2025 (7) TMI 578 - HC - Customs

Rectification of the mistake - appeal was not maintainable before the Tribunal - Section 129B(2) of Customs Act 1962 - whether the Tribunal could have dismissed the miscellaneous application filed under Section 129B(2) of the Act as the Department has raised issue regarding the jurisdiction of the Tribunal? - Smuggling of Gold - HELD THAT - The appeal is admitted on the substantial questions of law. Till the appeal is heard and decided the order dated 24th October 2024 passed by the Tribunal shall remain stayed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

i) Whether the Customs Excise and Service Tax Appellate Tribunal (Tribunal) had jurisdiction to entertain and decide the appeal filed by the respondent under Section 130 of the Customs Act, 1962, given the proviso to Section 129A(1) which bars appeals to the Tribunal against orders passed by the Commissioner (Appeals) relating to goods imported or exported as baggage, especially when the case concerns smuggling of gold secreted inside a passenger's body and thus falls under baggage as per Rule 3(b) of the Baggage Rules, 2016.

ii) Whether the Tribunal erred in law and on facts by holding that the gold smuggled was not a prohibited item and could be released on payment of duty, redemption fine, and penalty, despite the import of gold being regulated under the Foreign Exchange Management Act (FEMA), 1999, Foreign Exchange Management (Current Account Transaction) Rules, 2000, and the Foreign Trade (Development and Regulation) Act, 1992, and the Customs Act, 1962, which allow imposition of restrictions and prohibitions on import of gold.

iii) Whether the Tribunal erred in not appreciating that the respondent failed to declare the gold as required under the Customs Baggage Declaration Regulations, 2013 read with the Baggage Rules, 2016, and did not fulfill eligibility criteria under Notification No. 50/2017-Customs dated 30.06.2017, and that the smuggled gold qualifies as prohibited goods under Section 2(33) of the Customs Act, 1962, and hence cannot be released by Customs.

iv) Whether the Tribunal acted without jurisdiction and contrary to law in entertaining and deciding the appeal on merits, despite the statutory bar under the proviso to Section 129A(1) of the Customs Act.

v) Whether the Tribunal erred in dismissing the rectification application filed by the revenue under Section 129B(2) of the Customs Act, which sought to correct the patent error of jurisdiction apparent on the face of the record in the Tribunal's order dated 24.10.2024.

vi) Whether the Tribunal erred in not following its own earlier decisions and relevant Supreme Court precedents which establish that non-compliance with import conditions renders goods prohibited and that restrictions on import constitute prohibitions, thereby classifying the seized gold as prohibited goods.

vii) Whether the impugned orders dated 24.10.2024 and 22.04.2025 are non-est and not maintainable as the order dated 24.10.2024 was passed without jurisdiction and the subsequent order dated 22.04.2025 failed to appreciate this fundamental jurisdictional defect.

2. ISSUE-WISE DETAILED ANALYSIS

Issue i & iv & v & vii - Jurisdiction of the Tribunal to entertain the appeal and rectification application

Relevant legal framework and precedents: The proviso to Section 129A(1) of the Customs Act, 1962 explicitly bars appeals to the Tribunal against orders passed by the Commissioner (Appeals) relating to goods imported or exported as baggage. Rule 3(b) of the Baggage Rules, 2016 defines baggage and includes goods carried by passengers. Section 129B(2) allows rectification of mistakes apparent from the record by the Tribunal.

Court's interpretation and reasoning: The Court examined whether the Tribunal had jurisdiction to entertain the appeal filed by the respondent, given the statutory bar on appeals relating to baggage. The gold was smuggled by the respondent concealed in his body and personal effects, falling squarely within the definition of baggage. The Court held that the proviso to Section 129A(1) precludes the Tribunal from entertaining appeals against orders relating to baggage. Therefore, the Tribunal acted without jurisdiction in deciding the appeal on merits. Further, the rectification application filed by the revenue sought to correct this jurisdictional error, which was a mistake apparent on the face of the record. The Tribunal's dismissal of this rectification application was erroneous.

Key evidence and findings: The Tribunal's order dated 24.10.2024 allowed the respondent's appeal and directed release of gold with conditions. The revenue filed a rectification application under Section 129B(2) pointing out the jurisdictional bar. The Tribunal dismissed the rectification application without proper appreciation of the statutory bar.

