Adjudication upholds confiscation of undeclared goods and imposes penalty for deliberate fraud

The adjudicating authority was justified in concluding that the consignment marked with additional marking L/C contained undeclared goods, leading to confiscation of the entire consignment. The court upheld the confiscation of both the consignments, one of which did not contain any incriminating materials, under relevant provisions of the Customs Act. Additionally, the court found the importers' actions to be a deliberate attempt to defraud the government revenue, imposing a penalty of Rs. 2,00,000 to address the seriousness of the offense. The appeal was rejected, affirming the authority's decision.

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Issues Involved:
1. Justification of the adjudicating authority's conclusion regarding the consignment marked with additional marking L/C.
2. Liability for confiscation of the consignment of 41 bales which do not contain any incriminating materials.
3. Deliberate attempt to defraud the Government revenue warranting imposition of penalty.

Issue-wise Detailed Analysis:

1. Justification of the Adjudicating Authority's Conclusion Regarding the Consignment Marked with Additional Marking L/C:

The first issue to be considered is whether the Collector was justified in holding that the consignment with additional marking L/C relates to the goods in respect of which L/C had been opened and for which the Bill of Entry (B/E) had been filed. It is not disputed that the importers had placed two indents for identical goods in 41 bales each on the same date. It is also not denied that the said two lots came by the same vessel having the same markings. Even the package numbers run from 1 to 41. Normally, in the case of supplies of identical items under two indents, distinctive marks would be given or at least different package numbers would be given. There is no mention about the indents numbers on the documents or packages. The only distinction as found on the packages on examination is the additional mark 'L/C'. It is an admitted fact that only in respect of 41 bales, L/C had been opened and in respect of the other 41 bales they have been imported on "Document Against Payment" basis. In such circumstances, the department rightly examined both the lots simultaneously since it is difficult to apportion which lot belongs to the B/E filed by the importers. The importers in the normal course can be expected to file the B/E only in respect of that lot where financial commitment has already been made by opening the L/C. It is found that when on examination, the 41 bales marked with additional marking L/C were found to contain goods not declared. The importers have chosen to disown that lot and claimed only those which are free from mis-declaration. Such a stand is not tenable especially when both the lots had been imported by the same importers on the basis of indents placed on the same date for identical goods for the same number of packages. Moreover, the documents produced by the importers viz. their letter to the suppliers cancelling one of the indents, their letter to the bankers for returning the documents in respect of one lot and the letter from the suppliers stating that the other lot was sent by mistake with marking L/C in order to establish the contention that the other lot was not imported by them do not carry conviction for the following reasons: It has been brought on record that the indenters have not received any correspondence from the importers regarding the cancellation of the indent for the other lot. The bankers have also clearly indicated that they have received the letter from the importers asking them to return the documents only on 2-11-87 though the letter is dated 4-8-87. The telex and the letter from the suppliers are undated and strangely these documents don't talk anything of the additional marking 'L/C' and its significance. During the hearing, the advocate for the importers raised the possibility that the additional mark 'L/C' may denote 'L/C awaited'. Such a contention cannot be accepted because of the fact that the other lot has been imported on DAP basis and no L/C was expected to be opened nor L/C is awaited in that case. In the absence of the effective rebuttal from the importers by production of evidence as to the significance of the additional marking 'L/C', any person will only come to the conclusion that the additional marking L/C denotes the consignment, for which the L/C had been opened. It is only in this consignment concealment of non-declared goods was noticed. The Shed Superintendent and the Customs House Agent had also clearly indicated that in the absence of clear importing documents, it would not be possible to apportion the goods to the B/E filed. In the circumstances, the Collector is well justified in holding that the importers had imported the two lots with identical marking only with a view to getting Polyamide staple fibre concealed in 23 bales out of the total of 82 bales by creating a camouflage.

2. Liability for Confiscation of the Consignment of 41 Bales Which Do Not Contain Any Incriminating Materials:

The next issue to be considered is whether Section 119 could be invoked in the case of 41 bales wrapped in black wrapper in respect of which the goods imported are as per description in the documents. According to the Concise Oxford Dictionary, 'conceal' means - to hide completely or carefully - to keep secret - to disguise- to keep from telling. Under Section 119 of the Customs Act, the object used for concealing is liable for confiscation. In a case like this where two identical lots, one without contraband and another with contraband, have been imported, the object of importing the other lot is to disguise the contraband to get it passed. In such a situation it cannot be envisaged that only the materials which have been physically used for covering contraband or hiding them are sought to be covered under Section 119. In the context of dictionary meaning referred to above, the items which have been brought simultaneously along with the contraband goods to disguise and camouflage the contraband are also covered by the term 'concealment'. Even without going into this aspect, this lot is liable for confiscation under Section 111(d) of the Customs Act. In view of our findings that the lot with the additional markings 'L/C' is the one sought to be cleared under the B/E, the other lot for which a B/E has not been filed and no license produced is liable for confiscation under Section 111(d) of the Customs Act. We, therefore, uphold the Collector's order of confiscation of both the lots.

3. Deliberate Attempt to Defraud the Government Revenue Warranting Imposition of Penalty:

Now coming to the question of penal liability, it is observed that the importers apparently have created documents after the examination and investigation commenced. The letters appear to have been written by them with back dates and have either not reached the addressee or have been delivered subsequently. The letter and the telex from the suppliers are undated and appear to have been solicited. Moreover, the importers had pre-planned to import the polyamide fibre concealed in some of the bales by placing two indents simultaneously on the same date and also importing them with the same marks and numbers. It is also strange to note that the suppliers do not offer any explanation as to why the consignment contained polyamide fibre concealed in 23 bales. All these factors lead us to the conclusion that the importers' action is deliberate and cannot be let off with leniency. However, taking into account the fact that removal of undeclared goods has been timely arrested and both the consignments have been ordered for absolute confiscation, we consider that the penalty of Rs. 2,00,000/- (Rupees two lakhs) would meet the ends of justice. Accordingly, we modify the Collector's order to this extent. The appeal is otherwise rejected.

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