By TIOL News Service

CHENNAI, OCT 20, 2016: THE 1st respondent, who arrived by Singapore Airlines Flight at Anna International Airport, Chennai, was intercepted by the Officers of the Directorate of Revenue Intelligence, Chennai. On examination of his baggage, 111 broken bits of gold biscuits, totally weighing 2548.3 grams, were found and recovered from certain folding scissor boxes and stapler pin boxes. In addition to other miscellaneous items, they were seized. Gold was valued at Rs.10,34,355/- and other goods were valued at Rs.41,117/-. All the above, were in excess of the declared items. The Adjudicating Authority had ordered absolute confiscation of 111 gold bits weighing 2548.3 grams, valued at Rs.10,34,355/- (MV), under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992. Being aggrieved by the Order-in-Original No.31 of 2000, dated 31.03.2000, the 1st respondent has filed Appeal before CESTAT, Chennai. After hearing the parties, by observing that there is no need for absolute confiscation of the goods, and under Section 125 of the Customs Act, 1962, option for redemption against payment of fine is available to the 1st respondent, in respect of gold also, and that there is no bar against such option, by reason of the goods, being an item notified under Section 123 of the Act, or for any other reasons, vide Final Order No.455 of 2007, dated 20.04.2007, CESTAT, Chennai, held that the 1st respondent ought to have been given the option to redeem gold. So saying, CESTAT, Chennai, has set aside the Order-in-Original No.31 of 2000, dated 31.03.2000, passed by the Commissioner of Customs, Madras-1 and issued positive directions to him, to give option to the 1st respondent, to redeem gold, after determining a reasonable amount of redemption fine. Being aggrieved by the same, instant Civil Miscellaneous Appeal is filed by revenue.

The appellant submitted that the observations of CESTAT that Section 125 of the Customs Act 1962 does not discriminate between gold and other goods, is not correct. It was submitted that the statute confers discretion to be exercised by the authority and the Tribunal cannot direct the said authority, to exercise discretion, in favour of the respondent, in which case, there is nothing for the competent authority to exercise his discretion. The use of the word, 'may' in Section 125 of the Act, confers discretion on the adjudicating authority to pass appropriate orders, depending upon the facts and circumstances of each case.

It was also submitted that when goods are prohibited, then discretion is with the Customs authority to confiscate the same, without giving any option, to pay fine, in lieu thereof and when the goods are not prohibited, then the Customs Authority, has no option, but to allow an option to the owner, to pay a fine in lieu of confiscation. In the case of improper importation of gold, (being prohibited), option, as to whether to release the same, on payment of redemption fine or order for absolute confiscation, is with the exclusive jurisdiction of the concerned authority and on the facts and circumstances of the instant case, when after considering Section 125 of the Customs Act, 1962, a detailed order of confiscation has been passed, on merits, it would not be appropriate to CESTAT, Madras, to remand the matter once again, to consider option.

After hearing both sides and referring to various judgements, the High Court held:

+ Earlier in W.A.No.377 of 2016, dated 28.07.2016, - 2016-TIOL-1664-HC-MAD-CUS on similar lines, the Court has considered a case, under Section 111(d) of the Customs Act, 1962, dealing with provisional release. Instant case deals with Section 125 of the customs act, 1962. The ratio of the same is applicable to this case also.

+ When it is the case of the appellant that 2548.3 grams of gold were concealed and not declared, in contravention of Section 77 of the Customs Act, 1962 and that there was a violation of Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development and Regulations) Act, 1992 and when reference has been made to the Custom Notification No.117/92-Cus., dated 01.03.1992, as amended from time to time and when there was a categorical finding of the adjudicating authority that the respondent had deliberately attempted to smuggle 2548.3 grams of gold, by concealing and without declaration of Customs, for monetary consideration and that gold bits seized were liable for confiscation, under Section 111(d)(i)(l) and (m) of the Customs Act, 1962, r/w. Section 3(3) of the Foreign Trade (Development & Regulation) Act, 1992 and when the 1st respondent was also detained under the COFEPOSA Act, for six months and when the Commissioner of Customs (AIRPORT), had imposed a penalty of Rs.50,000/- (Rupees fifty thousand only), with Section 112(a) of the Customs Act, 1962, it is unfortunate that without due consideration to the above facts and statutory provisions and the categorical finding of the adjudicating authority, the Tribunal has observed that there is no need for absolute confiscation of the goods.

+ One of the contentions raised in the instant case, is that gold is not a prohibited item and therefore, there can be an order to release the same, on payment of redemption fine. While adverting to the substantial question of law, "Whether gold is a prohibited item within the meaning of the provisions of the Customs Act, 1962?" and after considering the statutory provisions under the Customs Act, 1962 and Foreign Trade (Development and Regulations) Act, 1992 and public notices in No.51, dated 27.10.1997 and No.54, dated 04.09.1997, the Hon'ble Division Bench of Calcutta High Court has categorically held that gold is a prohibited item, which comes within the first part of Section 2(33) of the Customs Act.

+ When exercise of discretion is conferred on the adjudicating authority to decide, as to whether, such discretion should be exercised in favour of the importer or any other person, falling under Section 112(b) of the Customs Act, 1962 and when in the case of smuggling or attempted smuggling, goods have been imported, in contravention of the provisions of the Customs Act, 1962 or any other law, for the time being in force, and when a prima facie case of attempt to smuggle the goods, is made out, it is not open to the Tribunal to issue any positive directions to the adjudicating authority, to exercise option in favour of the 1st respondent.

+ In the case on hand, when discretion is conferred on the adjudicating authority, under Section 125 of the Customs Act, 1962, as to whether, gold and other goods seized, should be confiscated absolutely or be permitted to be redeemed on payment of fine, on the facts and circumstances of the case, and considering the statutory provisions and notification, he has ordered absolute confiscation of gold and other goods, used for import and released certain goods on payment of fine and duty. Exercise of discretion has been interfered with by the Tribunal, with a specific direction to give option for redemption, in which event, there is no choice left to the adjudicating authority to act. He has no freedom or liberty to act, according to own will and that he has been compelled to exercise discretion and his power, without control, other than his own judgment.

+ At the time, when discretion is exercised under Section 125 and if any challenge is made under Article 226 of the Constitution of India, the twin test, to be satisfied is "relevance and reason". In the light of the judgments of the Hon'ble Apex Court and applying the same to the facts of this case and testing the discretion exercised by the authority, on both subjective and objective satisfaction, as to why, the goods seized, cannot be released, when smuggling is alleged and on the materials on record, it is held that the discretion exercised by the competent authority, to deny release, is in accordance with law. Interference by the Tribunal is against law and unjustified.

(See 2016-TIOL-2544-HC-MAD-CUS)