2025 (5) TMI 1930 - AT - Customs

Smuggling - Violation of the Cigarettes and Other Tobacco Products Act 2003 (COPTA) - consignments of foreign brand cigarettes from North-East to Mumbai - Confiscation of the Imported foreign origin cigarettes illegally brought into India under Section 111(d) and 111(i) of the Customs Act 1962 - HELD THAT - On combined reading of the ITC-HS policy conditions for cigarettes and the provisions of COPTA it is very clear that imports of cigarettes are subject to the regulations framed under COPTA inter alia for display of pictorial warnings and other statutory information to be mentioned in the package containing cigarettes. These provision shall also apply to the licit of import of cigarettes. It is a fact on record that in respect of the imported cigarettes these have been imported in violation of COPTA and import policy inasmuch as the packages of the cigarettes do not contain or display the requisite mandatory details. Therefore in my considered opinion there is clear violation of the provision of Section 111(d) of the Customs Act 1962 in the present case. The facts on record clearly provide that the consignment was booked for delivery to the consignor i.e. Shri Sarup Singh on the advice of Shri Manish Naobatram Gupta as evidenced in Air way bill relating to the impugned consignment. No other record or evidence has been produced to state that the appellants are the passengers arriving in India who had brought the imported cigarettes in an illegal manner and forwarded the same from Kolkata to Mumbai in the said consignment. Therefore it is clear that the imported goods in the present case though having contravened the provisions of Section 111(d) ibid and Section 111(i) ibid it cannot be said that the appellants are the passengers to saddle with the penalty for having done any act or omission to do any act under Section 112(a) ibid. On the other hand since the appellants have received the foreign origin cigarettes in the past cases and in the present case were about to receive the same for distribution or sale in an illegal manner they are rightly liable for imposition of penalty under Section 112(b) ibid. To the above extent I find that the impugned order confirming the adjudged demands of penalty under Section 112(a) ibid on the appellants is legally not sustainable. Thus I am of the considered view that the penalty imposed on the appellants in the original order dated 13.03.2018 and confirmed in the impugned order dated 29.03.2019 is reduced to the extent of Rs.1, 75, 000/- on Shri Sunil Subrammanian and Rs.75, 000/- on Shri Suneesh A.K. being the penalty imposable under Section 112(b) of the Customs Act 1962 for their role played in relation to the illegal import of foreign origin cigarettes. In the result by partially modifying the impugned order dated 29.03.2019 I partly allow the appeals filed by the appellants in their favour as above.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the imported foreign origin cigarettes, found to be in violation of the Cigarettes and Other Tobacco Products Act, 2003 (COPTA), and the relevant import policy, are liable for confiscation under Section 111(d) and 111(i) of the Customs Act, 1962.
• Whether the appellants, who are not shown to be the passengers importing the goods but are involved in receipt and onward transportation, can be held liable for penalty under Section 112(a) and/or Section 112(b) of the Customs Act, 1962.
• Whether the appellants discharged their burden under Section 123 of the Customs Act, 1962, to prove that the seized goods were not smuggled.
• The quantum and applicability of penalty under the Customs Act, 1962, with respect to the appellants' role in the illegal import and distribution chain of the cigarettes.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability of the imported cigarettes for confiscation under Section 111(d) and 111(i) of the Customs Act, 1962

Relevant legal framework and precedents: Section 111(d) provides for confiscation of goods imported contrary to any prohibition imposed under the Customs Act or any other law. Section 111(i) covers confiscation of dutiable or prohibited goods found concealed in any package. The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COPTA) regulates import of cigarettes, mandating statutory packaging requirements such as pictorial warnings.

Court's interpretation and reasoning: The Tribunal noted that the imported cigarettes did not conform to the mandatory packaging and labeling requirements under COPTA and were thus imported in violation of the law. The cigarettes were foreign brand and lacked the required statutory information, making the import illegal. The Tribunal held that the imported goods are liable for confiscation under Section 111(d) as the import contravened the prohibition under COPTA. Further, as the cigarettes were concealed in white plastic bags and cardboard boxes, Section 111(i) also applied.

Key evidence and findings: The Air Intelligence Unit intercepted the consignment, physically examined it in presence of witnesses, and found 300,000 cigarette sticks without proper statutory markings. No valid import documents were produced by the persons receiving the consignment.

Application of law to facts: The cigarettes were imported in violation of COPTA and the import policy. Hence, confiscation under Section 111(d) and (i) was justified.

Treatment of competing arguments: The appellants did not contest the illegal import aspect but challenged the imposition of penalty on them as 'passengers' under Section 112(a).

Conclusions: The Tribunal affirmed the confiscation of the cigarettes under Section 111(d) and (i).

Issue 2: Liability of appellants for penalty under Section 112(a) and/or 112(b) of the Customs Act, 1962

Relevant legal framework and precedents: Section 112(a) penalizes any person who does or omits any act which renders goods liable for confiscation or abets such act. Section 112(b) penalizes persons who acquire possession or are concerned in carrying, removing, harboring, keeping, concealing, selling or dealing with such goods, knowing or having reason to believe them to be liable for confiscation.

