2020 (3) TMI 168 - HC - Customs

Customs authorities uphold gold chain confiscation at airport, petitioner's penalty reduced under Customs Act.

The court upheld the confiscation of 32 undeclared gold chains by customs authorities at Chennai Airport. The petitioner was subject to a redemption fine ... Confiscation for non-declaration under Section 111(l) and (m) - penalty under Section 112 - penalty quantification under Section 112(ii) subject to Section 114A - redemption fine under Section 125 limited to market value less duty - eligibility for benefit under Customs Notification No.31/2003-Cus - requirement of declaration and payment of duty in convertible foreign exchange for concessionConfiscation for non-declaration under Section 111(l) and (m) - requirement of declaration - Validity of confiscation of the gold chains for non-declaration on arrival. - HELD THAT: - The Court upheld that non-declaration of dutiable goods brought from outside India renders them liable to confiscation under Section 111(l) and (m) of the Customs Act, 1962. The judgment notes that passengers are required to declare goods on the Disembarkation Card and at customs, and that the petitioner admitted carrying 32 gold chains in person which were not declared. The factual finding of admission and non-declaration supports the conclusion that the goods were liable to confiscation. [Paras 24, 29, 30, 31, 33]Confiscation of the undeclared gold chains was justified under Section 111(l) and (m).Eligibility for benefit under Customs Notification No.31/2003-Cus - requirement of declaration and payment of duty in convertible foreign exchange for concession - Whether the petitioner was entitled to the concession under Notification No.31/2003-Cus and whether extension of that benefit was appropriate. - HELD THAT: - The Court observed that the Notification permits eligible passengers of Indian origin to import up to a specified quantity of gold provided customs duty is paid in convertible foreign exchange and the goods are declared. Although the petitioner was ultimately granted the benefit by the Commissioner (Appeals), the Court recorded that the petitioner had not produced documentary evidence of purchase abroad and had failed to declare and pay duty in foreign exchange at entry. On that basis the Court held that, as a matter of principle, the benefit ought not to have been extended though it noted that no challenge was made to the grant of the benefit and that the petitioner had already been allowed the concession by the appellate authority. [Paras 28, 29, 33, 34, 35]Technically the petitioner did not satisfy the declaration and payment conditions for Notification No.31/2003-Cus, and the concession ought not to have been extended; however, the grant of the benefit by the Commissioner (Appeals) stood unchallenged in substance in these proceedings.Penalty under Section 112 - penalty quantification under Section 112(ii) subject to Section 114A - Proper head and permissible quantum of penalty to be imposed for the petitioner's conduct. - HELD THAT: - The Court found that the facts attracted only the situation contemplated by Section 112(ii) of the Customs Act, 1962. Penalty under Section 112(ii) is subject to Section 114A and in the factual matrix before the Court Section 114A did not apply. Consequently the statutory cap for penalty was ten per cent of the duty sought to be evaded or Rs. 5,000/-, whichever is higher. Applying that test to the duty found to be sought to be evaded, the Court concluded that the maximum permissible penalty was Rs. 5,000/-, and therefore reduced the penalty previously fixed by the authorities to that amount. [Paras 38, 40, 41, 42, 43]Penalty under Section 112 should be treated as falling under Section 112(ii) and reduced to the statutory maximum of Rs. 5,000/-.Redemption fine under Section 125 limited to market value less duty - Validity and extent of the redemption fine imposed under Section 125. - HELD THAT: - The Court reiterated that redemption fine under Section 125 cannot exceed the market value of the confiscated goods less the duty chargeable. Having regard to the petitioner being a first time offender, the attempted smuggling, the extension of the Notification benefit by the appellate authority (not challenged), and that the duty sought to be evaded was limited, the Court held that the redemption fine earlier imposed was excessive. Exercising its revisional jurisdiction to moderate the penalty and redemption fine, the Court reduced the redemption fine to Rs. 50,000/- from the higher amounts imposed by the authorities. [Paras 