2020 (3) TMI 1010 - AT - Customs

Tribunal Upholds Confiscation of Smuggled Drugs and Addresses Penalties

The tribunal upheld the confiscation of smuggled pharmaceutical bulk drugs under Sections 111(d) and 111(l) of the Customs Act, 1962, based on confessions ... Smuggling - Pharmaceutical Bulk Drugs (PBD) - Miglitol - Mifepristone - Ethynal Estradiol - prohibited goods or not - demand based on various statements - retraction of statements - onus to prove - Circular No. 95/2003-Cus dated 06.11.2003 - Confiscation of sale proceeds of smuggled goods - penalty - principles of natural justice - HELD THAT:- The standard of proof in a case like this would obviously different from other cases. When Shri Bavishi himself has agreed about the smuggling activity in general and was corroborated by others and when they could not produce any evidence of legal procurement, it has to be construed that the department has discharged its burden and thus, we have no hesitation in concluding that the goods are smuggled in nature and accordingly the provisions of Section 11(d) and (l) of Customs Act, 1962 are attracted. Therefore, we find that the confiscation of goods is justified. One more submission made by the appellants is that they have retracted statements and thus, the same lose evidentiary value. We find that the persons concerned have accepted the modus operandi to the knowledge of which, they alone are privy of. Retraction is an understandable after thought employed by the persons to wiggle them out of the legal tangle. We find that the activity of smuggling has not only been accepted by Shri Manish Bavishi but by others involved in the completion of the acts of commission and omission in this regard. We find that retraction, if any, would have had some face value if they could establish licit procurement of the impugned goods. In the absence of the same retraction has no meaning. Another argument taken by the appellants is that the principles of natural justice have been violated and that the adjudicating authority has not given opportunity for being heard and request for cross examination was not granted - Understandably, the appellant has a vested interest in prolonging the proceedings. In such a case, the departmental officers cannot play in to their hands of the appellants in procrastination of the proceedings. We find that legal remedies under the act cannot be allowed to be misused by the people who have indulged in smuggling activities by which they have not only put the public health and Revenue at peril. That would be travesty of justice. We find that sufficient opportunities of hearing have been given by the adjudicating authority - the principles of natural justice are not violated. Seizure of goods - HELD THAT:- The appellants could not prove the legal acquisition of the goods. Therefore, in the circumstances of the case, the same are treated as smuggled goods and hence, liable for confiscation under Section 111(d) & (l) Customs Act, 1962. Confiscation of sale proceeds - HELD THAT:- These good too are to be treated as smuggled and hence liable for confiscation under Section 111(d) & (l) of the Customs Act, 1962.As the goods are not available for confiscation, confiscation of sale proceeds is required to be upheld in terms of Section 121 of the Customs, Act, 1962. Appellants have also raised the issue that no duty has been demanded on the seized goods. We find that this is not a case of legal import of goods. The question of duty does not arise when goods are confiscated absolutely. Only when the goods are allowed to be redeemed, such goods shall be cleared on payment of duty in addition to the fine in lieu of confiscation. Penalties - HELD THAT:- For all the acts of commission and omission as discussed, he has rendered himself liable for penalty. Showing any lenience to perpetrators of evasion of duty while playing with the lives of people, would be against the interests of justice - Looking in to the long litigation; fact that the sale proceeds have been confiscated and other circumstances of the case we are inclined to reduce the penalty in respect of Appeal No C/594/ 2010 from 30 lakhs to 10 lakhs and penalty in respect of Appeal No C/633/ 2010 from one Crore to 30 lakhs. Levy of penalty on others in respect of other appeals - HELD THAT:- The allegation of abetting, if any, is in relation to the sale and purchase of bulk drugs in the course of trade within India. The whole allegation is that they have issued invoices without receiving or sending goods physically. In that case, they cannot be alleged to have dealt with goods within the meaning of Section 112(b) of the Customs, Act 1962, more so when the knowledge of the goods being smuggled is absent. If the appellants have committed any offence under Drugs and Cosmetics, Act, 1940 the concerned agencies would take necessary action. Therefore, we hold that penalty is not imposable either on Shri Parag Bhavasar or on M/s Palam Pharma either under Section 112 (a) or under Section 112(b) of the Customs, Act, 1962. Application disposed off. Issues Involved:1. Confiscation of pharmaceutical bulk drugs under Section 111(d) and 111(l) of the Customs Act, 1962.2. Confiscation of sale proceeds under Section 121 of the Customs Act, 1962.3. Imposition of penalties under Section 112(a) and 112(b) of the Customs Act, 1962.Detailed Analysis:Confiscation of Pharmaceutical Bulk Drugs:The case involved the interception of individuals carrying pharmaceutical formulations worth two lakh rupees, leading to the discovery of a smuggling operation involving bulk drugs like Miglitol, Mifepristone, and Ethynal Estradiol. The drugs were found in the possession of Shri Manish Bavishi and his associates, who admitted to smuggling these drugs from China and other countries via air passengers. The drugs were seized from Bavishi's warehouse and other locations. The tribunal concluded that the seized drugs were smuggled based on the confessions of the involved parties and the lack of evidence for legal procurement. Consequently, the drugs were confiscated under Section 111(d) and 111(l) of the Customs Act, 1962.Confiscation of Sale Proceeds:The tribunal examined the sale proceeds amounting to Rs. 2,96,47,100 deposited by end users like M/s Hetero Drugs Ltd and M/s Hetero Labs Ltd. It was found that these companies received the smuggled drugs directly from Mumbai, not from the purported supplier M/s Palam Pharma Pvt Ltd in Mehsana. The tribunal upheld the confiscation of these sale proceeds under Section 121 of the Customs Act, 1962, as the goods were deemed smuggled.Imposition of Penalties:The tribunal addressed the penalties imposed on various appellants:- Shri Manish Bavishi: Recognized as the mastermind behind the smuggling operation, Bavishi was initially penalized Rs. 30 lakhs and Rs. 1 crore in two separate orders. The tribunal reduced these penalties to Rs. 10 lakhs and Rs. 30 lakhs, respectively, considering the prolonged litigation and other circumstances.- Shri Parag Bhavsar and M/s Palam Pharma: The tribunal found no evidence that Bhavsar or his company had knowledge of the smuggled nature of the drugs. Bhavsar believed the transactions were legitimate based on assurances from Bavishi. Consequently, the penalties imposed on Bhavsar and M/s Palam Pharma were set aside.- M/s Hetero Labs Ltd and M/s Hetero Drugs Ltd: These companies were found to have conducted their transactions in good faith, without knowledge of the smuggled nature of the drugs. The tribunal noted that penalties under Section 112(b) could not be imposed on corporate entities without proving mens rea. Therefore, the penalties on these companies were also set aside.- Shri Rajesh Seth of M/s Reliable Agency: The tribunal found that Seth's involvement was limited to issuing invoices at Bavishi's behest without dealing with the actual goods. There was no evidence of his knowledge of the smuggling activities. Thus, the penalties imposed on Seth were annulled.Conclusion:The tribunal upheld the confiscation of the smuggled drugs and the sale proceeds but reduced or annulled the penalties on several appellants due to lack of evidence of their knowledge or involvement in the smuggling activities. The judgments were pronounced on 04.02.2020.