Sanjeev Kumar vs CEGAT

R.S. Mongia, J

In pursuance of an intelligence report, the Customs Authorities organised a raid-cum-Naka on 2nd July, 1982 in Sunam and during the course of the said raid, petitioner Sanjeev Kumar was apprehended and four gold biscuits of foreign origin weighing 464 grams, Indian currency worth Rs. 7/- and one key were recovered from the petitioner. As a result of the search of one metal box held by the petitioner in a cloth bag, gold ornaments weighing 239 grams and Indian currency worth Rs. 3,220/- were also recovered. Since, the petitioner failed to produce any evidence for their legal acquisition/possession etc., the said gold biscuits, Indian currency and gold ornaments were seized. The gold ornaments and the Indian currency were seized on the reasonable belief that these ornaments were manufactured out of the smuggled gold and the Indian currency was the sale proceeds of smuggled gold/gold ornaments. After show cause notice etc. was issued to the petitioner, the items which were seized were ordered to be confiscated u/s 111 of the Customs Act and a penalty of Rs. 75,000/- was imposed on the petitioner u/s 112 of the Customs Act. Aggrieved by the said order, the petitioner had filed an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi. Vide order dated 24th April, 1987 (Annexure P.2) the appeal of the petitioner was partly allowed. The order confiscating the gold ornaments and Indian currency was set aside and the order regarding the confiscation of fiscation of four gold biscuits, was, however, confirmed. Penalty of Rs. 75,000/- was reduced to Rs. 20,000/-.

The petitioner, thereafter moved the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi, u/s 130 of the Customs Act for referring the following questions of law for the decision of this Court:-

"(i) As to whether, in the facts and circumstances of the case, the Tribunal is correct in law in dismissing the defence of the applicant summarily?

(ii) As to whether the Tribunal is correct in law in coming to a finding of fact without appreciating the evidence on record?

(iii) As to whether the Tribunal is correct in law in holding the applicant liable to a penalty merely on the ground that the gold biscuits were found from his possession?

(iv) As to whether, in the facts and circumstances of the case, the Tribunal is correct in law in holding the applicant guilty and liable to a penalty u/s 112 of the Customs Act, without finding all the ingredients of the said provisions?

(v) As to whether it can be held that the recovery of 4 gold biscuits from the possession of the applicant was proved beyond reasonable doubt?"

The Tribunal rejected the application vide order dated 20th October, 1987 (Annexure P.4). It is this order that has been impugned by the petitioner in the present writ petition.

The learned Counsel for the petitioner had not seriously contended that questions of law Nos. (i), (ii) and (v) really arise for determination by this Court. However, he contended that question Nos. (iii) and (iv) do arise. The learned counsel maintained that u/s 112 of the Customs Act, which deals with the penalty for improper importation of goods etc. the penalty can only be imposed if the person from whose possession the contraband item is recovered, knows or has reason to believe that the contraband item/items is/are liable to confiscation u/s 111 of the Customs Act. According to the learned counsel, simple possession of an item liable to confiscation u/s 111 of the Customs Act, is not sufficient to impose penalty u/s 112 of the Customs Act. Section 112 of the Customs Act is in the following terms:-

"112. Penalty for improper importation of goods, etc.

Any person, -

(a) Who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation u/s 111, or abets the doing or omission of such an act, or

(b) Who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation u/s 111, shall be liable, -

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding five times the value of the goods or one thousand rupees, whichever is the greater;

(ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding five times the duty sought to be evaded on such goods or one thousand rupees, whichever is the greater;

(iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made u/s 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the greater;

(iv) in the case of goods falling both under clause (i) and (iii), to a penalty not exceeding five times the value of the goods or five times the difference between the declared value and the value thereof or one thousand rupees, whichever is the highest;

(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding five times the duty sought to be evaded on such goods or five times the difference between the declared value."

The learned Tribunal while dealing with this aspect, whether Questions Nos. (iii) and (iv) were to be referred or not, observed as under:-

"These questions do not arise out of the Order passed by this Tribunal. In the instant case confiscation of the four gold biscuits was not challenged by the applicant at the time of hearing of the appeal on merits. What was contended was that the said four gold biscuits were never recovered from the possession of the appellant. Under these circumstances the legality of confiscation of the said biscuits by the Additional Collector was not in issue before the Tribunal at the time of hearing of the appeal and in view of Section 123 of the Customs Act, the only question to be decided by the Tribunal was as to whether the said gold biscuits were recovered from the applicant or not. This Tribunal after examining the evidence on record upheld the finding of the Additional Collector that the said four gold biscuits were recovered from the applicant."

I am afraid, the learned Tribunal was not correct in appreciating the matter as to whether Questions Nos. (iii) and (iv) arose for determination by this Court or not The question that arose for determination was whether mere possession of smuggled goods or the confiscation thereof ipso facto entails penalty or it has to be shown that if a person in possession of such smuggled items had the knowledge or reason to believe that such an item was liable to confiscation u/s 111 of the Act. According to me, the following questions do arise for determination by this Court:-

1) Whether for imposing penalty u/s 112 of the Customs Act, mere possession of an item, which is liable to confiscation u/s 111 is sufficient or there is further requirement that the person from whom such an item was recovered, had the knowledge or reason to believe that such an item was liable to confiscation u/s 111 of the Customs Act.

2) If the answer to Question No. 1 is in the affirmitive, that it has to be shown that the person from whom an item to the type falling u/s 111 of the Customs Act is recovered, had the knowledge or reason to believe that such an item was liable to confiscation, then is it for the department to show on some material that the person had such a knowledge or reason to believe or is it for the person himself to show that he had no such knowledge or reasonable belief that the item was liable to confiscation u/s 111 of the Customs Act.

Under the circumstances mentioned above, this writ petition is allowed, order Annexure P.4 is quashed and the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi is directed to state the case and refer the above-mentioned two questions of law to this Court for adjudication. This may be done within three months of the receipt of this order. There will be no order as to costs.