2016 (5) TMI 390 - HC - Customs

High Court overturns trial court order, allows Criminal Revision Petition. Reconsider valuation, Circular No.27/2015-Customs, penalty, independence.

The High Court set aside the trial court's order and allowed the Criminal Revision Petition. The trial court was directed to reconsider the petition, ... Legality and correctness of impugned order - Petitioner placed heavy reliance on the contents of Circular No.27/2015-Customs dated 23.10.2015 and pleaded that the communication sent to the Customs Officials reference to the dropping of Criminal Proceedings pending against the accused committed offences in case of baggage and outright smuggling cases and in case of appraising cases and commercial frauds. Held that:- it is observed in candid terms that 'the market value of the goods smuggled by the Petitioner was approximately ₹ 31.83 lakhs and further the valuation of smuggled goods at ₹ 21,22,150/- as per the Order-in-Original was not merely a mechanical replication of the internet prices of the smuggled goods etc., the necessary qualitative and quantitative details relating to the valuation of the smuggled goods at ₹ 21,22,150/- were not furnished on the side of the Respondent before this Court. Also, the Petitioner had not availed a valuable/ reasonable opportunity of being heard before adjudication wherein admittedly, a penalty of ₹ 1,50,000/- was imposed upon the Petitioner. As such, in view of the aforesaid divergent stand taken by the respective parties in regard to the valuation of the goods smuggled by the Petitioner in India in the subject manner in issue and also as to the applicability of the Circular No.27/2015-Cus, this Court, in the interest of Justice, Fair Play, Equity, Good Conscience and even as a matter of prudence, sets aside the impugned order passed by the trial Court and allows the Criminal Revision Petition. - Decided in favour of appellant Issues Involved:1. Whether the trial court erred in dismissing the petition to drop proceedings under Section 135 of the Customs Act.2. Applicability and interpretation of Circular No.27/2015-Customs dated 23.10.2015.3. The impact of the non-payment of the penalty imposed during adjudication on the withdrawal of prosecution.4. The reliability and method of valuation of smuggled goods.5. The independence of criminal prosecution from adjudication proceedings.Detailed Analysis:1. Error in Dismissing Petition to Drop Proceedings:The petitioner challenged the trial court's dismissal of his petition to drop the proceedings under Section 135 of the Customs Act. The petitioner argued that the trial court failed to appreciate the Supreme Court's decision in K.M. Mathew v. State of Kerala (1992 AIR 2206), which allows a Magistrate to drop proceedings at the instance of the accused. The petitioner contended that the trial court's view that only the prosecution could file a petition to drop proceedings was contrary to law.2. Applicability and Interpretation of Circular No.27/2015-Customs:The petitioner relied on Circular No.27/2015-Customs dated 23.10.2015, which communicated that criminal proceedings should be dropped if the value of the smuggled goods in baggage cases was below Rs. 20 lakhs. The petitioner argued that the valuation of the goods, if done correctly, would fall below this threshold. The respondent, however, contended that the circular does not mandate a mechanical dropping of all proceedings but requires a review of each case.3. Impact of Non-Payment of Penalty:The respondent argued that the petitioner had not appealed against the adjudication order imposing a penalty of Rs. 1,50,000, which had thus attained finality. The petitioner had also not paid the penalty, which the respondent claimed barred him from seeking the withdrawal of prosecution. The court directed the trial court to consider whether the non-payment of the penalty operates as a bar to dropping the prosecution under the circular.4. Reliability and Method of Valuation of Smuggled Goods:The petitioner challenged the method of valuation used by the respondent, which was based on internet prices. The court noted that the valuation method should be reliable and supported by documentary evidence, as observed in Aggarwal Distributors (P) Ltd. v. Commissioner of Customs, New Delhi (2000 (117) E.L.T. 49). The court directed the trial court to call for necessary materials from the respondent to substantiate the valuation of Rs. 31.83 lakhs and Rs. 21,22,150.5. Independence of Criminal Prosecution from Adjudication Proceedings:The petitioner argued that the findings in adjudication proceedings do not bind criminal prosecution, citing Radhey Shyam Kejriwal v. State of West Bengal (2011) 3 SCC 581. The court acknowledged that criminal prosecution and adjudication proceedings are independent in character and directed the trial court to consider this aspect while disposing of the petition afresh.Conclusion:The High Court set aside the trial court's order dated 11.03.2016 and allowed the Criminal Revision Petition. The trial court was directed to restore the petition to its file and dispose of it afresh by calling for necessary materials from the respondent regarding the valuation of the smuggled goods. The trial court was also instructed to consider the applicability of Circular No.27/2015-Customs, the impact of non-payment of the penalty, and the independence of criminal prosecution from adjudication proceedings. The trial court was to provide a reasoned speaking order within six weeks, adhering to the principles of natural justice.