Application of law to facts: Since the gold was smuggled as baggage, appeals against orders passed by Commissioner (Appeals) in such cases are barred from being entertained by the Tribunal. The Tribunal's entertaining and deciding the appeal was therefore without jurisdiction. The rectification application was a valid remedy to address this error, which the Tribunal wrongly rejected.

Treatment of competing arguments: The respondent's appeal was entertained on merits by the Tribunal. The revenue contended that the appeal was barred by law and the Tribunal lacked jurisdiction. The Court sided with the revenue, emphasizing the statutory bar and the need to uphold jurisdictional limits.

Conclusions: The Tribunal lacked jurisdiction to entertain the appeal relating to baggage and erred in deciding the appeal on merits. The rectification application was rightly filed and ought to have been allowed. The impugned orders are non-est and not maintainable.

Issue ii & iii & vi - Whether the gold was prohibited goods and the regulatory framework governing import of gold

Relevant legal framework and precedents: Import of gold is regulated under Section 5 of the Foreign Exchange Management Act (FEMA), 1999 and the Foreign Exchange Management (Current Account Transaction) Rules, 2000. The Reserve Bank of India (RBI) issues Master Directions on import of goods, including gold. Section 9A of the Foreign Trade (Development and Regulation) Act, 1992 empowers the government to impose quantitative restrictions on imports. Sections 11(2)(f) and 11(3) of the Customs Act, 1962 allow imposition of restrictions on import of goods. Section 2(33) of the Customs Act defines prohibited goods. The Supreme Court in Om Prakash Bhatia v. Commissioner of Customs held that non-compliance with prescribed conditions renders goods prohibited. In Sheikh Mohd. Omer v. Collector of Customs, the Court held that even restrictions on import amount to prohibitions.

Court's interpretation and reasoning: The Court analyzed the regulatory regime controlling import of gold and found that the import of gold is subject to stringent conditions and restrictions. The respondent had not declared the gold as required under the Customs Baggage Declaration Regulations, 2013 and Baggage Rules, 2016, nor fulfilled eligibility conditions under Notification No. 50/2017-Customs. Therefore, the gold was smuggled and constituted prohibited goods under Section 2(33) of the Customs Act. The Tribunal erred in holding that the gold was not prohibited and could be released on payment of duty and penalty.

Key evidence and findings: The gold was concealed inside the respondent's body and personal effects and was not declared. The regulatory framework clearly mandates declaration and compliance with import restrictions. The Tribunal's order contradicts established legal principles and precedent.

Application of law to facts: Non-declaration and concealment of gold violate the Customs Baggage Declaration Regulations and Baggage Rules, rendering the gold prohibited goods. The import restrictions imposed by FEMA, RBI Master Directions, and Customs Act further support this classification. The seized gold is liable for confiscation and cannot be released.

Treatment of competing arguments: The respondent argued that the gold was not prohibited and could be released on payment of duty and penalty. The revenue relied on statutory provisions and precedents to assert that the gold was prohibited and smuggled. The Court upheld the revenue's position.

Conclusions: The gold concealed by the respondent was prohibited goods under the Customs Act. The import restrictions and regulatory framework were not complied with, making the gold liable for confiscation. The Tribunal's contrary conclusion was erroneous.

3. SIGNIFICANT HOLDINGS

"The proviso to Section 129A(1) of the Customs Act, 1962 explicitly bars appeals to the Tribunal against orders passed by the Commissioner (Appeals) relating to goods imported or exported as baggage. The gold smuggled by the respondent, being concealed in his body and personal effects, falls within the definition of baggage as per Rule 3(b) of the Baggage Rules, 2016. Therefore, the Tribunal lacked jurisdiction to entertain and decide the appeal on merits."

"Non-compliance with the prescribed conditions for import of gold, including failure to declare the goods as per Customs Baggage Declaration Regulations, 2013 and Baggage Rules, 2016, renders such goods prohibited under Section 2(33) of the Customs Act, 1962. Import restrictions imposed under FEMA, RBI Master Directions, and the Customs Act constitute prohibitions, and smuggled gold is liable for confiscation."

"The rectification application filed under Section 129B(2) of the Customs Act to correct the jurisdictional error apparent on the face of the record ought to have been allowed. The Tribunal erred in dismissing the same."

"The impugned orders dated 24.10.2024 and 22.04.2025 are non-est and not maintainable as the Tribunal acted without jurisdiction in entertaining the appeal and deciding on merits, contravening the statutory bar under the proviso to Section 129A(1) of the Customs Act."