2025 (7) TMI 1555 - HC - Customs

Maintainability of petition - availability of alternative remedy - Absolute Confiscation - penalty - smuggling of cigarettes and photocopier machines of foreign origin was being carried out under the guise of aluminium scrap from foreign countries - HELD THAT - The facts recorded by the Adjudicating Authority also reveal a much more active role played by Mr. Rajesh Gadiya in terms of sending and forwarding e-mails making calls enabling documentation etc. The most incriminating circumstance which in such an investigation ought to go completely against Mr. Rajesh Gadiya is the destruction of all the e-mails and the destruction of the mobile phones which he admits. The Supreme Court in M/s Telestar Travels Pvt. Ltd. v. Special Director of Enforcement 2013 (2) TMI 396 - SUPREME COURT has clearly laid down the position that whenever a party demands the right to cross examination the authority concerned has to look at what is the prejudice that could be caused to the said party if the cross examination is not permitted. In the present case all the parties were known to each other. Mr. Rajesh Gadiya had introduced the supplier to the importer i.e. Mr. Suresh Malik. Mr. Rajesh Gadiya is a person who is in the trade and is aware of all the happenings in the trade. Mr. Rajesh Gadiya has also prima facie enabled and facilitated the documentation for the said import - The entire scheme of things as per the Adjudicating authority which was devised by these persons was to indulge in smuggling so as to avoid payment of customs duty and loss to the exchequer. In the opinion of this court there is no violation of the principles of natural justice. None of the conditions for entertaining a writ petition as per the decision in Commercial Steel Ltd. 2021 (9) TMI 480 - SUPREME COURT are satisfied. Under these circumstances this is not a fit case for entertaining a writ petition under Article 226 of the Constitution of India. There is a full-fledged substantial appellate remedy that is provided under the statute to the Petitioners - Accordingly the Petitioners ought to avail of its appellate legal remedy as per law. However the limitation period for filing of the appeal under Section 129A of the Customs Act 1962 is a period of three months and the said period has already expired. The Court is inclined to permit the Petitioners to file their appeals within one month in which case the appeals shall not be dismissed on the ground of limitation and shall be adjudicated on merits. The said appeals shall be filed along with the requisite pre-deposit - Petition disposed off.

Summary

ISSUES:

Whether the imposition of penalties and confiscation under the Customs Act, 1962 and the Foreign Trade (Development and Regulation) Act, 1992 is justified for smuggling of prohibited and restricted goods disguised as aluminium scrap.Whether statements recorded under Section 108 of the Customs Act, 1962 without granting the right to cross-examination can be relied upon by the Adjudicating Authority.Whether the right to cross-examination is an absolute right in customs adjudication proceedings and under what circumstances it may be denied.Whether destruction of evidence such as emails and mobile phones by a party can be considered as indicative of knowledge and involvement in smuggling activities.Whether a writ petition under Article 226 of the Constitution is maintainable in the presence of an alternative statutory remedy under Section 129A of the Customs Act, 1962.Whether waiver or reduction of pre-deposit for filing an appeal against penalty orders can be granted on the ground of financial incapacity or the substantial amount of penalty imposed.

RULINGS / HOLDINGS:

The Court upheld the imposition of penalties and absolute confiscation of goods under Sections 111(d), 112(a)(i), 114AA, and other relevant provisions of the Customs Act, 1962, finding that the parties were involved in deliberate smuggling of prohibited and restricted goods disguised as aluminium scrap.The Court held that statements recorded under Section 108 of the Customs Act, 1962 can be relied upon even if cross-examination is not granted, provided the circumstances are exceptional and the party is not prejudiced; the right to cross-examination is not an unfettered right but depends on the facts and necessity to prevent prejudice.The Court denied the request for cross-examination of co-noticees, emphasizing that such requests must be supported by cogent reasons and cannot be used to subvert the adjudication process; cross-examination of co-noticees who may incriminate themselves is not permissible.The destruction of emails and mobile phones by a party was held to be a clear indication of awareness and involvement in smuggling activities, amounting to destruction of material evidence under Section 201 of the Indian Penal Code.The Court held that the writ petitions under Article 226 were not maintainable as none of the exceptional grounds such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to vires of statute were established; the petitioners were directed to avail the statutory appellate remedy under Section 129A of the Customs Act, 1962.The Court granted limited waiver of pre-deposit for one petitioner considering the substantial value of the consignment and penalties imposed, permitting filing of appeals within one month subject to a total pre-deposit of Rs. 1 Crore; no waiver was granted to the other petitioner.

RATIONALE:

The Court applied the provisions of the Customs Act, 1962, particularly Sections 111(d) (confiscation), 112(a)(i) (penalty for knowingly importing prohibited goods), 114AA (penalty for false declaration), and Section 119 (confiscation for concealment), along with Section 3 of the Foreign Trade (Development and Regulation) Act, 1992.The Court relied on precedents including J&K Cigarettes Ltd. (2009), Sushil Aggarwal v. Principal Commissioner of Customs, and M/s Telestar Travels Pvt. Ltd. v. Special Director of Enforcement, which clarify that the right to cross-examination in adjudication proceedings under customs law is not absolute but contingent upon demonstration of prejudice and necessity.The Court emphasized that cross-examination requests must be specific and justified, rejecting blanket or vague requests, and noted that co-noticees cannot be compelled to participate in proceedings that may incriminate themselves, citing N.S. Mahesh vs. Commissioner of Customs.The Court observed that the destruction of evidence by a party is a strong indicator of culpability and supports imposition of penalties and confiscation.The Court followed the principle that writ jurisdiction under Article 226 is discretionary and should not be exercised where effective alternate statutory remedies exist, referencing the Supreme Court's decision in The Assistant Commissioner of State Tax & Ors. v. M/s Commercial Steel Limited.The Court exercised discretion in granting partial waiver of pre-deposit based on the substantial financial burden and consignment value, balancing the need for compliance with procedural safeguards and access to appellate remedies.