2026 (1) TMI 405 - AT - Customs

Rough marble imports under SIL licences challenged as restricted; penalties u/s112 and confiscation u/s111 set aside

The dominant issue was whether penalties under s.112 could be sustained for import of restricted rough marble allegedly in excess of, or without, valid ... Imposition of penalties under section 112 - Imports rough marble - lack of the required licence - restricted under the Foreign Trade Policy and they could be imported only on a Special Import Licence [SIL] issued by the Director General of Foreign Trade [DGFT] - liable confiscation under section 111 - HELD THAT:- While it was clear that the goods were imported without adequate valid licences and also that the officers had cleared the goods, the details of the adjudication orders and fines paid, etc., were not available. DRI issued the SCN proposing to confiscate the goods and impose penalties which culminated in the impugned order. It is undisputed that PG and Priceless (which were amalgamated into Marble City)had imported rough marble, a good whose import was restricted and which could be imported only on a licence issued by the DGFT. It is also undisputed that in some Bills of Entry, the imports of rough marble were in excess of the quantities indicated in the corresponding SIL or without an SIL covering the entire quantity. Learned authorized representative submitted that in some cases, the import consignments were booked by PG and Priceless even before the issue of SIL which, however, is immaterial because licence is required to import goods into India and not to enter into a contract or place orders for goods. One may place an order without a licence but at the time the goods are imported one should have a licence covering the import. Since DRI could only get details of the Bills of Entry which were filed and the SILs which were issued by the DGFT and could not obtain copies of the adjudication orders, details of fine and penalties, etc. or even hard copies of the Bills of Entry where the details of fines and penalties imposed by the officer and paid by the appellant might have been recorded, the SCN was issued presuming that in all cases where there was a difference between the Bill of Entry and the SIL, the appellant had imported and cleared the goods without a licence. Since the documents are not available, one cannot draw an adverse inference that the person was unauthorizedly absent on that day. Extending further, if the entire register for the entire year is examined one can discover all the days on which every employee had not signed in the attendance register on each working day during that entire year. It is possible that nobody may have kept copies of leave sanction, tour bills, directions to attend meetings outside the office, etc. One cannot, from this investigation, conclude that there was rampant unauthorized absenteeism in the entire office ten years ago. We do not share the views of the DRI or the Principal Commissioner about the officers in the appraising group, import shed and the officers who issued the ‘out of charge’ in the disputed Bills of Entry; these Customs officers deserve better trust and respect. In the absence of any evidence to the contrary, it must be presumed that the goods were cleared by the officers after adjudication, etc. and that the custodian had given the goods to the importers only after the customs officer issued ‘Out of Charge’. Since we have found in favour of Marble City on merits, the question of limitation need not be examined. Consequently, the penalties imposed on it cannot be sustained and neither can the penalties imposed on others in the impugned orders. The impugned orders deserve to be set aside and are set aside. All the six appeals are, accordingly, allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether penalties could be sustained on the premise that restricted rough marble was cleared for home consumption without valid licence coverage, when the department relied only on electronic Bill of Entry data and licence details, without producing assessed Bills of Entry, adjudication orders, or evidence of clearance without adjudication/redemption. (ii) Whether, in the absence of evidence showing collusion/negligence of Customs officers or release by the custodian without 'out of charge', the Court should presume regularity of official acts and accept that disputed clearances likely occurred only after adjudication/redemption fine/penalty (or licence amendment), thereby defeating the foundation for confiscation-based penalties. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Sustainability of penalties where the department lacked assessed records/adjudication orders and proceeded on assumptions from ICES and licence data Legal framework (as discussed by the Court): The Court examined the pre-self-assessment import clearance process under the Customs Act, including filing of Bill of Entry under section 46, assessment/examination under section 17, and clearance for home consumption under section 47. It also noted that if restricted goods were imported without adequate licence coverage, they would be liable to confiscation under section 111 and penalty under section 112, typically after show cause notice and adjudication, with release often on payment of redemption fine under section 125. Interpretation and reasoning: The Court treated it as undisputed that the commodity was restricted and that in some Bills of Entry the import quantity exceeded the quantity indicated in the corresponding licence or lacked full coverage. However, the Court found that the department's case rested on an inference drawn merely from comparing (a) Bills of Entry data available in the electronic system and (b) licence quantities issued by the licensing authority. The Court held this comparison was incomplete because it did not establish what occurred after filing of the Bill of Entry-particularly whether the consignments were subjected to offline adjudication and released on payment of redemption fine/penalty (or covered by licence amendments), a practice which statements of the importer, its agent, and Customs officers indicated had occurred. The Court emphasised that the department could not produce adjudication orders or assessed Bills of Entry reflecting manual adjudication entries and redemption particulars, and that it was therefore impermissible to presume, solely from missing old records, that goods were cleared without licence and without adjudication. Conclusions: The Court concluded that the show cause and the impugned orders proceeded on assumptions unsupported by positive evidence of unauthorised removal/clearance without adjudication. Consequently, the penalties imposed could not be sustained on merits. Issue (ii): Presumption of regularity in Customs clearance; absence of evidence of collusion/negligence or custodian release without 'out of charge' Legal framework (as discussed by the Court): The Court analysed the multi-officer clearance architecture for the relevant period: assessment by the appraising officers, physical examination, and issuance of 'out of charge' under section 47 only upon satisfaction that duty was paid and goods were not prohibited. The Court also considered the role of the custodian, who releases goods only upon production of requisite documents including the Bill of Entry with the Customs 'out of charge'. Interpretation and reasoning: The Court reasoned that, given the structured clearance process involving multiple Customs functionaries and the custodian, it was not plausible that restricted goods could be removed from the Customs area without either (a) a valid licence or (b) adjudication leading to confiscation with an option of redemption and consequent payment of fine/penalty, followed by 'out of charge'. Accepting the department's conclusion would necessarily imply that, across the disputed Bills of Entry, all officers involved (and/or the custodian) had either colluded or acted negligently; the Court found there was no evidence whatsoever to support such an implication. In the absence of evidence to the contrary, the Court held it must be presumed that clearances occurred through regular official process, including adjudication/redemption where licence shortfall existed, consistent with confirmations recorded during investigation. The Court also held that if adjudication had already been done for the same goods, initiating another proceeding again proposing confiscation/fine/penalty on the same basis was unsustainable. Conclusions: The Court declined to accept the department's theory of clearance without licence/adjudication, held the foundational factual premise for penalties was unproven, and set aside the penalties not only on the importer entity but also on the other noticees whose penalties were based on the same impugned findings. Final outcome applied to all issues: On merits, the Court set aside the impugned orders and allowed all appeals. Having decided in favour of the appellants on merits, the Court did not examine limitation.