Penalty for smuggling foreign gold reduced for intermediary under s.112(b)(i) of Customs Act, recognizing limited role

CESTAT (AT), Kolkata upheld the finding that the appellant was involved in smuggling gold of foreign origin and confirmed imposition of penalty under s.112(b)(i) of the Customs Act, 1962. The Tribunal noted that the appellant was apprehended at the airport with gold biscuits concealed in his rectum, failed to produce any documents evidencing lawful possession, and clearly intended to remove the goods from the customs area without payment of duty. However, recognizing that the appellant was merely an intermediary and not the ultimate beneficiary, CESTAT held the original penalty excessive and reduced it from Rs. 2,00,000 to Rs. 50,000, disposing of the appeal accordingly.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the imposition of penalty on the appellant under Section 112(b)(i) of the Customs Act, 1962, for alleged smuggling of gold, was legally sustainable in view of objections regarding: (a) non-supply / non-authentication of relied upon documents; (b) alleged absence of proof of foreign origin and reasonable belief for seizure and confiscation; and (c) alleged non-compliance with Section 138B of the Customs Act, 1962 in relying upon the appellant's statement.

1.2 Whether the quantum of penalty imposed under Section 112(b)(i) of the Customs Act, 1962 required interference having regard to the appellant's role as an intermediary and not as ultimate beneficiary of the smuggled gold.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Sustainability of penalty under Section 112(b)(i) of the Customs Act, 1962

Interpretation and reasoning

2.1 The Court noted that the appellant was apprehended at the airport while attempting to board a flight, and four gold biscuits concealed in his rectum were detected by CISF personnel during frisking, and were subsequently extracted by medical staff.

2.2 It was recorded, on the basis of the appellant's own detailed statement, that he had travelled to Guwahati as instructed by another person, had gone to an unknown place where four pieces of gold biscuits were inserted in his rectum, and that he was promised consideration for carrying and delivering the consignment. The appellant admitted concealment of the gold in his rectum and his attempt to transport the same without payment of applicable customs duties.

2.3 The Court treated this admission, coupled with the physical recovery of the gold biscuits from the appellant's body, as establishing beyond doubt his role in attempting to smuggle gold out of the customs area without payment of duty.

2.4 The Court further observed that the gold biscuits were of foreign origin and that the appellant could not produce any document evidencing lawful acquisition, possession, transportation or dealing with the recovered gold, which led to the inference that he was involved in smuggling and that the goods were liable to confiscation under Section 111(b) and (d) of the Customs Act, 1962.

2.5 On these facts, the Court held that the appellant was directly involved in the acquisition, possession and transportation of foreign origin gold biscuits, which he knew or had reason to believe were liable to confiscation, thereby attracting penal liability under Section 112(b)(i) of the Customs Act, 1962.

2.6 The objections raised by the appellant regarding authenticity and supply of relied upon documents, alleged absence of reasonable belief of foreign origin, and alleged non-compliance with Section 138B were not accepted in light of the clear and admitted facts of detection, concealment in body cavity, and the appellant's own inculpatory statement; the Court proceeded on the basis that these facts sufficiently established the offence and sustained reliance on the statement and recovery.

Conclusions

2.7 The Court concluded that the appellant's involvement in smuggling of foreign origin gold biscuits was established beyond doubt, and that he was liable to penalty under Section 112(b)(i) of the Customs Act, 1962.

2.8 The imposition of penalty under Section 112(b)(i) by the adjudicating authority, as upheld in appeal, was affirmed on merits.

Issue 2 - Quantum of penalty under Section 112(b)(i)

Interpretation and reasoning

2.9 While sustaining the finding of liability, the Court examined the quantum of penalty of Rs. 2,00,000/- imposed on the appellant.

2.10 The Court observed that the appellant functioned as an intermediary carrier and was not the ultimate beneficiary of the smuggled gold. Having regard to the limited role played by him, the Court considered the quantum of penalty to be very high and disproportionate.

Conclusions

2.11 The Court held that the penalty should be reduced to make it commensurate with the appellant's role in the offence.

2.12 The penalty under Section 112(b)(i) was accordingly reduced from Rs. 2,00,000/- to Rs. 50,000/-, while maintaining the finding of liability and disposing of the appeal on these terms.

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