44, 45, 46]Redemption fine under Section 125 reduced to Rs. 50,000/- as excessive in the circumstances.Requirement of declaration - refund of excess amounts paid - Relief consequential to modification of penalty and redemption fine. - HELD THAT: - Because the Court reduced both the penalty and the redemption fine, it directed refund of the balance amount paid by the petitioner. The Court noted that the petitioner had already paid duty, penalty and redemption fine after the Commissioner (Appeals) order, and accordingly ordered refund of the excess within three months from receipt of the order. [Paras 36, 46]Respondents directed to refund the balance amount to the petitioner within three months.Final Conclusion: The writ petition is allowed in part: the confiscation was sustained for non-declaration; however the penalty is reduced to Rs. 5,000/- under Section 112(ii) and the redemption fine is reduced to Rs. 50,000/- under Section 125, and the respondents are directed to refund the balance amount to the petitioner within three months; otherwise the impugned revisional order is modified accordingly. Issues Involved:1. Confiscation of gold chains and imposition of redemption fine and penalty.2. Eligibility for concessional rate of duty under Notification No.31/2003.3. Validity of the penalty and redemption fine imposed.4. Reduction of penalty and redemption fine by the appellate authority.5. Justification for further reduction of penalty and redemption fine.Issue-wise Detailed Analysis:1. Confiscation of Gold Chains and Imposition of Redemption Fine and Penalty:The petitioner carried 32 gold chains weighing 177 grams valued at Rs. 3,84,444/- without declaring them to customs at Chennai Airport, leading to confiscation. The petitioner was asked to pay a redemption fine of Rs. 1,92,000/- under Section 125 of the Customs Act, 1962, and a penalty of Rs. 38,000/- under Section 112(a) of the Customs Act, 1962. The Assistant Commissioner of Customs noted that the petitioner did not declare the goods and lacked foreign currency to pay the duty, indicating an intention to evade duty, thus making the goods liable for confiscation.2. Eligibility for Concessional Rate of Duty Under Notification No.31/2003:The petitioner argued eligibility for a concessional rate of duty under Notification No.31/2003 dated 01.03.2003, as he had stayed abroad for more than six months. The Commissioner of Customs (Appeals) acknowledged this eligibility and found no previous offenses against the petitioner, leading to a reduction in the redemption fine and penalty.3. Validity of the Penalty and Redemption Fine Imposed:The petitioner contended that the imposition of penalty and redemption fine was unjustified as he was a bona fide importer who purchased the gold chains for his wedding. The respondents argued that the petitioner failed to declare the gold chains, attracting Sections 111(l) and (m) of the Customs Act, 1962. Under Section 77, the petitioner was required to declare the gold, which he failed to do, leading to the confiscation and penalty.4. Reduction of Penalty and Redemption Fine by the Appellate Authority:The Commissioner of Customs (Appeals) reduced the redemption fine from Rs. 1,92,000/- to Rs. 1,55,000/- and the penalty from Rs. 38,000/- to Rs. 19,000/-, considering the petitioner's eligibility for the concessional rate of duty and lack of previous offenses. The Revisional Authority upheld this order, leading to the present writ petition.5. Justification for Further Reduction of Penalty and Redemption Fine:The court noted that the petitioner admitted to carrying the gold chains without declaration, indicating an intention to smuggle. However, the benefit of Notification No.31/2003 was extended to the petitioner. The court found that the penalty under Section 112(ii) should not exceed 10% of the duty or Rs. 5,000/-, whichever is higher. The maximum penalty was determined to be Rs. 5,000/- instead of Rs. 19,000/-. The redemption fine under Section 125 should not exceed the market value of the confiscated goods less the duty chargeable. Considering the petitioner's first-time offense and the benefit of the notification, the redemption fine was reduced to Rs. 50,000/- from Rs. 1,55,000/-.Final Judgment:The court modified the impugned order as follows:1. The penalty was reduced to Rs. 5,000/-.2. The redemption fine was reduced to Rs. 50,000/-.3. The respondents were directed to refund the balance amount of Rs. 1,19,500/- to the petitioner within three months.The writ petition was disposed of with these observations, and no costs were imposed.