2025 (4) TMI 936 - HC - Customs

Grant of an option to pay fine as per the provisions of Section 125 of the Customs Act 1962 in lieu of confiscation of the seized goods - gold bars weighing more than the permissible limit - prohibited item or not - HELD THAT - All the authorities below have rightly held that the petitioners are not entitled for payment of fine in lieu of confiscation by exercising the power conferred under Section 125 of the Act. Since the decisions relied upon by the learned counsel for the petitioners cited supra are per-incuriam as it has not considered the well settled legal position as held by the Division Bench of this Court in P. Sinnasamy 2016 (9) TMI 879 - MADRAS HIGH COURT this Court is not bound to follow the said decision of the learned Single Judge relied upon by the learned counsel for the petitioners. It is also to be noted that in the decisions relied upon by the learned counsel for the petitioners referred to supra goods involved were gold jewelery imported within the permissible limit and it was not a case of gold bars weighing more than legally permissible limit as in the instant case. Conclusion - The petitioners are not entitled to the option to pay fine under Section 125 given the concealment of gold bars exceeding the permissible limit. The scope of interference by this Court under Article 226 of the Constitution of India does not arise and accordingly the writ petition is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

• Whether the petitioners were entitled to be given the option to pay a fine under Section 125 of the Customs Act, 1962, in lieu of confiscation of the seized goods.
• Whether gold bars weighing more than the permissible limit (1 kg) imported by the petitioners fall under the definition of "prohibited goods" as per Section 2(33) of the Customs Act, 1962.
• The extent of discretion vested in customs authorities under Section 125 of the Act to grant or refuse the option to pay fine depending on the facts and circumstances of the case.
• The applicability and interpretation of relevant notifications issued by the Central Board of Excise and Customs (CBEC) regarding the import of gold by eligible passengers.
• The impact of concealment and non-declaration of goods on the classification of goods as prohibited and on the exercise of discretion under Section 125.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to option to pay fine under Section 125 of the Customs Act

Relevant legal framework and precedents: Section 125 of the Customs Act, 1962, provides that when goods are liable to confiscation, the customs authorities may, at their discretion, allow the person from whom the goods are seized to pay a fine instead of confiscation. The language of the statute employs the term "may," indicating discretionary power rather than a mandatory obligation.

Precedents include the Division Bench judgment in Commissioner of Customs (Air) Vs. P.Sinnasamy, which held that the option to pay fine is discretionary and depends on the facts and circumstances of each case. This was further upheld by the Supreme Court in Samyanathan Murugesan Vs. Commissioner of Customs.

Court's interpretation and reasoning: The Court emphasized that the discretion under Section 125 is not absolute but must be exercised considering the eligibility of the importer, compliance with import conditions, and whether the goods are prohibited. The discretion to grant the option to pay fine is withheld if the goods are prohibited or if the importer has concealed the goods to evade customs.

Key evidence and findings: The petitioners concealed gold bars weighing 3052 grams (exceeding the permissible limit of 1 kg) inside betel nut flakes and failed to declare the same. This concealment and non-declaration indicated an intention to smuggle.

Application of law to facts: Since the petitioners exceeded the permissible limit and concealed the goods, the authorities rightly exercised their discretion to refuse the option to pay fine and proceeded with confiscation.

Treatment of competing arguments: The petitioners argued that since gold is not explicitly prohibited under Section 2(33), they should be entitled to pay fine. The Court rejected this, holding that restricted goods imported beyond permissible limits and concealed are treated as prohibited under the Act.

Conclusion: The petitioners were not entitled to the option to pay fine under Section 125 due to concealment and import beyond the permissible limit.

Issue 2: Whether gold bars exceeding 1 kg constitute "prohibited goods" under Section 2(33) of the Customs Act

Relevant legal framework and precedents: Section 2(33) defines "prohibited goods" to include goods the import or export of which is prohibited or restricted under the Act or any other law. The CBEC Notification dated 06.03.2014 restricts import of gold bars exceeding 1 kg by eligible passengers.

