Commissioner of Customs(Air)Custom HouseNo.60, Rajaji SalaiChennai – 1 v. 1. Samynathan Murugesan & Ors.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 27-04-2009CORAM:THE HONOURABLE MRS. JUSTICE PRABHA SRIDEVANANDTHE HONOURABLE MR. JUSTICE M.SATHYANARAYANANC.M.A.No.2040 of 2007Commissioner of Customs(Air)Custom HouseNo.60, Rajaji SalaiChennai – 1… AppellantVs.1. Samynathan Murugesan2.Customs, Excise and Service Tax Appellate TribunalSouth Zonal Bench at ChennaiShastri Bhawan Annexe, 1st Floor26, Haddows RoadChennai – 600 006 … RespondentsCivil Miscellaneous Appeal against the final order No.1038 of 2006dated 09-11-2006 on the file of Customs, Excise and Service TaxAppellate Tribunal, Chennai.For appellant :: Mr. S. Yashwanth, SCGSCFor respondents:: Mr. A. Thiagarajan, SC for Mr. S. Ramesh Kumar for R1JUDGMENT(Judgment of the Court was delivered by Prabha Sridevan,J.)The substantial question of law raised in this civilmiscellaneous appeal are as follows:“Whether in the facts and circumstances of the case,the Tribunal was right in remanding the matter with adirection to the Commissioner to invoke the power underSection 125 of the Customs Act for redemption of the goodson payment of fine?”2.The facts of the case are as follows:The respondent is a Indian passport holder. He had beenworking in Singapore under a work permit. The period of stay inSingapore are as follows:From 1993 to 1995, he was there for two years. He returned to https://hcservices.ecourts.gov.in/hcservices/ India for a short visit and went back in 1995, worked their for aperiod of 5 ½ years continuously. Then, again he was there in 2004and 2005. In 2005, he brought gold ornaments allegedly purchased fromthe savings over the years and kept in safe custody. When he arrivedat Chennai Airport on 12-07-2005 a Customs Officer intercepted him.He asked him what were the goods that he was carrying. He said thatthey were personal belongings, TV sets and gold jewellery. He alsooffered to pay duty if it was found that he was carrying baggage inexcess of free baggage allowance or in excess of duty free allowance.The officers seized gold jewellery under a mahazar and also damagedthe TV set to see if any gold was concealed in the picture tube. Theconfessional statement was recorded. He was arrested and remanded tojudicial custody on 13-07-2005 and also detained under COFEPOSA. On09-01-2006, a show cause notice was issued. The Department proposedto levy penalty under Section 112 of the Customs Act. TheCommissioner of Customs ordered absolute confiscation of the goldjewellery and a TV set and a penalty of Rs.2,00,000/- was imposed.On appeal, the Tribunal remanded the matter for fresh adjudication,giving the respondent a reasonable opportunity of redeeming thegoods. Against this order of remand, the present appeal has beenfiled.3.The learned Senior Central Government Standing Counselsubmitted that a person working abroad is eligible to import goldweighing upto 7.075Kgs as per the Explanation to notification31/2003-Cus.dated 01-03-2003. An eligible passenger is one who hascoming to India after a period of not less than 6 months of stayingabroad and short visits upto a total of 30 days shall be ignored.The learned Senior Central Government Standing Counsel submittedthat the respondent herein gone to Singapore on 19-04-2005 andreturned to India on 12-07-2005, that is, he had stayed only forabout 2 ½ months and prior to 19-04-2005 had visited abroad wasduring 2004. There were no short visits. Therefore, the respondentwas not ‘an eligible passenger’ to bring gold. 4.The next submission that he made was that the respondent wasin fact walking through the green channel at the time of interceptionand he specifically denied that he was carrying gold. In the customsdeclaration form, he had not declared the gold ornaments carried byhim. But when the gold jewellery was found, he said in his statementthat the TV in which the gold ornaments were recovered do not belongto him and that they were given by his uncle’s friend at SingaporeAirport. The second version is that he had converted his hardearnings to gold chains and jewellery ornaments and gifts which hereceived from relatives and friends were also converted to goldchains. There was no evidence to support this statement. Thelearned counsel submitted that it would not be possible for alabourer/driver to have earned 40lakhs to purchase so much gold. Itwas clearly a false statement. He had attempted to smuggle 7.075Kgsby ingenious concealment in the TV set without declaring to customsin violation of