2022 (10) TMI 893 - HC - Customs

Court dismisses challenge to Customs Act order; petitioner's claims rejected, directed to appeal process

The court dismissed the petition challenging the impugned order dated 30th July 2019, which involved the interception and confiscation of prohibited ... Mandatory pre-deposit condition for entertaining appeal - right of appeal as a statutory, conditional right - legislative intent to curtail stay/waiver litigation and ensure expeditious disposal - prohibited goods and confiscation for import contrary to statutory conditions - admissions recorded under statutory interrogation and their evidentiary effectMandatory pre-deposit condition for entertaining appeal - right of appeal as a statutory, conditional right - legislative intent to curtail stay/waiver litigation and ensure expeditious disposal - Pre-deposit under Section 129E of the Customs Act cannot be waived and the appellate authority has no power to dispense with the mandatory deposit as a condition precedent to entertain an appeal. - HELD THAT: - The Court applied the reasoning in Haresh Nagindas Vora and related decisions to hold that the 2014 amendment to the provision removed the appellate authority's discretion to waive the pre-deposit. The amendment reflects a legislative policy to curb time-consuming adjudication of waiver applications and to secure the interest of revenue by mandating a limited percentage deposit. The Court rejected submissions seeking to impugn the constitutional validity of the amended provision, distinguishing decisions relied upon by the petitioner (including Mardia Chemicals) and endorsing precedents holding that a statutory right of appeal may be made conditional so long as the condition is not so onerous as to render the right illusory. In consequence, the prayer for waiver of the pre-deposit was not entertained and the petitioner was directed to pursue the statutory appellate remedy subject to the deposit requirement. [Paras 5, 6, 7]Prayer for waiver of the mandatory pre-deposit under Section 129E refused; appeal to CESTAT must comply with the pre-deposit requirement.Prohibited goods and confiscation for import contrary to statutory conditions - admissions recorded under statutory interrogation and their evidentiary effect - Claim for quashing the adjudication and the contention of breach of principles of natural justice were rejected; the impugned adjudicatory findings (including classification of goods as prohibited and imposition of penalties) were not interfered with and petitioner was directed to file appeal to CESTAT. - HELD THAT: - On the facts found in the impugned order - including use of multiple (allegedly dummy) IECs, absence of outward remittances, lack of banking transactions, and other material recorded in a detailed adjudication - the Court found no ground to quash the order. The Court held that the petitioner had not filed a substantive reply to the show cause notice and therefore could not claim prejudice from denial of cross-examination; further, statements recorded under Section 108 were admitted by the petitioner and not retracted, supporting the adjudicating authority's conclusions. Given the existence of disputed factual questions and the availability of the statutory appellate remedy, the High Court declined to exercise writ jurisdiction to interfere with the adjudication and penalties, leaving factual and quantification issues to the appellate forum. [Paras 9, 10, 14, 15, 16]Contention of breach of natural justice rejected; petition to quash impugned order dismissed and petitioner directed to raise all contentions in appeal before CESTAT.Final Conclusion: Writ petition dismissed. Mandatory pre-deposit under Section 129E must be complied with; no interference with the adjudicating authority's findings on confiscation, prohibited goods and penalties; petitioner to pursue remedy by filing appeal before CESTAT with pre-deposit, with all rights and contentions kept open for the appellate forum. Issues Involved:1. Legality of the impugned order dated 30th July 2019.2. Mandatory pre-deposit requirement under Section 129E of the Customs Act.3. Valuation and classification of the goods as prohibited.4. Alleged breach of principles of natural justice due to denial of cross-examination.Detailed Analysis:1. Legality of the Impugned Order:The petitioner challenged the order dated 30th July 2019, which was based on intelligence inputs leading to the interception and confiscation of a container containing Electroshock batons, Knuckle dusters, and suspected counterfeit personal care products. The respondents found the petitioner involved in importing these goods using 16 Importer Exporter Codes (IECs), of which 12 were non-existent, and 4 IEC holders denied any involvement. The impugned order found no outward remittances for the goods imported using these IECs.2. Mandatory Pre-deposit Requirement under Section 129E:The petitioner initially sought a waiver of the mandatory pre-deposit of 7.5% of the penalty under Section 129E of the Customs Act. The court referenced the case of Haresh Nagindas Vora Vs. Union of India, which upheld the constitutional validity of the amended Section 129E, mandating pre-deposits to expedite the disposal of appeals and reduce litigation. The court cited similar judgments, including Nimbus Communications Ltd. Vs. Commissioner of S.T. Mumbai-IV, affirming that the pre-deposit requirement is not unreasonable or discriminatory and serves the interest of revenue.3. Valuation and Classification of Goods as Prohibited:The petitioner contested the valuation of the goods and the classification as prohibited. The respondents argued that the adjudicating authority had detailed the facts, the role of the petitioner, and the basis for classifying the goods as prohibited under Section 2(33) of the Customs Act, read with Section 11 of the Foreign Trade (Development & Regulation) Act 1992 (FTDR Act) and the Foreign Trade (Regulation) Rules 1993 (FTDR Rules). The court referenced the Supreme Court's judgment in Om Prakash Bhatia Vs. Commissioner of Customs, Delhi, which clarified that goods not complying with import conditions are considered prohibited. The Delhi High Court's judgment in Commissioner of Customs & Central Excise, Delhi Vs. Achiever International further supported the classification of goods imported using dummy entities as prohibited.4. Alleged Breach of Principles of Natural Justice:The petitioner claimed a breach of natural justice due to the denial of cross-examination of certain persons whose statements were relied upon by the respondents. The court found this contention meritless, noting that the petitioner did not file a reply to the show cause notice despite multiple opportunities. The court held that the petitioner's conduct did not warrant invoking the jurisdiction under Article 226 of the Constitution of India and emphasized the availability of an effective alternative remedy of appeal under Section 129E of the Act.Conclusion:The court dismissed the petition, directing the petitioner to approach the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) for an appeal under Section 129E of the Act. The petitioner's statements recorded under Section 108 of the Act, admitting their role, were not retracted, reinforcing the court's decision. All rights and contentions were kept open for the appeal in CESTAT.