Court's interpretation and reasoning: The Tribunal analyzed whether the appellants could be considered 'passengers' liable under Section 112(a). It found no evidence that the appellants physically brought the goods into India or were passengers responsible for import. The consignment was booked in the name of another person (Shri Sarup Singh). However, the appellants were involved in receiving the cigarettes from the consignee and arranging onward transportation for illegal distribution.

The Tribunal held that the appellants cannot be held liable under Section 112(a) as passengers but are liable under Section 112(b) for dealing with smuggled goods. The appellants' role in receiving and forwarding the cigarettes for distribution demonstrated their involvement in dealing with goods liable to confiscation.

Key evidence and findings: Statements and investigation revealed that the appellants received cigarettes in past consignments and were involved in booking parcels for onward transportation to other cities. No documents were produced to show licit import or lawful possession.

Application of law to facts: Since the appellants were not passengers importing the goods but were involved in handling and forwarding smuggled goods, penalty under Section 112(b) was applicable, but not under Section 112(a).

Treatment of competing arguments: The appellants challenged their classification as passengers liable under Section 112(a). The Tribunal agreed with this contention and reduced the penalty accordingly.

Conclusions: Penalty under Section 112(a) was not sustainable against the appellants; however, penalty under Section 112(b) was justified.

Issue 3: Burden of proof under Section 123 of the Customs Act, 1962

Relevant legal framework and precedents: Section 123 places the burden of proving that seized goods are not smuggled on the person from whose possession the goods were seized or the owner. Cigarettes are notified goods under Section 123(2), thus attracting this burden.

Court's interpretation and reasoning: The Tribunal noted that the appellants failed to produce any valid documents or evidence to prove that the cigarettes were lawfully imported or not smuggled. Hence, they failed to discharge the burden imposed under Section 123.

Key evidence and findings: Absence of valid import documents and the investigation findings showing illegal import and distribution.

Application of law to facts: The appellants' failure to discharge the burden under Section 123 supported the confiscation and penalty.

Treatment of competing arguments: The appellants did not provide evidence to rebut the presumption of smuggling.

Conclusions: The appellants were rightly held liable as they failed to prove lawful possession of the goods.

Issue 4: Quantum of penalty and final determination

Relevant legal framework and precedents: Section 112 provides for penalty not exceeding the value of the goods or Rs. 5,000 whichever is greater, for prohibited goods.

Court's interpretation and reasoning: The original penalty imposed on Shri Sunil Subramaniam was Rs. 3,50,000 and on Shri Suneesh A.K. Rs. 1,50,000 under Section 112(a) and (b). The Tribunal found penalty under Section 112(a) unsustainable and reduced the penalty to Rs. 1,75,000 on Shri Sunil Subramaniam and Rs. 75,000 on Shri Suneesh A.K., under Section 112(b) only.

Key evidence and findings: The appellants' involvement in receiving and forwarding smuggled cigarettes justified penalty under Section 112(b).

Application of law to facts: Reduction of penalty was warranted as the appellants were not passengers importing the goods but were involved in dealing with smuggled goods.

Treatment of competing arguments: The Tribunal accepted the appellants' contention regarding non-applicability of Section 112(a) penalty.

Conclusions: Penalty was partially modified and reduced accordingly.

3. SIGNIFICANT HOLDINGS

"Plain reading of the above legal provisions clearly indicate that imported goods are liable for confiscation under Section 111 (d) of the Customs Act, 1962, only if 'import' of such goods are prohibited or contrary to the prohibition imposed under the relevant legislation is in force. Similarly, if the imported goods are found concealed in any package so as to enable its smuggling, then such goods are liable for confiscation under Section 111(i) ibid."

"It cannot be said that the appellants are the 'passengers' to saddle with the penalty for having done any act or omission to do any act under Section 112(a) ibid. On the other hand, since the appellants have received the foreign origin cigarettes in the past cases and in the present case, were about to receive the same for distribution or sale in an illegal manner, they are rightly liable for imposition of penalty under Section 112(b) ibid."

"The appellants have not provided any credential evidence to prove their innocence to state that they are not in any way concerned with the smuggling of foreign origin cigarettes in violation of the COPTA."

"The penalty imposed on the appellants in the original order dated 13.03.2018 and confirmed in the impugned order dated 29.03.2019, is reduced to the extent of Rs.1,75,000/- on Shri Sunil Subrammanian, and Rs.75,000/- on Shri Suneesh A.K., being the penalty imposable under Section 112(b) of the Customs Act, 1962 for their role played in relation to the illegal import of foreign origin cigarettes."

The Tribunal finally determined that the imported cigarettes were liable for confiscation under Sections 111(d) and 111(i) of the Customs Act, 1962, due to violation of COPTA and concealment. The appellants were not liable for penalty under Section 112(a) as passengers importing the goods but were liable under Section 112(b) for dealing with smuggled goods. The appellants failed to discharge their burden under Section 123 to prove lawful possession. Accordingly, the penalty was partially modified and reduced to reflect their actual role in the illegal import and distribution chain.