provisions under section 11 and 77 of the Customs Actand therefore, the learned Senior Central Government Standing Counselsubmitted that this was a case where the goods were ‘prohibited’since he did not belong to the category of persons who could bring ingold at concessional rate of duty. So far as the respondent wasconcerned, he was prohibited from bringing the gold since he did not https://hcservices.ecourts.gov.in/hcservices/ satisfy the relevant conditions. Therefore, under Section 112, theofficer had the discretion to decide whether he should allow the goldto be redeemed. The officer had considered the mode of concealmentand the fact that he was not an eligible passenger and had rightlyheld that absolute confiscation is warranted. The learned CentralGovernment Standing Counsel referred to the following decisions:Shaik Jamal Basha Vs. Government of India (1997 (91) ELT 277(AP))Garg Woollen Mills (P) Ltd. Vs. Addl.Collr. of Customs, NewDelhi (1998 (104) ELT 306 (SC))A. Shaud Ali Vs. Additional Collector of Customs, Madurai2001 (133) ELT 554 (Mad)Nine Star Exports Vs. Commissioner of Customs (Ports) Chennai(2003(151) ELT 265 (Mad))Gurucharansingh Vs. Directorate of Revenue Intelligence in Crl.Appeal No.576 of 2008 dated 01-04-2008Commissioner of Central Excise, Bangalore Vs. Srikumar Agencies (2008 – TIOL-220-SC-CX-LB)M.K.S. Mohammed Rafi Vs. Joint Commissioner of Customs inW.P.No.15146 of 2001 dated 03-12-2004Prince Anthony Sagayam Vs. The Deputy Commissioner of Customs inW.A.No.758 and 563 of 2006 dated 25-01-20085.Mr. A. Thiagarajan, learned Senior Counsel appearing for therespondent submitted that the goods were only restricted goods. Goldwas not a prohibited item. Therefore, the officer was under amandatory duty to give option to the person found guilty to pay inlieu of confiscation. He relied on 1997 (91) E.L.T. 227 (A.P.)(ShaikJamal Basha Vs. Government of India). 6.Section 2(33) of the Customs Act defines ‘prohibited’ goods.It reads as follows:“(33)" prohibited goods " means any goods the importor export of which is subject to any prohibition under thisAct or any other law for the time being in force but doesnot include any such goods in respect of which theconditions subject to which the goods are permitted to beimported or exported have been complied with;”7.Section 11 empowers the Central Government to prohibit eitherabsolutely or subject to such conditions to be fulfilled before orafter clearance the import or export of the goods of any specifieddirection by issuing a notification in this behalf. The effect ofinterpretation of the words “prohibited goods” was considered in OmPrakash Bhatia Vs. Commissioner of Customs (2003 (6) SCC 161) and inparagraph No.10 of the said judgment the Supreme Court held asfollows: https://hcservices.ecourts.gov.in/hcservices/ “10. From the aforesaid definition, it can be statedthat (a) if there is any prohibition of import or export ofgoods under the Act or any other law for the time being inforce, it would be considered to be prohibited goods; and(b) this would not include any such goods in respect ofwhich the conditions, subject to which the goods areimported or exported, have been complied with. This wouldmean that if the conditions prescribed for import or exportof goods are not complied with, it would be considered tobe prohibited goods. This would also be clear from Section11 which empowers the Central Government to prohibit either'absolutely' or 'subject to such conditions' to befulfilled before or after clearance, as may be specified inthe notification, the import or export of the goods of anyspecified description. The notification can be issued forthe purposes specified in Sub-section (2). Hence,prohibition of importation or exportation could be subjectto certain prescribed conditions to be fulfilled before orafter clearance of goods. If conditions are not fulfilled,it may amount to prohibited goods. This is also made clearby this Court in Sheikh Mohd. Omer v. Collector of Customs,Calcutta and Ors. AIR 1971 SC 293 wherein it was contendedthat the expression 'prohibition' used in Section 111(d)must be considered as a total prohibition and that theexpression does not bring within its fold the restrictionsimposed by Clause (3) of the Import Control Order, 1955.The Court negatived the said contention and held thus:--"...What Clause (d) of Section 111 says is that anygoods which are imported or attempted to be importedcontrary to "Any prohibition imposed by any law for thetime being in force in this country" is liable to beconfiscated. "Any