Precedents include the Division Bench decision in P.Sinnasamy, which held that gold imported beyond permissible limits and without compliance with conditions falls within the definition of prohibited goods.

Court's interpretation and reasoning: The Court interpreted the CBEC Notification as a legally binding restriction. Gold bars exceeding 1 kg are not allowed to be imported by eligible passengers, thus falling within the definition of prohibited goods under Section 2(33).

Key evidence and findings: The seized gold bars weighed 3052 grams, clearly exceeding the 1 kg limit prescribed by the Notification.

Application of law to facts: The import of gold bars beyond the prescribed limit without declaration constitutes import of prohibited goods.

Treatment of competing arguments: The petitioners contended that gold is not a prohibited item per se. The Court clarified that while gold itself may not be prohibited, import beyond prescribed limits and concealment renders it prohibited under the Act.

Conclusion: Gold bars exceeding 1 kg imported without compliance are prohibited goods under Section 2(33).

Issue 3: Discretion of customs authorities in granting option to pay fine under Section 125

Relevant legal framework and precedents: The discretionary nature of Section 125 is well established in P.Sinnasamy and Samyanathan Murugesan cases. The authorities must consider eligibility, compliance with conditions, and nature of goods before exercising discretion.

Court's interpretation and reasoning: The Court reiterated that discretion is not mandatory but depends on facts. Concealment and smuggling attempts justify refusal of option to pay fine.

Key evidence and findings: Petitioners concealed gold bars and did not declare them, indicating smuggling intent.

Application of law to facts: Given the concealment and violation of import limits, authorities properly exercised discretion to deny option to pay fine.

Treatment of competing arguments: Petitioners relied on Single Judge decisions allowing fine option for gold jewelry within limits. The Court distinguished those cases, noting the present case involves gold bars exceeding limits and concealment.

Conclusion: Discretion was rightly exercised to refuse option to pay fine.

Issue 4: Applicability of CBEC Notification dated 06.03.2014

Relevant legal framework: The Notification restricts import of gold bars and ornaments by eligible passengers to a maximum of 1 kg upon payment of 10% customs duty.

Court's interpretation and reasoning: The Notification remains in force and is binding. Import beyond 1 kg without declaration violates the Notification.

Key evidence: Gold bars weighing 3052 grams were seized from petitioners.

Application of law to facts: Petitioners violated the Notification by importing gold bars exceeding 1 kg without declaration.

Conclusion: Notification applies and supports classification of seized gold as prohibited goods.

Issue 5: Effect of concealment and non-declaration on classification and discretion

Relevant legal framework and precedents: Concealment of goods and failure to declare is a key factor in determining smuggling and classification as prohibited goods. The Supreme Court and Division Bench judgments have emphasized this aspect.

Court's interpretation and reasoning: Concealment indicates intention to evade customs duty and smuggle, justifying confiscation and denial of fine option.

Key evidence: Gold bars were concealed inside betel nut flakes and not declared.

Application of law to facts: Concealment and non-declaration establish smuggling intent and justify refusal of option to pay fine.

Conclusion: Concealment is a decisive factor against granting option to pay fine.

3. SIGNIFICANT HOLDINGS

"The language employed by the legislature in Section 125 of the Customs Act is only 'may' and that is the reason why the discretion is left to the customs authorities depending upon the facts and circumstances of each case to decide whether the option to pay fine can be granted or not."

"When the gold imported is beyond the legally permissible limit, i.e., weighing more than 1kg, the said gold has to be treated as a prohibited item as per the provisions of Section 2(33) of the Act."

"The intention of the petitioners was only to smuggle the gold bars into India and hence, the ratio laid down by the Hon'ble Supreme Court as well as this Court in P.Sinnasamy's case is squarely applicable to the facts of the instant case."

"The option to pay fine in lieu of confiscation is not a mandatory right but a discretionary relief which can be refused if the goods are prohibited or if there is concealment and non-compliance with import conditions."

The Court upheld the concurrent findings of the authorities below that the petitioners were not entitled to the option to pay fine under Section 125, given the concealment of gold bars exceeding the permissible limit, and dismissed the writ petition without costs.