2023 (2) TMI 288 - HC - Customs

Petitioner Granted Appeal on Pre-Deposit; Attached Properties Accepted as Security

The Court upheld the Order in Original (OIO) but allowed the petitioner to appeal by providing the required pre-deposit amount. The appellate authority ... Smuggling - seizure of gold weighing 46.3 kgs - Prohibited goods or not - levy of personal penalty under section 112 of the Customs Act, 1962 - Validity of SCN - Jurisdiction of DRI to issue SCN - It is the grievance of the petitioner that he never received a notice to show cause as to why 22.3 kgs of gold be not confiscated under section 111 of the Customs Act and as to why the penalty be not imposed under section 112 of the Customs Act - violation of principles of natural justice - non-availment of opportunity for want of necessary pre-deposit required under section 29E of the Customs Act - HELD THAT:- Reliance is placed on the decision of M/s. Cannon India Limited vs. Commissioner of Customs, [2022 (8) TMI 888 - SC ORDER] whereas the Apex Court has held that DRI has no jurisdiction to issue show cause notice under the Customs Act inasmuch as only such officer of Customs who has been assigned specific function would be a “a proper officer” under the Central Government in terms of section 2(34) of the Act to issue notice, while exercising the powers under section 6 of the Customs Act - Therefore, the show cause notice issued to the petitioner by the DRI is invalid and this decision would be binding to the Courts within the territory of India under Article 141 of the Constitution of India. Therefore, the show cause notice is urged to be quashed. Considering the fact that essential remedy of appeal is available and it is an efficacious remedy, this Court would prefer not to venture into examining these aspects. According to us, this contention can always be raised before the appellate authority who would also lead to adjudication on factual matrix. Another contention on the part of the petitioner is that he was not in India and was caught at New Delhi Airport and when the show cause notice was issued, it was served upon his wife. When he returned to India in February, 2016, he was caught in connection with another case and because of that he was not in a position to contest the allegations levelled in the show cause notice - HELD THAT:- Much emphasis is placed on the ground of violation of principles of natural justice, as penalty imposed here is based on the statement of co-accused and without any independent corroborative evidence. Application of section 9D of the Central Excise Act and section 138B of the Customs Act is made which makes it mandatory for the Commissioner to conduct the examination-in-chief before admitting the statements and evidence. Section 138B of the Customs Act makes it clear that no statement can be used as evidence unless and until the contents are affirmed by the person before the Commissioner. As the gold is not prohibited for import, therefore, the action of Commissioner in confiscating such gold is illegal, according to the petitioner. It is urged that Commissioner has failed to recognise the settled position that gold is not prohibited for import and it is only restricted. Therefore, the chance ought to have been given to redeem the same with fine. Penalty imposed of Rs. 50 lakhs upon the petitioner under section 12B of the Customs Act - HELD THAT:-The appeal was preferred before the the CESTAT with an application for dispensing with the per-deposit of the amount of fine and penalty imposed upon the petitioner. However, the same was rejected by the CESTAT essentially on the ground that in absence of the amount of the pre-deposit and penalty, the appeal is not maintainable. Absence of any opportunity of cross-examination and gross violation of the principles of natural justice in adjudication of proceedings - HELD THAT:- Denial of right to cross-examine the witnesses whose statements recorded under section 108 of the Customs Act and of those officers who recorded such statements is much emphasized upon - The cross-examination, in a given scenario, is held not to be an absolute right and the facts of every matter shall need to be regarded by the Court at the time of considering the request for cross-examination. This Court also is not oblivious of the fact that without proving the version of the witnesses in examination-in- chief, it is impermissible for the prosecution/department to take into account their evidence given in the form of oral statements. Section 9D of the Customs Excise Act and Section 138B of the Customs Act require fulfillment of these requirements. However, these being legal issues can be raised at any stage before any judicial or quasi judicial authority and they need to be regarded by those authorities. Again, non-availment of opportunity whether would also cause serious prejudice to the parties, also, can be well appreciated by the Appellate authority as and when raised. Thus, what can be