prohibition" referred to in that sectionapplies to every type of "prohibition". That prohibitionmay be complete or partial. Any restriction on import orexport is to an extent a prohibition. The expression "anyprohibition" in Section 111(d) of the Customs Act, 1962includes restrictions. Merely because Section 3 of theImports and Exports (Control) Act, 1947, uses threedifferent expressions "prohibiting", "restricting" or"otherwise controlling", we cannot cut down the amplitudeof the word "any prohibition" in Section 111(d) of the Act."Any prohibition" means every prohibition. In other wordsall types of prohibitions. Restriction is one type ofprohibition. From item (I) of Schedule I, Part IV to ImportControl Order, 1955, it is clear that import of livinganimals of all sorts is prohibited. But certain exceptionsare provided for. But nonetheless the prohibitioncontinues."”Therefore, if we apply this judgment to the notification, thenotification contemplates import of gold subject to certainconditions. The relevant paragraphs of Import trade control orderare extracted as follows:“Import of Gold permitted as Baggage. https://hcservices.ecourts.gov.in/hcservices/ Import of gold in any form, including ornamentsbut excluding ornaments studded with stones or pearls, isallowed to be imported as part of baggage by passengers ofIndian origin or a passenger holding a valid passportissued under the Passport Act subject to the followingconditions:that the passenger importing the gold is coming toIndia after a period of not less than six months ofstay abroad;the quantity of gold imported shall not exceed 10Kg, per passengerimport duty on gold shall be paid in convertibleforeign currency;there will be no restriction on sale of suchimported gold.A person shall be deemed to be of Indian origin, if—he held an Indian passport at any time, orhe or either of his parents or any of his grandparents, was a citizen of India by virtue of theConstitution of India or the Citizenship Act, 1955 (57of 1955); provided that the national of Pakistan orBangladesh shall be deemed to be not of Indian origin.A spouse (not being a national of Pakistan orBangladesh) of a person of Indian origin shall also bedeemed to be of Indian origin.”8.Relevant portion of The Exemption Notification 31/2003 underSection 25 of the Customs Act reads thus:“G.S.R. (E).- In exercise of the powers conferred bysub-section(1) of section 25 of the Customs Act, 1962(52 of1962) and in supersession of the notification of theGovernment of India in the erstwhile Ministry of Finance(Department of Revenue) No.171/94-Customs, dated the 30thSeptember, 1994, published in the Gazette of India, videnumber G.S.R. 733(E), dated the 30th September, 1994, theCentral Government, being satisfied that it is necessary inthe public interest so to do, hereby exempts goods of thedescription specified in column (2) of the Table below andfalling under Chapter 71 of the First Schedule to theCustoms Tariff Act, 1975 (51 of 1975), when imported intoIndia by an eligible passenger, from so much of the duty ofcustoms leviable thereon which is specified in the saidFirst Schedule, as is in excess of the amount calculated atthe rate as specified in the corresponding entry in column(3) of the said Table and from the whole of the additionalduty leviable thereon under section 3 of the said CustomsTariff Act. … (2) The exemption is subject to the followingconditions, namely:-(i)the duty shall be paid in convertible foreign currency; https://hcservices.ecourts.gov.in/hcservices/ (ii)the quantity of gold imported in any form shall notexceed ten kilograms per eligible passenger, and(iii)the gold is either carried by the eligible passengerat the time of his arrival in India or is imported byhim within fifteen days of his arrival in India.…“Explanation : For the purpose of this notification,“eligible passenger” means a passenger of Indian origin ora passenger holding a valid passport, issued under thePassports Act, 1967 (15 of 1967), who is coming to Indiaafter a period of not less than six months of stay abroad;and short visits, if any, made by the eligible passengerduring the aforesaid period of six months shall be ignoredif the total duration of stay on such visits does notexceed thirty days and such passenger has not availed ofthe exemption under this notification or under thenotification being superseded at any time of such shortvisits.”Therefore, the gold brought in could be cleared on payment of aconcessional rate of duty if the respondent is an eligible passenger.The respondent is not a eligible