2025 (5) TMI 420 - AT - Customs

Absolute confiscation - levy of penalty and quantum thereof - black pepper of foreign origin - violation of Section 46 of the Customs Act 1962 through routes that were not notified under Section 7(c) of the Customs Act - HELD THAT - The alleged intermediary Ashish planted by the appellant could never be traced nor his whereabouts ascertained. Even the appellant who had allegedly placed order for supply of 20-22 MTs black pepper on said Ashish could not intimate his whereabouts including phone number. It is thus likely that there may be no existing person of the said description and it is only stated as a fa ade to protect the appellant. Even the investigating agencies could not lay its hand on said Ashish nor Pravin Kasera for whom said Ashish was meant to supply the goods led the authorities to any of his details. The fact of having placed order for procurement of 20-22 tons by a fictitious person is clever ploy by the appellant to extricate himself of consequential liabilities. The appellant could not produce even a single piece of evidence to support his contention that they had placed order on the said person named Ashish who in turn had allegedly informed the appellant about the seizure. With no formal orders or no payments having been made and with no details about Ashish the version of the appellant is difficult to be believed. That being so if Ashish was a real person upon whom the appellant had placed order for supply of said black pepper it belies logic as to why the appellant was/is not familiar with the whereabouts of the person who promised to deliver such large quantity of the said goods. From the facts of the case it is evidently established that the appellant was well aware as to where the black pepper is being procured from and how it was required to be transported to prevent detention. It is not tenable that the import of such huge quantity of black pepper worth crores of rupees would be made by an unknown seller without receiving any payment from the purchaser. No prudent businessmen would deal and carry out such activities to/from unknown buyers and risk huge quantity of goods. Conclusion - There are no reason justifying non-imposition of penalty on the appellant. Mens rea on part of the appellant and his intent for smuggling of large quantities of black pepper evading duty payment is established. The onus to support his version about Ashish by furnishing his details was on the appellant which has not been discharged. There is no payment proof of licit acquisition of the said goods. The confiscation of goods calls for no interference. There being no real owner/claimant of seized goods the absolute confiscation of smuggled black pepper is in order. The appellant by his contumacious conduct has indeed rendered himself liable for imposition of penalty. A penalty of Rs. 1, 00, 000/- on the appellant would meet the ends of justice. The Order of the lower authority is thus upheld and modified only to the aforesaid extent qua the appellant - Appeal allowed in part.

Summary

The core legal questions considered by the Tribunal in this appeal revolve around the following issues:

1. Whether the black pepper seized was smuggled goods liable to confiscation under the Customs Act, 1962.

2. Whether the appellant had mens rea or knowledge regarding the smuggled nature of the seized goods.

3. Whether the penalty imposed on the appellant under Section 112 of the Customs Act was justified and appropriate in quantum.

4. Whether the appellant's contention of ignorance and lack of involvement in smuggling could absolve him from penalty liability.

Issue 1: Smuggling and Confiscation of Goods

The relevant legal framework includes Section 46 of the Customs Act which mandates lawful import through notified routes, and Sections 111(b) and (d) which provide for confiscation of goods imported in contravention of the Act. The Department seized 22,120 kgs of black pepper of foreign origin, marked as "Produce of Vietnam," found concealed under flattened paper cartons without any documents evidencing lawful import. The goods were intercepted on non-notified routes and thus prima facie smuggled.

The Court noted that the smuggled nature of the black pepper was undisputed and established on record. The absence of any import documentation and concealment tactics confirmed violation of customs laws. The confiscation of the goods was therefore upheld as per statutory provisions. The Court applied the law to the facts, concluding that absolute confiscation was warranted given the illicit importation and absence of any legitimate claimants.

Issue 2: Mens Rea and Knowledge of the Appellant

The appellant claimed ignorance about the smuggled nature of the goods and denied any mens rea or involvement in smuggling. He asserted that he had placed an order for supply of black pepper through a broker named Ashish, whose whereabouts were unknown, and that no payment was made prior to seizure. The appellant contended that the penalty imposed was unjustified due to lack of culpability.

The Tribunal critically examined these claims against the evidence. The investigating officers could not trace the alleged broker Ashish, nor could the appellant provide any contact details or proof of transaction. The Court found the appellant's story to be a "clever ploy" and a facade to evade liability. It held that the appellant's failure to produce any corroborative evidence or payment proof undermined his plea of innocence.

The Court emphasized that the appellant's conduct, including personally inquiring about the seized goods without prior notice, indicated his real interest and benefit from the goods. The appellant's admission of previous commercial dealings with Ashish further negated his claim of ignorance. The Tribunal concluded that the mens rea was established, and the appellant was aware of the smuggled nature of the goods and their illicit transportation.

Issue 3: Justification and Quantum of Penalty

The penalty was imposed under Section 112 of the Customs Act for dealing with smuggled goods. The appellant challenged the quantum, arguing it was excessive and unjustified given his claimed ignorance.

The Tribunal acknowledged the appellant's plea but found no merit in it due to the established mens rea and deliberate evasion tactics. However, considering the entire factual matrix and the appellant's conduct, the Tribunal exercised its discretion to reduce the penalty from Rs. 10,00,000/- to Rs. 1,00,000/-. The Tribunal reasoned that this quantum would meet the ends of justice while reflecting the gravity of the offense and the appellant's involvement.

The Court thus modified the penalty order to the extent mentioned but upheld the confiscation and the imposition of penalty in principle.

Issue 4: Appellant's Claim of Ignorance and Lack of Involvement

The appellant's defense rested on the assertion that he neither knew nor participated in smuggling and that the broker Ashish was a separate entity responsible for the transaction.

The Tribunal found this argument unsubstantiated and contradicted by the facts. The inability to produce any evidence about Ashish, the lack of payment records, and the appellant's own admissions indicated complicity. The Court held that the appellant's version was a tactical attempt to mislead investigations and avoid liability.

Accordingly, the claim of ignorance was rejected as baseless and insufficient to absolve the appellant from penalty or confiscation consequences.

Significant Holdings

"The smuggled nature of black pepper has not been disputed and stands established from records."

"The appellant could not produce even a single piece of evidence to support his contention that they had placed order on the said person named Ashish... it belies logic as to why the appellant was/is not familiar with the whereabouts of the person who promised to deliver such large quantity of the said goods."

"This story was made out by way of tactics on the part of the appellant, to render the investigations directionless. The establishment of mens rea on the part of the appellant is therefore evident."

"The appellant by his contumacious conduct has indeed rendered himself liable for imposition of penalty."

"Considering, however the entire factual matrix, we are of the view that in the given circumstances, a penalty of Rs. 1,00,000/- on the appellant would meet the ends of justice."

The Tribunal established the core principles that smuggled goods are liable to absolute confiscation, and persons involved with knowledge or intent in such smuggling are liable for penalty under the Customs Act. Mere claims of ignorance without evidence do not absolve liability. The burden lies on the accused to prove innocence and legitimate acquisition, failing which penalty and confiscation orders stand.

In conclusion, the Tribunal upheld the confiscation of the seized black pepper as smuggled goods and confirmed the imposition of penalty on the appellant for his complicity and mens rea. The penalty quantum was moderated to Rs. 1,00,000/- to balance justice with the facts of the case.