By TIOL News Service

KOLKATA, MAY 12, 2016: BY a common order, the Commissioner of Customs (Preventive) has imposed "exemplary penalty" of Rs.10,07,00,000/- u/s 112 of the Customs Act, 1962 in case of either petitioner. The petitioner in the first matter has been found to be "the mastermind and kingpin of the instant smuggling operation" and the petitioner in the second matter has been found to be "the principal accomplice of" the other petitioner.

The question of law that has been urged is as to whether the expression "goods in respect of which any prohibition is in force" implies goods which have been specifically barred from being brought into the country and not the smuggling of any goods into the country which may otherwise have been brought into the country by the appropriate channel upon payment of due duty thereon.

In course of the search and seizure operations carried out on the nine carriers by the DRI, 272 rectangular-shaped gold bars weighing 36.856 kg were recovered from such persons and the materials were seized on the belief that they were illegally imported into the country from Bangladesh and were liable for confiscation u/s 111 of the Act. All nine persons, from whose possession the gold was recovered, were examined under Section 108 of the Act and, on the basis of their statements it was perceived that the two key players were the two petitioners herein.

The only ground urged is that the penalty imposed on either petitioner on the basis of the value of the smuggled gold could not have been made as gold is not a prohibited item nor is the import thereof prohibited by virtue of any notification or order under the Act of 1962 or any other law for the time being in force. The petitioners assert that only the duty that may have been sought to be evaded on these smuggled goods could have been made the basis of assessing the penalty liable to be imposed on the petitioners.

After extracting section 112 of the Customs Act, 1962, the High Court considered the submissions made by both sides and observed thus -

++ There is a distinction between Section 111 and Section 112 of the Act. The former provides for confiscation of improperly imported goods and the latter prescribes the penalty for improper importation of goods. The judgments relied upon by the Union reveal a liberal construction of a provision in favour of the State to deal with the mischief for which the statute and the provision have been enacted. However, such construction may not apply to a penalty as the cardinal rule for construing a penal provision is otherwise. It is possible for a provision providing for confiscation of goods to be liberally interpreted, but when a provision provides for punishment it has to be strictly construed.

++ The expression "goods in respect of which any prohibition is in force" in the context of Section 112 of the Act would imply goods which are prohibited from being imported and not goods which have been smuggled into the country in contravention of the procedure established by law for the import thereof. Thus, while the corresponding provision in Section 111 of the Act permits the confiscation of the goods on a broader construction of the relevant expression with reference to the definition of "prohibited goods"; the similar provision in Section 112 of the Act has to be strictly construed and confined to goods which are expressly prohibited from being imported into the country .

The impugned order, insofar as it imposes a penalty on either petitioner based on the value of the goods, was set aside and the matter remanded for such limited purpose for the imposition of such other quantum of penalty that may be permissible.

The Writ Petitions were allowed to the limited extent as above.

(See 2016-TIOL-925-HC-KOL-CUS)