2020 (3) TMI 168 - HC - Customs

Smuggling - Gold Chains - prohibited item or not - Baggage Rules - Confiscation - redemption fine - penalty - benefit of Notification No. 31/2003-Cus dated 01.03.2003 - HELD THAT - As per Section 2(39) of the Customs Act 1962 smuggling in relation to any goods means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113 of the Customs Act 1962 - If there was an attempt to smuggle the goods without payment of customs duty by not declaring the same with the customs officials at the Airport the goods are confiscable under Section 111 of the Customs Act 1962. Under Customs Notification No.31/2003-Cus dated 01.03.2003 an eligible passenger of Indian origin is allowed to import upto 10kg of gold provided customs duty is paid in convertible foreign exchange - In this case the petitioner had failed to declare 177 grams of gold carried by him in his pant pocket and only when he was intercepted by the customs officers before he left the port he admitted that he had carried 32 Nos. of gold chain weighing 177 grams for an unknown person to be given to an unknown person for a consideration of Rs. 3000/. Since the petitioner failed to declare gold chains numbering 32 they were confiscated and the petitioner was liable for penalty and redemption fine under Section 112(a) and 125 of the Customs Act 1962. To avail the benefit of the Customs Notification No.31/2003-Cus dated 01.03.2003 the petitioner was not only required to declare the quantity of gold carried by him in person but also was required to pay the customs duty in foreign exchange. This was not done by the petitioner. The imported gold chains were not a prohibited item. The petitioner has attempted to smuggle of the gold chains and/or acted as an accessory for another person. However the benefit of Customs Notification No.31/2003-Cus dated 01.03.2003 has been extended. Penalty under Section 112(ii) of the Customs Act 1962 - HELD THAT - Penalty imposable under Section 112(ii) is subject to penalty Section 114A of the Customs Act 1962. Penalty under Section 114A of the Customs Act 1962 is not attracted. Penalty under Section 112(ii) of the Customs Act 1962 can vary only between 10% of the duty sought to be evaded or Rs. 5, 000/- whichever is higher - Therefore the penalty that could be imposed under Section 112 (ii) of the Customs Act 1962 on the petitioner could not exceed 10% of the duty or Rs. 5000/- whichever is higher. 10% of Rs. 39, 598/- is only Rs. 3, 959/-. Therefore maximum penalty that can be imposed on the petitioner could not exceed of Rs. 5, 000/. I am therefore inclined to modify the penalty to Rs. 5, 000/- from Rs. 18, 000/-. Redemption fine under Section 125 of the Customs Act 1962 - HELD THAT - Redemption fine under Section 125 of the Customs Act 1962 cannot exceed the market value of the confiscated goods less the duty chargeable thereon. Since customs duty sought to be evaded was only Rs. 39, 598/- by the petitioner and he being a firsttime offender having indulged in an attempt to smuggle 177 grams gold chains number of 32 and considering the fact that the benefit of Customs Notification No.31/2003-cus dated 01.03.2003 has been extended to the petitioner and there being no challenge to extension of such benefit to the petitioner the redemption fine of Rs. 1, 55, 000/- appears to be on the higher side - the redemption fine reduced to Rs. 50, 000/- from Rs. 1, 55, 000/-. Appeal allowed in part.

Summary

Issues Involved:
1. Confiscation of gold chains and imposition of redemption fine and penalty.
2. Eligibility for concessional rate of duty under Notification No.31/2003.
3. Validity of the penalty and redemption fine imposed.
4. Reduction of penalty and redemption fine by the appellate authority.
5. Justification for further reduction of penalty and redemption fine.

Issue-wise Detailed Analysis:

1. Confiscation of Gold Chains and Imposition of Redemption Fine and Penalty:
The petitioner carried 32 gold chains weighing 177 grams valued at Rs. 3,84,444/- without declaring them to customs at Chennai Airport, leading to confiscation. The petitioner was asked to pay a redemption fine of Rs. 1,92,000/- under Section 125 of the Customs Act, 1962, and a penalty of Rs. 38,000/- under Section 112(a) of the Customs Act, 1962. The Assistant Commissioner of Customs noted that the petitioner did not declare the goods and lacked foreign currency to pay the duty, indicating an intention to evade duty, thus making the goods liable for confiscation.

2. Eligibility for Concessional Rate of Duty Under Notification No.31/2003:
The petitioner argued eligibility for a concessional rate of duty under Notification No.31/2003 dated 01.03.2003, as he had stayed abroad for more than six months. The Commissioner of Customs (Appeals) acknowledged this eligibility and found no previous offenses against the petitioner, leading to a reduction in the redemption fine and penalty.

3. Validity of the Penalty and Redemption Fine Imposed:
The petitioner contended that the imposition of penalty and redemption fine was unjustified as he was a bona fide importer who purchased the gold chains for his wedding. The respondents argued that the petitioner failed to declare the gold chains, attracting Sections 111(l) and (m) of the Customs Act, 1962. Under Section 77, the petitioner was required to declare the gold, which he failed to do, leading to the confiscation and penalty.

4. Reduction of Penalty and Redemption Fine by the Appellate Authority:
The Commissioner of Customs (Appeals) reduced the redemption fine from Rs. 1,92,000/- to Rs. 1,55,000/- and the penalty from Rs. 38,000/- to Rs. 19,000/-, considering the petitioner's eligibility for the concessional rate of duty and lack of previous offenses. The Revisional Authority upheld this order, leading to the present writ petition.

5. Justification for Further Reduction of Penalty and Redemption Fine:
The court noted that the petitioner admitted to carrying the gold chains without declaration, indicating an intention to smuggle. However, the benefit of Notification No.31/2003 was extended to the petitioner. The court found that the penalty under Section 112(ii) should not exceed 10% of the duty or Rs. 5,000/-, whichever is higher. The maximum penalty was determined to be Rs. 5,000/- instead of Rs. 19,000/-. The redemption fine under Section 125 should not exceed the market value of the confiscated goods less the duty chargeable. Considering the petitioner's first-time offense and the benefit of the notification, the redemption fine was reduced to Rs. 50,000/- from Rs. 1,55,000/-.

Final Judgment:
The court modified the impugned order as follows:
1. The penalty was reduced to Rs. 5,000/-.
2. The redemption fine was reduced to Rs. 50,000/-.
3. The respondents were directed to refund the balance amount of Rs. 1,19,500/- to the petitioner within three months.

The writ petition was disposed of with these observations, and no costs were imposed.