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2nd Floor, Old Bldg., New Custom House, Ballard Estate, Mumbai APPEARANCE:

Shri Mihir Mehta, Advocate for the appellant Shri Ram Kumar, AC(AR) for the respondent CORAM:
HON'BLE MR. AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER No: A/85388/2023 DATE OF HEARING : 15.12.2022 DATE OF DECISION : 16.03.2023 Per: AJAY SHARMA This appeal has been filed assailing the order dated 8.1.2019 passed by the Chief Commissioner of Customs, Mumbai, Zone-V by which the application filed by the appellant for Compounding of Offence in terms of Section 137(3) of the C/86190/2019 Customs Act, 1962 read with the Customs (Compounding of Offences) Rules, 2005 was rejected.

2. The issue to be decided herein is whether the learned Chief Commissioner is justified in rejecting the application for compounding of offence as not maintainable in terms of proviso to Section 137(3) of the Customs Act, 1962 by resorting to the definition of 'prohibited goods' as prescribed under Section 2(33) ibid?

3. The facts leading to the filing of the instant appeal are stated in brief as follows. According to Directorate of Revenue Intelligence, Mumbai (hereinafter referred to as 'DRI') three consignments of Air conditions, imported in the name of M/s. Anmol Trading, M/s. Vinayak Enterprises & Royal Trading, were examined by the officers of DRI, Mumbai on 29th & 30th December, 2017 at JNPT and a total of 57 kgs. gold bars concealed in the air conditioner, valued at Rs.16.96 crores, were seized under the provisions of Customs Act. According to the department the investigation revealed that the entire operation was orchestrated by the appellant and one Rajuram Purohit.

7. I have heard learned counsel for the appellant and learned Authorised Representative for the Revenue and perused the case records including the written submissions/synopsis and case laws cited by the respective sides. In order to appreciate the issue involved herein I consider it proper to have a look at Sections 2(33) and 137(3)(c)(ii) of the Customs Act, 1962 which are reproduced hereunder:-

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C/86190/2019 "2(33) Prohibited Goods:- "prohibited goods"

9. Gold is freely importable and therefore can such a good will become prohibited merely because it was imported illegally without prior permission? In my view the answer is in negative. The learned Chief Commissioner has rejected the application merely on the ground that since the gold bars have been imported illegally therefore the definition of 'prohibited goods' as per sec.2(33) gets attracted and the gold bars becomes prohibited goods for which no compounding application is maintainable. According to me, learned Chief Commissioner has misdirected himself by looking into the definition of 'prohibited goods' as prescribed u/s. 2(33) of Customs Act, 1962 because Section 137(3)(ii) ibid only talks about prohibit items and specifically mentioned that it has no application if the goods involved are prohibited items for import and export in the ITC (HS) Classification of Export and Import Items of the Foreign Trade Policy. A perusal of the list of prohibited items for import & export in India nowhere mentions gold or gold bar. For the applicability or otherwise of section 137 ibid one has to look only into the list of prohibited items and the word 'prohibited goods', as has been relied upon by the learned Chief Commissioner, nowhere mentioned in section 137 ibid. The definition of prohibited goods as specified in Sec.2(33) ibid cannot be applied in section 137(3) ibid in view of explicit language employed C/86190/2019 therein and the relevant provision in question excludes only the prohibited items for import and export in ITC (HS) classification of export and import items of the Foreign Trade Policy. There is a difference between 'prohibited items' and 'prohibited goods'. The definition of prohibited goods prescribed u/s. 2(33) by any stretch cannot be applied into the provision of Section 137 (3)(c)(ii) ibid. The learned Chief Commissioner failed to appreciate that Section 2 ibid itself begins with the words 'unless context otherwise requires'.