gathered is that service of show cause notice appears to be valid and thereafter also, couple of notices were served upon the petitioners for availing an opportunity of hearing at the time of adjudication of the show cause notice and it emerges prima facie that the petitioner has not participated. Whether the reasons put forth for non-participation, even through the authorised representative, could surely be agitated in appeal for the Appellate authority to adjudicate - it is not convincing that there has been any breach of principles of natural justice much less gross violation at the time of service and thereafter of adjudication of the show cause notice. However, the fact remains that the participation on the part of the petitioner was missing when OIO was finalized. Non-availment of opportunity for want of necessary pre-deposit required under section 29E of the Customs Act - HELD THAT:- The appellate authority could not adjudicate on merits. Therefore, the balance needs to be struck by allowing the petitioner to approach the appellate authority by furnishing the amount of predeposits of the requisite amount. Resultantly, without making any interference with the OIO, all the petitioners are permitted to approach the appellate authority. Petition disposed off. Issues Involved:1. Validity of the Show Cause Notice issued by the Directorate of Revenue Intelligence (DRI).2. Alleged violation of principles of natural justice.3. Requirement of pre-deposit for appeal under Section 129E of the Customs Act.4. Right to cross-examination.5. Confiscation of gold and imposition of penalties.Issue-wise Detailed Analysis:1. Validity of the Show Cause Notice issued by the Directorate of Revenue Intelligence (DRI):The petitioner challenged the jurisdiction of the DRI to issue the show cause notice, relying on the Supreme Court's decision in M/s. Cannon India Limited vs. Commissioner of Customs, which held that only a 'proper officer' as defined under Section 2(34) of the Customs Act could issue such notices. The Court noted that the Additional Director General of DRI was not the proper officer to exercise the power under Section 28(4), making the initiation of recovery proceedings invalid. However, the Court preferred not to venture into this aspect, suggesting that the appellate authority could adjudicate on this issue.2. Alleged Violation of Principles of Natural Justice:The petitioner argued that there was a gross violation of principles of natural justice as the show cause notice was served on his wife and not him. He also claimed that he was not given an opportunity to defend himself or cross-examine witnesses. The Court acknowledged that the petitioner was not present during the adjudication of the show cause notice but found that notices for personal hearings were served multiple times. The Court concluded that there was no prima facie breach of principles of natural justice but allowed the petitioner to raise these issues before the appellate authority.3. Requirement of Pre-deposit for Appeal under Section 129E of the Customs Act:The petitioner contended that he was financially incapable of making the mandatory pre-deposit of 7.5% of the penalty amount required for filing an appeal. The Court noted that the Customs Excise and Service Tax Appellate Tribunal (CESTAT) dismissed the appeal for non-compliance with this requirement. The Court allowed the petitioner to approach the appellate authority by furnishing the pre-deposit amount within four weeks and suggested that the value of attached properties could be considered as adequate security.4. Right to Cross-examination:The petitioner emphasized the denial of the right to cross-examine witnesses whose statements were recorded under Section 108 of the Customs Act. The Court referred to the Supreme Court's decision in M/s. Kanungo & Company vs. Collector Of Customs, which held that cross-examination is not an absolute right and must be considered on a case-by-case basis. The Court allowed the petitioner to raise this issue before the appellate authority.5. Confiscation of Gold and Imposition of Penalties:The petitioner argued that the confiscation of gold was illegal as gold is not prohibited for import but only restricted. The Court noted that the penalty was imposed based on the statements of co-accused and without independent corroborative evidence. The Court allowed the petitioner to contest the confiscation and penalties before the appellate authority, which could consider the entire factual matrix and legal issues.Conclusion:The Court did not interfere with the Order in Original (OIO) but permitted the petitioner to approach the appellate authority by furnishing the pre-deposit amount. The appellate authority was directed to consider the value of attached properties as adequate security and to decide the appeal in accordance with the law. The Court emphasized that none of its findings would prejudice the rights of the parties during the adjudication of the appeals.