Horizon Ferro Alloys Vs. Union of India [Punjab-Haryana High Court, 21-06-2016]

Customs Act, 1962 – Section 104(4) & 125 – ‘restricted’ item for import – Cigarettes – release of seized goods even pending adjudication – Under Section 125 of the Customs Act, unless the importation or exportation of goods is expressly “prohibited” the Adjudication Authority would be obliged to offer to the Owner the goods an option to pay fine in lieu of confiscation.

Prohibited Goods


IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

CORAM: HON’BLE MR.JUSTICE M.JEYAPAUL AND HON’BLE MR. JUSTICE HARINDER SINGH SIDHU

DATE OF DECISION :- June 21, 2016

Horizon Ferro Alloys Pvt. Ltd. And others …Petitioners

Versus

Union of India and others …Respondents

Present:- Mr. Sujay Kantawala, Advocate with Mr.Pankaj Bali, Advocate for the petitioners; Mr. V.K. Kaushal, Advocate for respondent no.1. Mr. Kamal Sehgal, Advocate for respondent no.3.

M. JEYAPAUL, J.

1. Reply was filed.

2. Heard the submissions made by learned counsel appearing for the writ petitioners and the learned counsel appearing for the respondents.

3. The first grievance raised in the petition revolves around interpretation of Section 4(2) of the Code. It is contention of the petitioners that the Respondents are not following the procedure prescribed under Section 154, 157, 167, 172 and 177 of the Code, despite absence of any provision inconsistent with the same in the Act. Several orders granting interim protection pending decision on this very issue are already placed on record and referred in the earlier Order dated 13.6.2016. Without prejudice to their contentions on this legal issue, the petitioners have joined the investigations being conducted by the DRI in respect of seizure of Cigarettes and restricted R-22 Gas, which were admittedly imported by the petitioner company by concealment in aluminium scrap and mis-declaration of material particulars in the three Bills of Entry filed at ICD at Ludhiana. The alleged offence is a “cognizable” offence in terms of

Section 104(4) of the Customs Act, 1962.

4. The petitioner company has admitted mis-declaration in these three Bills of Entry and is willing to pay the differential duty on the Cigarettes for seeking its provisional release, and is willing to resort to statutory route of self-surrender by invoking jurisdiction of Settlement Commission for settlement of case at once upon issuance of show cause cum demand notice in respect of these three Bills of Entry. The settlement Commission is statutorily empowered to grant immunities from penalty, fine and prosecution under the Customs Act, 1962. Moreover, even otherwise the alleged offence is a compoundable offence.

5. It is submitted that although the R-22 Gas is a ‘restricted’ item for import, and the goods Cigarettes and the R-22 Gas were imported by concealment, however, none of these goods are expressly notified as ‘prohibited’ for importation. Imported Goods can only be seized under Section 110 of the Act, when there exists a reasonable belief that the same are liable to confiscation under Section 111. In respect of such goods even if the same are confiscated upon culmination of adjudication under Section 28 read with 124 of the Act, the owner/importer ‘shall’ be given an option to redeem the goods on payment of redemption fine in terms of Section 125 of the Act. Section 110A of the Act provides for provisional release of seized goods even pending adjudication. The petitioner company relies upon the Order dated 4.8.2015 of the Customs Excise and Service Tax Appellate Tribunal in the matter of Bhargav B. Patel in Appeal No. C/381/10-Mum reported in 2015-TIOL-1951-CESTAT-Mum, which is in the context of Section 125 of the Act. In para 11 thereof, it was held that under Section 125 of the Customs Act, unless the importation or exportation of goods is expressly “prohibited”, the Adjudication Authority is obliged to offer to the owner of the goods an option to pay fine in lieu of confiscation. The Tribunal referred to Asian Food Industries, 2006 (204) ELT 8 (SC), wherein the Hon’ble Apex Court inter alia observed that the meaning of word “prohibited” will have to be construed in regard to the text and context in which it is used and the words prohibition, restriction and regulation are meant to be applied differently. The Tribunal also observed that in the context of Section 111(d) or 113(d), in several precedents, the definition of ‘prohibited goods’ as contained in Section 2(33) of the Customs Act, 1962 has been applied liberally, including in

Om Parkash Bhatia vs Union of India, 2003 (155) E.L.T. 423 (S.C.)

and

Sheikh Mohd. Omer v. Collector, 1983 (13) E.L.T. 1439 (S.C.).

