2026 (2) TMI 52 - HC - Customs

Proportionality of punishment in export mis-declaration upheld; penalty and confiscation sustained, writ petition rejected despite natural justice plea

Petitioner was found to have mis-declared diamond make in export documentation, breaching export procedural rules, and the court upheld the imposition of ... Proportionality of punishment - penalty u/s 114 - confiscation u/s 113 - entry for exportation and mis-declaration u/s 50 - violation of principles of natural justice - Special Economic Zone Act, 2005 - alternative remedy under the Customs Appeal Rules, 1962 - HELD THAT:- M/s. Universal Gems violated the provisions of Section 50 of the Customs Act, 1962 read with Rule 46 of the Special Economic Zone Rules, 2006 which prescribes procedure for exports, by mis-declaring the make of the diamonds, and the petitioner facilitated the same. We do not find any infirmity or illegality in the impugned order which has been passed. The judgments, on which reliance is placed, will not come to the rescue of the petitioner as it is found that in the case of H.B. Cargo Services [2011 (3) TMI 816 - ANDHRA PRADESH HIGH COURT], the High Court had examined the issue after the order was passed by the Appellate Authority in the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, with regard to the revocation of suspension of the export license on the ground of illicit export. Whereas, in the case of Shangrila Latex [2016 (10) TMI 817 - GUJARAT HIGH COURT] the Court had examined the issue relating to the Foreign Trade (Development & Regulation) Act, 1992, and in light of the fact that there was no mens rea and the huge penalty of Rs.2.27 crores was not justified. The judgement in the case of Mukul Kumar Choudhuri [2009 (8) TMI 1130 - SUPREME COURT] deals with service jurisprudence and the penalty imposed in disciplinary proceedings. On an overall analysis of the facts and the impugned order, we neither find any jurisdictional error nor any violation of principles of natural justice or violation of statutory provisions, hence we are not inclined to entertain the writ petition. The petitioner, though has an alternative remedy of filing the appeal, however chose to contest the writ petition on merits despite our suggestion, and since we were called upon to address on merits, we have passed the present order. At this stage, petitioner has submitted that since the petitioner has no money, he is not in a position to file the appeal. It is trite that the monetary incapacity of litigant cannot dilute the statutory provision of appeal. Hence, in wake of the facts, the present writ petition is hereby rejected. Issues: (i) Whether the penalty of Rs. 425,27,99,100/- imposed under Section 114 of the Customs Act, 1962 on the petitioner for facilitating/exporting natural diamonds in the guise of lab-grown diamonds is legally sustainable; (ii) Whether the writ petition challenging the impugned order is maintainable in view of the alternative statutory remedy and the petitioners asserted monetary incapacity.Issue (i): Whether the penalty under Section 114 of the Customs Act, 1962 read with Section 113 and SEZ Rules is justified against the petitioner for facilitating mis-declared export of natural diamonds.Analysis: The Court examined the findings of the customs authority including seized documents, entries in the Keshav mark register, statements recorded under Section 108, and laboratory identification reports showing that 99.2% of the consigned diamonds were natural rather than lab-grown. The authority held that the petitioner facilitated the supply and abetted illegal export on commission basis and invoked Section 114 which permits penalty up to the value of the goods where confiscation under Section 113 is attracted. The Court considered precedents relied upon by the petitioner and found them distinguishable on facts and legal context.Conclusion: The Court held that there is no jurisdictional error or infirmity in the impugned order and that the levy of penalty under Section 114 is legally sustainable; the challenge to the penalty fails (decision against the petitioner on this issue).Issue (ii): Whether the writ petition is maintainable despite the existence of an alternative appellate remedy and the petitioners claim of financial inability to pursue that remedy.Analysis: The Court noted the existence of an alternative remedy under the Customs Appeal Rules, 1962. Although the petitioner urged monetary incapacity, the Court observed that inability to pay does not dilute statutory appeal provisions. The Court nevertheless proceeded to decide the petition on merits after being invited to do so, and found no grounds to interfere with the administrative order.Conclusion: The Court held that the writ petition is not maintainable as a substitute for the statutory appellate remedy in the absence of compelling jurisdictional error; the petitioners contention of monetary incapacity does not excuse non-availment of the alternative remedy (decision against the petitioner on maintainability).Final Conclusion: On the merits and on jurisdiction, the challenge to the penalty order under Section 114 is unsuccessful and the impugned order is upheld; the writ petition is accordingly rejected.Ratio Decidendi: Where evidence (including seized documents, recorded statements and laboratory reports) establishes facilitation or abetment of improper export attracting confiscation under Section 113, the penalty permitted by Section 114 including a penalty up to the value of the goods is a legally permissible consequence, and absence of monetary means does not displace the availability of the statutory appellate remedy.