Delhi High Court: The petitions were filed as to the interpretation of certain provisions of the Customs Act, 1962 relating to the question as to whether bringing ‘gold' into India falls within the ambit of a ‘prohibited‘ article under section 2(33) read with Section 11 of the Act, and if so, to what legal effect as to its release/redemption on payment of fine/penalty under section 125 besides 112 and 114 of the Act along with raising an issue as to whether bringing of gold into India without declaring it on arrival at Customs amounts to ‘smuggling' of gold into India in violation of Section 2(39) read with Section 111 of the Act and/or under any other analogous statutes inviting not only the confiscation of the gold but also action in the nature of the imposition of levy of fine/penalty. A division bench of Yashwant Varma and Dharmesh Sharma, JJ., finds no illegality in the individual orders passed by the Adjudicating Officer and which were impugned in these writ petitions.
The factual matrix relates to a common sequence of events wherein an attempt to bring in gold without a declaration on arrival at the Airport and trying to pass through the Customs Green Channel. In all these cases once the ‘subject gold' was confiscated by the Customs authorities, a show cause notice was sent, and an order was passed along with a fine to be paid by the defaulters. In most of these petitions, the order upholding the confiscation order along with the penalty imposed has been impugned.
The Court noted that the smuggling of gold is per se restricted by virtue of Section 111 as also in terms of various notifications issued under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR) and under the Reserve Bank of India Act. There is no gainsaying that one of the main objects of the Customs Act is to prohibit the smuggling of goods and sternly deal with the same, as could be plainly gathered on a conjoint reading of Sections 2(25), 11(2)(c), 111 and 112 of Customs Act.
On perusal of the contentions broadly advanced as well as the Notifications and Circulars issued by the Central Board of Excise and Customs (CBEC), Customs, and RBI and relevant statutory provisions, the Court stated that Section 2(33) of Customs Act while defining prohibited goods firstly brings within its dragnet all goods in respect of which a prohibitory notification or order may have been issued. That order could be one promulgated either under Section 11 of the Act, Section 3(2) of FTDR, or any other law for the time being in force. However, a reading of the latter part of Section 2(33) clearly concludes that goods that have been imported in violation of a condition for import would also fall within its ambit. If Section 2(33) were envisaged to extend only to goods the import of which was explicitly proscribed alone, there would have been no occasion for the authors of the statute to have spoken of goods imported in compliance with import conditions falling outside the scope of ‘prohibited goods'.
The Court further noted that it is manifest that a prohibition could be either in absolutist terms or subject to a regime of restriction or regulation. It is this theme that stands reiterated in Section 3(2) of the FTDR which again speaks of a power to prohibit, restrict or regulate. It becomes pertinent to bear in mind that in terms of the said provision, all orders whether prohibiting, restricting or regulating are deemed, by way of a legal fiction, to fall within the ambit of Section 11 of the Act. This in fact reaffirms our conclusion that Section 2(33) would not only cover situations where an import may be prohibited but also those where the import of goods is either restricted or regulated. A fortiori and in terms of the plain language and intent of Section 2(33), an import that is effected in violation of a restrictive or regulatory condition would also fall within the net of ‘prohibited goods'.
The Court observed that the absence of a notification issued under Section 11 of the Act or Section 3(2) of the FTDR would have no material bearing since a restriction on the import of gold stands constructed in terms of the Foreign Trade Policy (FTP) and the specific prescriptions forming part of the Indian Tariff Code (HS). Those restrictions which are clearly referable to Section 5 of the FTDR, and the relevant provisions of that enactment would clearly be a restriction imposed under a law for the time being in force. Once the concept of prohibited goods is understood to extend to a restrictive or regulatory measure of control, there would exist no justification to discern or discover an embargo erected either in terms of Section 11 of the Act or Section 3(2) of the FTDR. This more so since, the power to prohibit as embodied in the provisions itself envisages a notification or order which may stop short of a complete proscription and merely introduce a restriction or condition for import.
Thus, it is the FTP formulated in terms of Section 5 of the FTDR which makes the import of gold subject to RBI regulation. This stipulation thus clearly evidences the intent of the Union Government to confer RBI with the authority to formulate regulatory provisions in relation to the import of gold. Since this power stands bestowed upon the RBI by the Union Government and forms an integral part of the FTP itself, one need not look for or undertake an expedition to discern a power independently vested in the RBI to issue appropriate directives and circulars regulating the import of gold.
The Court concluded that the importation of gold is a prohibited item within the meaning of Section 2(33) of the Act, and that redemption in case of importation of gold that is brought into India illegally in the form of ‘smuggling' does not entitle the owner or importer for automatic release/redemption of such item, and therefore, as a necessary corollary a decision to allow release/redemption of the goods confiscated with or without the imposition of a fine in addition to payment of requisite duty is vested in the discretion of the Adjudicating Officer, who needless to state is duty bound to exercise his discretionary powers not only after considering the facts and circumstances of each case before it but also in a transparent, fair and judicious manner under Section 125 of the Act.
Thus, the Court held that an infraction of a condition for the import of goods would also fall within the ambit of Section 2(33) of the Act and thus their redemption and release would become subject to the discretionary power of the Adjudicating Officer.
[Nidhi Kapoor v Principal Commissioner and Additional Secretary to the Government of India, 2023 SCC OnLine Del 5099, decided on 21-08-2023]
Advocates who appeared in this case :
Mr. Nitin Ahlawat, Mr. Visesh Chaudhary, Mr. Sahil Dagar and Ms. Sonali Sardana, Advocates for petitioner
Mr. Tarun Gulati, Sr. Adv. Amicus Curie, Mr. Kishore Kunal, Mr. Kumar Sambhav, Advocates for respondent.
Mr. Satish Kumar, Sr. Standing Counsel and Ms. Sonu Bhatnagar, Sr. Standing Counsel on behalf of respondent 2 & 3 along with Mr. Dhruv, Mr. Mandal
