but must be a result of judicial thinking. The word in itself implies vigilant circumstances and care; therefore, where the Legislature concedes discretion it also imposes a heavy responsibility.
49. In Union of India v. Kuldeep Singh reported in (2004) 2 SCC 590, the Supreme Court again explained the meaning and significance of the word discretion as follows:
The word "discretion" signifies unrestrained exercise of choice or will; freedom to act according to one's own judgment; unrestrained exercise of will; the liberty or power of acting without control other than one's own judgment.
50. In the reported judgment, the Hon'ble Supreme Court while testing the correctness of a judgment rendered under the Narcotic Drugs and Psychotropic Substances Act, 1985, and the discretion to be exercised by the High Court, explained the principles governing the mode of exercise of the discretionary power for public functionaries as follows:
"20. When anything is left to any person, judge or Magistrate to be done according to his discretion, the law intends it must be done with sound discretion, and according to law. In its ordinary meaning, the word "discretion" signifies unrestrained exercise of choice or will; freedom to act according to one's own judgment; unrestrained exercise of will; the liberty or power of acting without control other than one's own judgment. But, when applied to public functionaries, it means a power or right conferred upon them by law, of acting officially in certain circumstances according to the dictates of their own judgment and conscience, uncontrolled by the judgment or conscience of others. Discretion is to discern between right and wrong; and therefore, whoever hath power to act at discretion, is bound by the rule of reason and law.
21. Discretion, in general, is the discernment of what is right and proper. It denotes knowledge and prudence, that discernment which enables a person to judge critically of what is correct and proper united with caution; nice discernment, and judgment directed by circumspection; deliberate judgment; soundness of judgment; a science or understanding to discern between falsity and truth, between wrong and right, between shadow and substance, between equity and colourable glosses and pretences, and not to do according to the will and private affections of persons.
22. The word "discretion" standing single and unsupported by circumstances signifies exercise of judgment, skill or wisdom as distinguished from folly, unthinking or haste;evidently therefore a discretion cannot be arbitrary but must be a result of judicial thinking. The word in itself implies vigilant circumspection and care; therefore, where the legislature concedes discretion it also imposes a heavy responsibility. "The discretion of a judge is the law of tyrants; it is always unknown. It is different in different men. It is casual, and depends upon constitution, temper and passion. In the best it is often times caprice; in the worst it is every vice, folly, and passion to which human nature is liable," said Lord Camden, L.C.J., in Hindson and Kersey reported in (1680) 8 HOW St Tr 57."
51. In Aero Traders Pvt. Ltd., v. Ravinder Kumar Suri reported in AIR 2005 SC 15, the Supreme Court, while explaining the meaning of the word discretion, held as follows:
the word 'discretion' connotes necessarily an act of a judicial character, as used with reference to discretion exercised judicially, it implies the absence of a hard and fast rule, and it require an actual exercise of judgment and a consideration of the facts and circumstances which are necessary to make a sound, fair and just determination and a knowledge of the facts upon which discretion may properly operate. When it is said that something it to be done according to the rules of reason and justice and not according to private opinion; according to law and not honour. It only gives certain latitude liberty accorded by statute or rules, to a Judge as distinguished from a ministerial or administrative official, in adjudicating on matters brought before him.
52. In State of NCT of Delhi v. Sanjeev, reported in (2005) 5 SCC 181, the Hon'ble Supreme Court, explaining the scope of judicial review of executive action held as follows:
"15. One of the points that falls for determination is the scope for judicial interference in matters of administrative decisions. Administrative action is stated to be referable to broad area of governmental activities in which the repositories of power may exercise every class of statutory function of executive, quasi-legislative and quasi-judicial nature. It is trite law that exercise of power, whether legislative or administrative, will be set aside, if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary (see State of U.P. v. Renusagar Power Co.). At one time, the traditional view in England was that the executive was not answerable where its action was attributable to the exercise of prerogative power. Professor de Smith in his classical work Judicial Review of Administrative Action, 4th Edn. at pp.285-87 states the legal position in his own terse language that the relevant principles formulated by the courts may be broadly summarised as follows:
The authority in which discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it; it must not act under the dictates of another body or disable itself from exercising discretion in each individual case. In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires.
53. In Reliance Airport Developers Pvt. Ltd., v. Airports Authority of India reported in 2006 (10) JT 423 (SC), the Hon'ble Apex Court held that the discretion must be governed by rule and not by humour or fanciful, but by legal and regular practice and procedure. The Hon'ble Apex Court further added that, Judicial Discretion" signifies unrestrained exercise of choice or will; freedom to act according to one's own judgment; unrestrained exercise of will; the liberty or power of acting without control other than one's own judgment.
54. The power conferred on the authority without any guidelines may likely to be abused or arbitrarily exercised and in such circumstances, the guidance and the control of exercise of such power has to be gathered from the object of conferment of such power. Non-consideration or non-application of mind to the relevant factors, renders exercise of discretion manifestly erroneous and it cause for judicial interference. In Global Energy Limited and another v. Central Electricity Regulatory Commission reported in 2009 15 SCC 570, the Hon'ble Supreme Court held that the exercise of discretion has to be in conformity with the purpose for which, it is conferred, object sought to be achieved and reasons to be recorded.
55. Power has to be exercised with regard to the duty arising from the nature of the action to be performed by the adjudicating authority. The conditions on the basis of which the power has to be exercised and the repercussions or consequences of such exercise, in the light of the scheme of the Act, which prohibits smuggling and other acts morefully set out in Section 11 and 11A of the Customs Act, 1962, or any other law for the time being in force, should always be kept in mind, while considering either provisional release or passing an order, on the culmination of adjudicatory proceedings.
56. At the time, when discretion is exercised under Section 125 and if any challenge is made under Article 226 of the Constitution of India, the twin test, to be satisfied is "relevance and reason". In the light of the judgments of the Hon'ble Apex Court and applying the same to the facts of this case and 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 release, is in accordance with law. Interference by the Tribunal is against law and unjustified.
57. In the light of the above discussion and decisions, we have no hesitation to set aside the order of the Tribunal. Substantial question of law raised is answered in favour of the respondent. Hence, the present Civil Miscellaneous Appeal is allowed. No costs.
(S.M.K., J.) (D.K.K., J.)
23.08.2016
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skm
To
The Customs, Excise & Service Tax Appellate Tribunal,
South Zonal Bench at Chennai,
Shastri Bhavan Annexe, 1st Floor,
26, Haddows Road, Chennai 600 006.
S. MANIKUMAR, J.
AND
D. KRISHNA KUMAR, J.
skm
C.M.A.No.1631 of 2008
23.08.2016