passenger. The learned SeniorCounsel appearing for the respondents submitted that the respondenthad been in Singapore from 1993. We are not concerned with the dateon which he first went to Singapore. For the purpose of thisexemption or this concession, he should have come to India after aperiod of not less than six months’ stay in Singapore and shortvisits made by the eligible passenger during the aforesaid period ofsix months shall be ignored if the total duration of stay on suchvisits does not exceed thirty days. He had gone to Singapore on 19-04-2005 was coming to India on 12-07-2005 i.e., after a period ofless than six months. So he was not an ‘eligible passenger’. Theprevious periods where he had stayed for longer duration are notrelevant now. The liberalisation policy and the repeal of the GoldControl Order had weighed with the Tribunal. The Tribunal ought tohave considered whether he could have carried the gold as part of hisbaggage as an eligible passenger. 9.In view of meaning of the word “prohibition” as construed laiddown by the Supreme Court in Om Prakash Bhatia case we have to holdthat the imported gold was ‘prohibited goods’ since the respondent isnot an eligible passenger who did not satisfy the conditions. Theimpugned order deserves to be set aside. 10.In 1992 (61) ELT 372(cited supra), the Supreme Court directedthe Collector to consider the exercise of discretion. In this case,the Collector had rightly considered it and refused to give theoption. 11.In 1997 (91) ELT 277(cited supra), the High Court held thatthe goods were not prohibited since they were ornaments. The wordsused in the Rules including ornaments but excluding ornaments studdedwith stones.” We are unable to follow this judgment. https://hcservices.ecourts.gov.in/hcservices/

12.In 1998 (104) ELT 306 (SC), the Supreme Court held, “5. Another contention that was urged by Shri MahabirSingh was that the Additional Collector, as also theTribunal, have failed to take into consideration theprovisions contained in Section 125 of the Act whichprescribes that whenever confiscation of any goods isauthorised by the Act, the officer adjudging it may, in thecase of any goods, the importation or exportation whereofis prohibited under the Act or under any other law for thetime being in force, and shall, in the case of any othergoods, give to the owner of the goods or, where such owneris not known, the person from whose possession or custodysuch goods have been seized, an option to pay in lieu ofconfiscation such fine as the said officer thinks fit. Wedo not find any merit in this contention of Mr. MahabirSingh. Under Section 125 a discretion has been conferred onthe officer to give the option to pay fine in lieu ofconfiscation in cases of goods, the importation orexportation whereof is prohibited under the Act or underany other law for the time being in force but in respect ofother goods the officer is obliged to give such an option.In the present case, having regard to the facts andcircumstances in which the goods were said to be importedand the patent fraud committed in importing the goods, theAdditional Collector has found that the goods had beenimported in violation of the provisions of Import (Control)Order, 1955 read with Section 3(i) of the Import and Export(Control) Act, 1947. In the circumstances he considered itappropriate to direct absolute confiscation of the goodswhich indicates that he did not consider it a fit case forexercise of his discretion to give an option to pay theredemption fine under Section 125 of the Act. The Tribunalalso felt that since this was a case in which fraud wasinvolved, the order of the Additional Collector directingabsolute confiscation of the goods did not call for anyinterference. We do not find any reason to take a differentview.”In the present case too, the concealment had weighed with theCommissioner to order absolute confiscation. He was right, theTribunal erred.13. In the result, the substantial question of law is answeredin favour of the appellant. Appeal allowed and the order of theTribunal is set aside. However, there will be no order as to costs. Sd/Asst.Registrar/true copy/Sub Asst.Registrarglp https://hcservices.ecourts.gov.in/hcservices/ To1Commissioner of Customs(Air)Custom HouseNo.60, Rajaji SalaiChennai – 12.Customs, Excise and Service Tax Appellate TribunalSouth Zonal Bench at ChennaiShastri Bhawan Annexe, 1st Floor26, Haddows RoadChennai – 600 0061 cc To Mr.S.Ramesh Kumar, Advocate, SR.18870.1 cc To Mr.S.Yashwanth, Advocate, SR.18382.C.M.A.No.2040 of 2007 VS(CO)pmk/12.5.2009