Customs Act| "Prohibited Goods" Not Confined To Section 11 Notifications: Calcutta High Court Restores ₹10.07 Crore Penalty In Gold Smuggling Case
The Court held that adjudicating authority's failure to specify which clause of Section 112 was invoked does not vitiate a speaking order.
The Calcutta High Court has held that gold qualifies as "prohibited goods" under Section 2(33) of the Customs Act, 1962, even in the absence of any notification issued by the Central Government under Section 11 of the Act, since the statutory definition extends to any prohibition imposed "under any other law for the time being in force," including restrictions on bulk gold import under Reserve Bank of India circulars and the Foreign Trade Policy.
The Court accordingly restored the maximum penalty of Rs.10.07 crore imposed on two persons found to have smuggled 36.856 kg of gold into India.
The Division Bench comprising Justice Debangsu Basak and Justice Aryak Dutt observed, “Prohibited goods within the meaning of Section 2(33) of the Act of 1962 is not limited to goods which have been so prohibited by virtue of exercise of powers under Section 11 of the Act of 1962. It involves prohibitions that have been imposed by other laws also. A good which may not have been prohibited under exercise of powers under Section 11 of the Act of 1962 nonetheless would fall within Section 2(33) as a prohibited goods and attract the mischief of the Act of 1962”.
The Directorate of Revenue Intelligence intercepted and seized 272 pieces of gold weighing 36.856 kg (valued at Rs 10.07 crore) on April 8, 2013, near the Indo-Bangladesh border. Statements under Section 108 of the Customs Act named Gopal Saha as the mastermind and intended recipient, with Ajgar Seikh as his principal accomplice. Following a show cause notice issued on October 3, 2013, under Section 124, the Commissioner of Customs (Preventive) confiscated the gold under Section 111(b) and imposed a penalty of Rs 10.07 crore each on Saha and Seikh under Section 112, alongside penalties on nine others on November 24, 2015.
Bypassing the statutory appellate remedy under Section 129A, Saha and Seikh filed writ petitions under Article 226, contending that gold was not a "prohibited" item and that penalty under Section 112(i) was without jurisdiction. On April 27, 2016, the Single Judge accepted their plea, held that gold was not a prohibited item, set aside the penalty under Section 112(i), and remanded the matter for re-imposition of penalty applicable to dutiable goods. Cross-appeals were subsequently filed by both sides.
The Division Bench held that "prohibited goods" under Section 2(33) extends beyond Section 11 notifications to include restrictions under any other law in force. Since bulk import of gold is restricted by RBI circulars and the Foreign Trade Policy, and neither petitioner was an authorized agency or a passenger under the Baggage Rules, the gold constituted prohibited goods.
Rejecting the contention that the adjudication order was without jurisdiction because it failed to specify which of the disjunctive clauses of Section 112 was being invoked, the Division Bench held that quoting a wrong or unspecified provision does not vitiate an order where the adjudicating authority otherwise possessed the power to pass it, and that the impugned order, being a speaking one that had clearly treated the seized gold as prohibited goods, was validly passed under Section 112(i) of the Act.
“It is trite law that when a challenge is thrown to an order of the Adjudicating Authority being without jurisdiction the test is to evaluate whether or not the provisions of the Act under which the adjudicating authority was functioning, vested such Adjudicating Authority with the decision making power or not. Quoting of wrong section in the order impugned will not vitiate the order impugned in the event, the Adjudicating Authority has the power to pass the order impugned”, it noted.
“In the facts and circumstances of the present case, therefore, the order of the Adjudicating Authority cannot be faulted merely because it has not specified provision of Section 112 of the Act of 1996 it has invoked. The impugned order is a speaking order and has specified that the seized goods were prohibited goods and therefore proceeded to impose penalty in terms of the provisions of Section 112(i) of the Act of 1962. The Adjudicating Authority has the power to invoke Section 112(i) of the Act of 1962 against the writ petitioners”, it further noted.
Accordingly, the High Court dismissed the petitioners' appeals, allowed the Customs Department's appeals, set aside the Single Judge's order, and restored the adjudication order imposing the Rs 10.07 crore penalty on each petitioner under Section 112(i) of the Customs Act, 1962.
Cause Title: Gopal Saha v. Union of India & Anr. (APO 139 of 2018 with WP Nos. 279 of 2016)
Appearances:
Petitioners: Arijit Chakraborti, Nilotpal Chowdhury and Prabir Bera, Advocates
Respondents: Bhaskar Prosad Banerjee, Senior Advocate, Abhradip Maity, Elora Pandit, Mainak Mazumdar and Pooja Basak, Advocates.