TMI Blog2018 (3) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not amount to service on him. This would be way too technical. Even otherwise the department had sent one summons to his address at Sharjah and finally relied on exhibition of such notices and summonses at the Customs House - question of breach of principles of natural justice therefore does not arise. Whether the power of the Commissioner to impose penalty under section 112 of the Customs Act was hedged with limitation of maximum of 10% of the duty attempted to be evaded or 100% of the value of goods? - Held that: - Chapter XIV of the Customs Act pertains to confiscation of goods and conveyances and imposition of penalties. Section 111 contained in the said chapter pertains to confiscation of improperly imported goods etc. The said section provides that goods brought from a place outside India in case of any of the eventualities mentioned in clauses (a) to (p) thereof shall be liable to confiscation. When clause (ii) of section 112 therefore, refers to dutiable goods other than prohibited goods, it shall necessarily have the reference to the goods, import of which is not prohibited or of which import is permissible subject to fulfillment of conditions and such conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, the petitioner was called upon to explain why penalties should not be imposed on him under sections 112 and 114AA of the Customs Act, 1962. Case of the petitioner is that such show cause notice was never served on him. The department though fully aware that the petitioner is a resident of Sharjah, sent the notices at the address of partnership firm at Rajkot and, thereafter, proceeded exparte against the petitioner without service of notice on him. Noticees other than the petitioner and his partnership firm appeared before the Commissioner who upon completion of the proceedings passed the impugned order. In addition to confirming duty demands against the rest of the noticees with interest and penalties, insofar as the petitioner is concerned, he imposed following penalties under sections 112 and 114AA of the Customs Act. ( h) I also impose Penalty of ₹ 2,00,00,000/( Rs. Two Crores only ) on Shri Bhargav Mehta, partner of M/s. Rajkot Impex, under Section 112(a) the Customs Act, 1962 for the acts and omission on their parts, as discussed above ( i) I also impose Penalty of ₹ 10,00,000/( Rs. Ten Lakhs only) on Shri Bhargav Mehta, partner of M/s. Rajkot Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conspiracy with the importer and the agent for smuggling gold for lucrative returns. This issue therefore, must rest here. ii) The second contention of the counsel for the petitioner was that the show cause notice and notice for personal hearing were never served on the petitioner. He contended that the petitioner was being called upon in his personal capacity to answer the charges levelled in the show cause notice. The department was well aware that the petitioner has permanent establishment at Sharjah, despite which, the notices were dispatched at the address of partnership firm at Rajkot. This would not be sufficient compliance of the requirement of service of notice. The petitioner therefore, could not participate in the proceedings. The entire proceedings therefore, proceeded exparte. The order is therefore, vitiated for want of proper hearing. iii) The last contention of the counsel for the petitioner was that the import of gold in any case was not prohibited. It was not even restricted as per the import policy prevailing at the relevant time. Gold was freely importable. Merely because an attempt to smuggle the gold even if so assumed was made, the import of gold pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Near R.K. Nagar, Opposite Crystal Mall, Off Kalavad Road, Rajkot which were also returned back with postal remarks as locked . Further summon was issued to Shri Bhargav Mehta at his present business address of M/s. Save Green General Trading Co. LLC, Sharjah which was not received back. The personal hearing of the case was held on 13.01.2016, 02.03.2016, 28.03.2016 and 30.03.2016. Letter dated 28.12.2015 intimating the date of PH as 13.01.2016, meant for Noticee M/s Rajkot Impex, SamrudhiBhavan, Gondal Road, Rajkot and Shri Bhargav Mehta, Partner of M/s Rajkot lmpex, or SamrudhiBhavan, Gondal Road, Rajkot was returned by the postal authorities undelivered. Letters dated 08.02.2016 and 09.03.2016 intimating the date of PH as 02.03.2016 and 28.03.2016/30.03.2016 were also displayed on the notice Board of the Custom House Mundra. The letters dated 08.02.2016 and 09.03.2016 meant for Noticee M/s Rajkot Impex, SamrudhiBhavan, Gondal Road, Rajkot and ShriBhargav Mehta, Partner of M/s Rajkot lmpex, SamrudhiBhavan, Gondal Road, Rajkot was returned by the postal authorities undelivered. Further, no reply to the Show Cause Notice has been submitted either by M/s Bhargav Mehta, partner of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department had sent one summons to his address at Sharjah and finally relied on exhibition of such notices and summonses at the Customs House. The question of breach of principles of natural justice therefore does not arise. 