2025 (9) TMI 1066 - HC - Customs

Imported gold eligible for redemption under Section 125; authorities must allow payment of redemption fine, duty, and interest

HC allowed the appeals in part and modified the impugned orders, holding that where imported gold is not prohibited, authorities should have afforded an ... Levy of penalty on appellant - Smuggling - Gold bar - restricted goods or not - absolute confiscation - HELD THAT:- There are force in the contention of the Learned Counsel for the appellants that an opportunity for redeeming the gold that was seized from them ought to have been extended to the appellants by the Authorities below. As is trite, in the absence of any prohibition for importing the gold into the country, there is always a discretion available to the proper officer under Section 125 of the Customs Act to permit redemption of the imported gold subject to the importer paying redemption fine together with the customs duty and interest thereon, as warranted under the Customs Act. As is apparent from a perusal of the appeal memorandum filed before the said Authority, neither the First Appellate Authority nor the Tribunal considered the said prayer of the appellants. On the facts and circumstances of the case, the Adjudicating Authority ought to have extended the appellants an opportunity of redeeming the imported gold, more so when there was no proposal in the show cause notice for an absolute confiscation of the gold in question. The impugned orders of the Appellate Tribunal modified, and these appeals are allowed to the limited extent of clarifying that the appellants shall be entitled to seek redemption of the gold seized from them on their appearing before the Additional Commissioner, Customs (Preventive), Cochin (the original authority) and complying with the conditions prescribed by the said Authority for redemption of the gold seized from them. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether the authorities erred in ordering absolute confiscation of seized gold when importation of gold was restricted but not prohibited, and whether appellants were entitled to the option of redemption under the Customs Act. 2. Whether the penalties imposed on the persons from whose premises the gold was seized were excessive or unsustainable on the material before the Adjudicating Officer and appellate authorities. 3. Whether the appellate authorities' failure to consider the specific plea for redemption (redemption fine, customs duty and interest) rendered the adjudication infirm. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Availability of redemption under the Customs Act when importation is restricted but not prohibited Legal framework: Section 125 of the Customs Act authorises the proper officer to permit redemption of seized imported goods on payment of redemption fine together with customs duty and interest; Section 108 permits recording of statements during investigation. Relevant executive notification regime (General Exemption No. 183 as amended) prescribed concessional duty conditions and import limitations for gold. Precedent Treatment: No precedent was cited or applied by the Court in the judgment; the Court applied statutory scheme and established administrative discretion under Section 125. Interpretation and reasoning: The Court reasoned that where importation is not prohibited but only restricted by policy or notification, absolute confiscation is not the inevitable or mandatory consequence. The discretion under Section 125 to allow redemption remains available unless the statutory scheme or the show-cause notice explicitly seeks absolute confiscation and conditions for redemption are lawfully excluded. The existence of a concessional duty regime subject to conditions (e.g., duty paid in convertible foreign currency, carried by eligible passenger, declaration at arrival, quantitative limit) does not convert permitted import into an absolute bar that would foreclose redemption where seized goods are of foreign origin. Ratio vs. Obiter: Ratio - Where importation of goods is restricted but not prohibited, the proper officer retains discretion under Section 125 to permit redemption on payment of redemption fine, duty and interest; failure to consider such discretion amounts to an omission requiring remedial direction. Obiter - Observations about the specific terms of the notification and its conditions are contextual and do not constitute a binding interpretation beyond the case facts. Conclusions: The Court held that the appellants should have been afforded an opportunity to redeem the seized gold. The absolute confiscation without considering the redemption plea was procedurally and substantively unsatisfactory in the facts of this case, and the orders are to be modified to permit redemption subject to conditions to be prescribed by the original authority. Issue 2 - Validity of penalties imposed on appellant(s) Legal framework: Adjudicatory powers under the Customs Act allow imposition of penalties where violations of customs law are established; evidence includes statements under Section 108 admitting foreign origin of seized gold. Precedent Treatment: No precedent was relied upon; the Court assessed the merits based on admitted facts and the material before the lower authorities. Interpretation and reasoning: The Court observed that the appellants, by recorded statements, admitted that the seized gold was of foreign origin. Given that admission and the record, the Court found no ground to interfere with the penalty orders. The Court distinguished the question of penalty (sanction for breach) from the separate question of redemption (remedial option under Section 125) - affirming that permitting redemption would not automatically vitiate the imposition of penalty where material supports it. Ratio vs. Obiter: Ratio - Penalties imposed were sustainable on the record and therefore will not be interfered with by the Court. Obiter - None material beyond the affirmation that admission of foreign origin is strong evidence supporting penalty. Conclusions: The Court declined to modify the penalty orders and upheld the penalties imposed by the Adjudicating Officer and confirmed by appellate fora. Issue 3 - Duty of appellate authorities to consider specific prayers for redemption and consequences of omission Legal framework: Administrative adjudication requires that appellate authorities consider and dispose of the grounds and reliefs raised by parties in their appeal memoranda; Section 125 provides the statutory relief (redemption) which may be invoked in appeals. Precedent Treatment: No case law cited; the Court applied principles of fair adjudication and statutory discretion. Interpretation and reasoning: The Court examined the appeal memoranda and found that the appellants specifically sought redemption before the First Appellate Authority and the Tribunal, but those authorities failed to consider the prayer. That omission was material because redemption is a statutory remedial route available to the appellants. The Court held that appellate bodies must address such pleas; failure to do so justifies appropriate corrective directions. The Court emphasized that the absence of a proposal for absolute confiscation in the show-cause notice made the omission more significant. Ratio vs. Obiter: Ratio - Where a statutory remedy (redemption) is invoked in pleadings and is available under the Act, appellate authorities must consider and rule upon the plea; failure to do so warrants remand or modification to permit consideration. Obiter - Procedural expectations for appeal memorandum formulation and specifics of how redemption applications should be processed are ancillary observations. Conclusions: The Court modified the impugned appellate orders to the limited extent of directing that the appellants be permitted to apply for redemption before the original authority, and set a date and appearance direction to enable the Additional Commissioner to decide redemption consistent with the Act and applicable conditions. Interrelationship of Issues (cross-reference) The Court treated the penalty and redemption questions as distinct: penalties affirmed (Issue 2) despite granting the limited relief of permitting redemption (Issue 1), because the statutory discretion to redeem does not automatically negate liability for penalty when the record supports it. The failure of appellate authorities to consider redemption (Issue 3) provided the principal ground for modification even while leaving penalties intact. Final Disposition (operative conclusion) The Court partly allowed the appeals by modifying the appellate orders to permit the appellants to seek redemption of the seized gold before the original adjudicating authority on specified conditions and directed personal appearance for consideration; penalties as imposed were affirmed and not disturbed.