Gold bangles worth Rs.16 crore confiscated under Section 113(k) for export diversion negligence

CESTAT Kolkata upheld confiscation of 1194 gold bangles weighing 54096 gms valued at Rs.16,10,43,792/- under Section 113(k) of Customs Act, 1962 for diversion of export consignment. Court found exporters negligent in failing to load goods for export despite completing formalities. Redemption fine reduced to Rs.15,00,000/- considering limited value addition. Penalties under Section 114(iii) imposed but Section 114AA penalty rejected as documents weren't falsified. COFEPOSA proceedings against main accused were dropped. Court criticized investigation lapses including missing CCTV footage and reliance on retracted statements without proper cross-examination procedures.

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1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the gold bangles cleared for export were liable for confiscation under Section 113(k) of the Customs Act, 1962 due to alleged diversion.
• The applicability of penalties under Sections 114(iii) and 114AA of the Customs Act, 1962 on the appellants/exporters.
• Whether the redemption fine imposed under Section 125 of the Customs Act was appropriate.
• The validity of the procedural lapses and the role of customs officials in the alleged diversion.
• Whether the statements recorded under coercion were admissible.
• The impact of non-supply of Relied Upon Documents (RUDs) and violation of natural justice principles.
• Whether the proceedings against other co-noticees, including customs officials and State Trading Corporation of India Ltd., should be upheld or dismissed.

2. ISSUE-WISE DETAILED ANALYSIS

Confiscation under Section 113(k) of the Customs Act:

• Legal Framework: Section 113(k) deals with confiscation of goods not loaded for export due to negligence or default.
• Court's Interpretation: The Court found that the goods were not loaded for export due to negligence, thus attracting Section 113(k).
• Key Evidence: The goods were cleared but not loaded, and the alleged diversion was not proven with sufficient evidence.
• Conclusion: The goods were liable for confiscation under Section 113(k) due to negligence.

Penalties under Sections 114(iii) and 114AA:

• Legal Framework: Section 114(iii) pertains to penalties for acts rendering goods liable for confiscation, while Section 114AA relates to false declarations.
• Court's Interpretation: Penalties under Section 114(iii) were applicable due to negligence, but Section 114AA was not applicable as no false declarations were found.
• Conclusion: Penalties were imposed under Section 114(iii) but not under Section 114AA.

Redemption Fine under Section 125:

• Legal Framework: Section 125 allows for redemption of confiscated goods upon payment of a fine.
• Court's Interpretation: The redemption fine was reduced to Rs. 15,00,000, considering the circumstances and value addition.
• Conclusion: The redemption fine was deemed excessive and reduced.

Procedural Lapses and Role of Customs Officials:

• Legal Framework: Examination of procedural compliance by customs officials.
• Court's Interpretation: Lapses were procedural, not indicative of connivance or intentional diversion.
• Conclusion: No penalties were imposed on customs officials due to lack of evidence of connivance.

Admissibility of Statements and Non-supply of RUDs:

• Legal Framework: Section 138B(b) of the Customs Act requires examination and cross-examination of statements.
• Court's Interpretation: Statements obtained under duress and without proper procedure were not admissible.
• Conclusion: The non-supply of RUDs violated natural justice, affecting the validity of the proceedings.

Proceedings against Co-noticees:

• Legal Framework: Examination of involvement of other parties in the alleged diversion.
• Court's Interpretation: Proceedings against co-noticees were dropped due to lack of evidence of their involvement.
• Conclusion: No proceedings were sustainable against co-noticees, including customs officials and State Trading Corporation of India Ltd.

3. SIGNIFICANT HOLDINGS

• Confiscation and Penalties: The Court upheld the confiscation of goods under Section 113(k) and imposed reduced penalties under Section 114(iii).
• Redemption Fine: The redemption fine was reduced to Rs. 15,00,000, considering the circumstances.
• Non-applicability of Section 114AA: No penalties were imposed under Section 114AA due to the absence of false declarations.
• Procedural Lapses: The lapses by customs officials were procedural and did not warrant penalties.
• Non-supply of RUDs: The violation of natural justice principles affected the proceedings, leading to the inadmissibility of certain evidence.
• Proceedings against Co-noticees: Dropped due to lack of evidence of involvement in the alleged diversion.

The appeals were disposed of with the above findings, and the order was pronounced in open court on 18.03.2025.

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