8. More complex and interesting question however is, whether the power of the Commissioner to impose penalty under section 112 of the Customs Act was hedged with limitation of maximum of 10% of the duty attempted to be evaded or 100% of the value of goods? In this context, we may refer to relevant provisions contained in the Customs Act. Chapter XIV of the Customs Act pertains to confiscation of goods and conveyances and imposition of penalties. Section 111 contained in the said chapter pertains to confiscation of improperly imported goods etc. The said section provides that goods brought from a place outside India in case of any of the eventualities mentioned in clauses (a) to (p) thereof shall be liable to confiscation. Clause (d) thereof provides as under : ( d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by order unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported, have been complied with. 13. Term 'dutiable goods' is defined under section 2(14) of the Act as under: ( 14) dutiable goods means any goods which are chargeable to duty and on which duty has not been paid. 14. We may also refer to the term 'smuggling' 2(39) of the Act which reads as under: ( 39) smuggling, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113. 15. We may recall, the contention of the counsel for the petitioner in this respect was that the gold at the relevant time was freely importable. Import of gold was not prohibited. Case of the petitioner would therefore, fall under second clause of section 112 and penalty not exceeding 10% of the duty sought to be evaded would be the maximum penalty imposable. Such contention shall have to be examined in light of the statutory provisions noted above. As noted, section 111 of the Act provides for various eventualities in which the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and dutiable goods other than prohibited goods. When clause (ii) of section 112 therefore, refers to dutiable goods other than prohibited goods, it shall necessarily have the reference to the goods, import of which is not prohibited or of which import is permissible subject to fulfillment of conditions and such conditions have been complied with. Condition of declaration of dutiable goods, their assessment and payment of customs duties and other charges is a fundamental and essential condition for import of dutiable goods within the country. Attempt to smuggle the goods would breach all these conditions. When clearly the goods are sought to be brought within the territory of India concealed in some other goods which may be carrying no duty or lesser duty, there is clear breach of conditions of import of goods though perse import of goods may not be prohibited. 17. In an elaborate judgment, Division Bench of Madras High Court in case of Malabar Diamond Gallery Ltd. (supra) has taken such a view. Interpretation of section 112 of the Customs Act in context of prohibition for import of goods came up for consideration before the Court. In the said case, the department had prior in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to the appellant, to seek for provisional release of gold, alleged to have been smuggled. At this juncture, it is relevant to extract Paragraphs 41 and 42 in the show cause notice, dated 16.09.2013, issued by the Directorate of Revenue Intelligence, as to how, the gold came to be seized and liable for confiscation...... 18. In the judgment of Kerala High Court in case of Abdul Razak v. Union of India reported in 2017(275) E.L.T. 300 (KER), facts were that the appellant before the High Court had landed in the country in a flight from MiddleEast without declaring any goods attracting the customs duty. After passing through the green channel at the airport, the Customs officers intercepted him. Upon examination, it was found that the appellant was carrying 8 kgs of gold by concealing it in emergency light, grinder etc. Smuggled gold was seized by the Customs department and subsequently confiscated after rejecting the appellant's request for release of the goods on payment of redemption fine. In this context, the definition of term 'prohibited goods' contained in section 2(33) of the Customs Act was required to be interpreted by the High Court. The High Court re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawback claim was granted. The Commissioner of Customs was of the opinion that this was the second such case of the same exporter and there was an organized racket to claim fraudulent drawback by overinvoicing the goods. He therefore, imposed redemption fines and personal penalties. In such background, the question of authority of the Customs department to confiscate the goods and the definition of term 'prohibited goods' contained in section 2(33) of the Act came up for consideration before the Supreme Court. It was observed as under : 10. From the aforesaid definition, it can be stated that (a) if there is any prohibition of import or export of goods under the Act or any other law for the time being in force, it would be considered to be prohibited goods; and (b) this would not include any such goods in respect of which the conditions, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either 'abso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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