However, the issue, whether in the context of Section 125, the definition of ‘prohibited goods’ under Section 2(33) is applicable or not, was neither raised nor determined in these precedents. The Tribunal also relied upon settled principles of statutory interpretation as held in

Ramesh Mehta vs. Sanwal Chand Singhvi (2004) 5 SCC 409

for ascertaining the scope of words ‘unless the context otherwise requires’ appearing in Section 2(33) for application of the definition of ‘prohibited goods’, and rightly held that the liberal definition of Section 2(33) which is applied in the context of Section 111 or 113 cannot be applied in the context of Section 125. The Tribunal relied upon the judgment of Hon’ble Andhra Pradesh High Court in

Shaik Jamal Basha vs. GOI, 1997 (91) ELT 277 (AP)

wherein after considering both Section 111 as well as scheme of Section 125 in a case of concealment the High Court was pleased to hold that attempt to import gold un-authorisedly will come under the second part of Section 125 (1) of the Act where the adjudging officer is under mandatory duty to give option to the person found guilty to pay fine in lieu of confiscation. Section 125 of the Act leaves option to the officer to grant the benefit or not so far as goods whose import is ‘prohibited’ but no such option is available in respect of goods which can be imported, but because of the method of importation adopted, become liable for confiscation. Hon’ble Madras High Court in T Elavarasan, 2011 (266) ELT 167 (MAD HC), was pleased to rely on the said judgment of Hon’ble Andhra Pradesh High Court and held that an option has to be given to the petitioner to pay the applicable customs duty and the redemption fine and to get the gold jewellery released, as per Section 125 of the Customs Act, 1962. In the context of Section 125 if the word “prohibited” is construed as to apply in respect of every violation of any regulation or restriction or statutory procedural requirement, the word ‘shall’ in said Section would be rendered redundant and meaningless. If the definition of ‘prohibited goods’ is applied in the context of Section 125, it would result in absurdity rendering the word ‘shall’ redundant and otiose, because there cannot be any situation where the goods would be liable to confiscation under Section 111 and 113 as the case may be without there being any violation of the provisions under the Customs Act, 1962 or under any other law or rules, regulations made thereunder. Therefore, in the context of statutory provisions of Section 125, so as to give a meaningful application to both words ‘may’ and ‘shall’ used in the said Section, the definition of ‘prohibited goods’ is inapplicable by application of settled principles of statutory interpretation. The Tribunal was therefore correct in observing that under Section 125 of the Customs Act, unless the importation or exportation of goods is expressly “prohibited” the Adjudication Authority would be obliged to offer to the Owner the goods an option to pay fine in lieu of confiscation.

6. In the instant case the Cigarettes and restricted R-22 Gas were admittedly imported by concealment. None of the two goods are expressly “prohibited” for importation. Therefore, ultimately the petitioner company who is owner as well as importer would be entitled for an option to redeem the goods even upon adjudication. In such case, Section 110A concerning provisional release would be applicable.

7. In the instant case, the stand taken on behalf of DRI was that the goods which according to their own estimate have local market value of ₹10 Crores would be absolutely confiscated and would have to be burnt or destroyed, and that such cases of fraud cannot be settled by the Settlement Commission. On behalf of DRI objection was raised even on territorial jurisdiction of this Court in respect of the matter. However, since the place of importation is at Ludhiana where the declaration was filed, we see no merit in this objection. The Learned Counsel appearing for the petitioners has shown us an order passed by the Settlement Commission in the matter of