2023 (10) TMI 904 - HC - Customs

Smuggling allegations and beneficial owner status in Customs proceedings; petitioner not held beneficial owner, matter remitted for proportionate penalty

The text addresses Customs proceedings arising from alleged smuggling, focusing on whether the respondent complied with natural justice and whether the ... Jurisdiction - proper officer to issue SCN - Smuggling - beneficial owner - Violation of principles of natural justice - none of the relied upon documents in the Show Cause Notice were furnished to the petitioner by the respondent - HELD THAT:- The Customs Department is not handicapped. It is open to the Customs Department to trace the location from where the payment of the amount was made and the person who made such payment to the petitioner. It appears that there is either an attempt to shield the persons who were actually involved in the smuggling of the imported consignment of 2,01,13,000 pieces of sewing machine needles of various sizes of Brand “Organ” and “Flying Tiger” and 70,200 pieces of “measuring tapes” of various sizes or there is no will to trace out such a person. Therefore, the impugned order is unsustainable - there are no direct materials to infer that the petitioner was marketing or dealing in the smuggled goods. Therefore, the petitioner cannot be declared as the “beneficial owner” of the smuggled goods within the meaning of Section 2(3A) of the Customs Act, 1962. Unless, the petitioner himself imported the goods and exercised effective control over the smuggled imported goods, the petitioner cannot be called as the “beneficial owner”. Therefore, while it cannot be construed that the impugned Order-in-Original was passed without a proper authorization from an officer senior in rank to the officer who has passed the impugned Order-in-Original, the petitioner cannot be treated as a “beneficial owner” of the smuggled goods. The case is remitted back to the respondent to re-do the exercise for imposing penalty on the petitioner in proportion with the role played by the petitioner in the alleged attempt to smuggle 2,01,13,000 pieces of sewing machine needles of various sizes of Brand “Organ” and “Flying Tiger” and 70,200 pieces of “measuring tapes” of various sizes - Petition disposed off. Issues Involved:1. Validity of the impugned Order-in-Original No.76206/2020 dated 28.09.2020.2. Determination of the petitioner as the 'beneficial owner' under Section 2(3A) of the Customs Act, 1962.3. Imposition of customs duty and penalties under Sections 114A and 114AA of the Customs Act, 1962.Summary:Validity of the Impugned Order-in-Original:The petitioner challenged the impugned Order-in-Original No.76206/2020 dated 28.09.2020, arguing it was passed beyond the prescribed period under Section 28(9)(b) of the Customs Act, 1962. The petitioner contended that the order should have been issued within one year from the date of the Show Cause Notice or within a further extended period of one year. The respondent argued that the time limit was extended due to the COVID-19 pandemic under Section 6 of the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020. The court concluded that the impugned order was issued within the extended period and thus was valid.Determination of the Petitioner as the 'Beneficial Owner':The petitioner was treated as the 'beneficial owner' under Section 2(3A) of the Customs Act, 1962, due to the inability to trace the actual importers. The court noted that the petitioner was involved in facilitating the clearance of goods but did not exercise effective control over the smuggled goods. The court held that the petitioner could not be treated as the 'beneficial owner' of the smuggled goods solely because the actual importers were untraceable.Imposition of Customs Duty and Penalties:The impugned order imposed customs duty and penalties on the petitioner under Sections 114A and 114AA of the Customs Act, 1962. The court found the penalties disproportionate to the petitioner's role as a facilitator. The court directed the respondent to re-assess the penalties in proportion to the petitioner's involvement within three months.Conclusion:The impugned Order-in-Original No.76206/2020 dated 28.09.2020 was set aside. The case was remanded back to the respondent to re-assess the penalties on the petitioner in proportion to his role in the alleged smuggling attempt. The court disposed of the writ petition with these observations.