2025 (5) TMI 1628 - AT - Customs

Smuggling - Appropriateness of penalties under Section 112 (a) and 112 (b) and 117 - Seizure of gold bars - sales proceeds - firm is licenced for sale and purchase of currency - Order of confiscation of gold and Indian currency - HELD THAT - The two prime accused Rahul Khanna and Luv Kush alongwith other co-accused could not produce any document in support of valid acquisition of foreign marked gold. They also were not able to satisfy the licit procurement of Indian currency seized under the belief of being the sale proceeds of smuggled gold. As emanates from the findings Rahul Khanna Luv Kush Pandey and Mohan Lal Agarwal hatched a conspiracy to smuggle gold from Nepal to India. As per plan Mohan Lal Agarwal would deliver smuggled gold through his personnel to Shyam Sunder Mishra and others deputed by Rahul Khanna at Panitanki Siliguri or other nearby area on the border. This gold was then required to be brought to Delhi by Shyam Sundar Mishra by train and delivered to Luv Kush Pandey. Rahul Khanna would then arrange sale of the smuggled gold through one Vinod Bhagat in and around Delhi. It was as per the directions of Rahul Khanna that Luv Kush Pandey would deliver the smuggled gold to Vinod Bhagat who would hand over the sale proceeds to Rahul Khanna Luv Kush Pandey as per the directions of Rahul Khanna. It is Rahul Khanna who through his representatives would transmit the sale proceeds of smuggled gold to Mohan Lal Agarwal or his representative. Thus a complex web of acquisition possession and sale of smuggled gold is evident in the whole scheme of things involving several people including the appellants herein. Looking into the role play as brought out in the Show Cause Notice and as noted in the adjudication order the fact of challenge to confiscated gold and Indian currency having been given up we feel that the ends of justice will be met by reducing the aforesaid penalties imposed. The appeals stand disposed off in the aforesaid terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

- Whether the penalties imposed under Sections 112(a), 112(b), and 117 of the Customs Act, 1962 on the appellants for their involvement in smuggling and dealing with smuggled gold and proceeds thereof were appropriate and justified.

- The extent of each appellant's role and culpability in the smuggling conspiracy and whether leniency in penalties was warranted.

- The legal basis and scope of penalties under Sections 112 and 117 of the Customs Act in cases involving smuggling of prohibited goods and dealing with proceeds of such goods.

- The propriety of the Adjudicating Authority's rejection of the appellants' belated retractions and their reliance on statements recorded under Section 108 of the Customs Act.

- The Tribunal also considered the appellants' abandonment of challenge to confiscation of gold and currency, limiting the appeal to the question of penalties only.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Appropriateness of penalties under Sections 112(a) and 112(b) of the Customs Act for dealing with smuggled goods

The legal framework under Section 112(a) and (b) penalizes persons who do or omit acts rendering goods liable to confiscation or who acquire possession or deal in goods known or believed to be liable to confiscation under Section 111. The penalties vary depending on whether goods are prohibited or dutiable, and the value or duty involved.

The Court emphasized that the seized goods, i.e., foreign marked gold bars and cut pieces, were prohibited goods liable to confiscation under Section 111. The appellants were found to have been involved in carrying, harbouring, and dealing with these goods.

Investigations revealed a conspiracy involving multiple accused including Rahul Khanna, Luv Kush Pandey, and Mohan Lal Agarwal, with the appellants Shyam Sundar Mishra and Sanjay Mishra acting as carriers or agents executing directions for collection and transportation of smuggled gold from Nepal into India.

The Court relied on evidence including statements recorded under Section 108 of the Customs Act, call detail records (CDR), and recovery of Indian currency believed to be sale proceeds of smuggled gold. The appellants' attempts to retract their original statements were dismissed as belated and mechanical, lacking credibility.

The Court applied the statutory provisions to the facts, holding that the appellants knowingly dealt with smuggled gold and were liable for penalties under Section 112(a) and (b). The role of each appellant was assessed based on their involvement and degree of participation in the smuggling chain.

Competing arguments by the appellants seeking leniency on the ground of limited role were considered but rejected to the extent of the original penalties. However, the Tribunal found the penalties imposed by the Adjudicating Authority to be excessive and disproportionate to the role played by each appellant.

Issue 2: Penalty under Section 117 of the Customs Act on Kiran Forex Pvt. Ltd.

Section 117 provides for penalties up to Rs. 4 lakh for contraventions not expressly covered by other penalty provisions. Kiran Forex Pvt. Ltd., a licensed currency dealer, was found involved in the conspiracy as the company owned by Rahul Khanna, one of the prime accused.

The company was implicated due to recovery of Indian currency from its premises and association with the smuggling network. The Tribunal held that the company was liable for penalty under Section 117 for failure to comply with the provisions of the Customs Act.

While the Adjudicating Authority imposed a penalty of Rs. 1 lakh, the Tribunal considered the company's role and the overall facts and reduced the penalty to Rs. 15,000, deeming it sufficient to meet ends of justice.

Issue 3: Appropriateness of reduction of penalties and the principle of proportionality

The Tribunal noted that the appellants had abandoned challenge to confiscation of the gold and currency, focusing solely on the penalties imposed. Considering the facts, role of each appellant, and the principles of proportionality and fairness, the Tribunal found the original penalties excessive.

The reduction was based on the extent of involvement: Rahul Khanna as the prime conspirator received the highest penalty, followed by Luv Kush Pandey, with the carriers Shyam Sundar Mishra and Sanjay Mishra receiving substantially lower penalties reflecting their subordinate roles.

The Tribunal's approach balanced deterrence against excessive punishment, ensuring penalties were commensurate with culpability while upholding the statutory mandate to penalize smuggling-related offenses.

3. SIGNIFICANT HOLDINGS

- The Court held that "the appellants knowingly dealt with smuggled gold and were liable for penalties under Section 112(a) and (b) of the Customs Act, 1962."

- The Tribunal affirmed the validity and reliability of statements recorded under Section 108 of the Customs Act and rejected belated retractions as "a mechanical and a futile attempt for escaping the clutches of law."

- It was established that the conspiracy involved a "complex web of acquisition, possession and sale of smuggled gold," with distinct roles for each accused, warranting differentiated penalties.

- On the principle of proportionality, the Tribunal stated that "the ends of justice will be met by reducing the aforesaid penalties imposed," reflecting a calibrated approach to punishment.

- Final penalties imposed were:

o Rahul Khanna: Rs. 3,50,000 under Sections 112(a) & (b)(i & ii)

o Luv Kush Pandey: Rs. 2,00,000 under Sections 112(a) & (b)(i & iii)

o Shyam Sundar Mishra: Rs. 25,000 under Section 112(b)(ii)

o Sanjay Mishra: Rs. 15,000 under Section 112(b)(ii)

o Kiran Forex Pvt. Ltd.: Rs. 15,000 under Section 117

- The Tribunal's decision underscores that penalties under the Customs Act must reflect the nature and degree of involvement in smuggling activities, ensuring justice without undue harshness.