Confiscation Penalty - Custom PDF

10
PROVISIONS RELATING TO
ILLEGAL IMPORT, ILLEGAL
EXPORT, CONFISCATION,
PENALTY & ALLIED
PROVISIONS
LEARNING OUTCOMES
After studying this chapter, you would be able to:
 comprehend the provisions relating to prohibited/ notified/specified
goods & illegal importation/exportation of goods
 identify the power to search suspected persons
 analyse and apply the circumstances demanding power to arrest and
inspect.
 analyse and apply the provisions relating to confiscation of
improperly imported goods.
 identify and examine the cases where penalty is leviable for improper
importation/exportation of goods
 identify the various offences and prosecution provisions relating
thereto.
© The Institute of Chartered Accountants of India

10.2 CUSTOMS & FTP
UNIT: I - PROVISIONS RELATING TO PROHIBITED/

NOTIFIED/SPECIFIED GOODS & ILLEGAL
IMPORTATION/EXPORTATION OF GOODS
1. INTRODUCTION
Chapters IV, IV A, IV B and IV C of the Customs Act deals with the provisions
relating to prohibition on importation and exportation of goods and detection
of illegal imports and exports. The relevant sections are sections 11, 11A to
11N. Before we understand these provisions, we should understand the
meaning of “prohibited goods”.
2. PROHIBITION ON ILLEGAL IMPORTATION/

EXPORTATION OF GOODS [CHAPTER IV]
PROHIBITED GOODS
The term “prohibited goods” has been defined under section 2(33) meaning
“any goods the import or export of which is subject to any prohibition under this
Act or any other law for the time being in force but does not include any such
goods in respect of which the conditions subject to which the goods are
permitted to be imported or exported have been complied with”.
This definition can be split as follows:
- any goods imports/exports of which is subject to any prohibition
- under this Act or any other law for the time being in force
- but does not include any such goods which complies with the conditions
imposed.
Hence, this definition is of a wider scope which covers goods not only subject to
prohibition under this Act but also under any other law in force. One exception is
those goods which complies or fulfills the condition imposed on it.
The prohibition provided under the Customs Act is in four parts:
Provisions Sections Chapter
General power to prohibit importation and 11 IV

PROVISIONS RELATING TO ILLEGAL IMPORT, ILLEGAL 10.3
EXPORT, CONFISCATION, PENALTY AND, ALLIED PROVISIONS
exportation of goods
Special prohibition relating to detection of 11A to 11G IV A

illegally imported goods and
prevention/disposal thereof
Prevention or detection of illegal export of 11H to 11 M IV B

goods
Power to exempt from the provisions of 11N IV C

Chapters IVA and IVB
POWER TO PROHIBIT IMPORTATION AND EXPORTATION OF GOODS

[SECTION 11]
If the Central Government is satisfied that it is necessary so to do for any of
the purposes specified in sub-section (2), it may, by notification in the Official
Gazette, prohibit either absolutely or subject to such conditions (to be fulfilled
before or after clearance) as may be specified in the notification, the import or
export of goods of any specified description.
Purposes for which import/export can be prohibited The purposes referred
to in sub-section (1) are the following:-
 the maintenance of the security of India;
 the maintenance of public order and standards of decency or morality;
 the prevention of smuggling;
 the prevention of shortage of goods of any description;
 the conservation of foreign exchange and the safeguarding of balance of
payments;
 the prevention of injury to the economy of the country by the uncontrolled
import or export of gold or silver;
 the prevention of surplus of any agricultural product or the product of
fisheries;
 the maintenance of standards for the classification, grading or marketing of
goods in international trade;
 the prevention of serious injury to domestic production of goods of any
description;

10.4 CUSTOMS & FTP
 the protection of human, animal or plant life or health;

 the protection of national treasures of artistic, historic or archaeological
value;
 the conservation of exhaustible natural resources;
 the protection of patents, trade marks, copyrights designs and geographical
indications;
 the prevention of deceptive practices;
 the carrying on of foreign trade in any goods by the State, or by a
Corporation owned or controlled by the State to the exclusion, complete or
partial, of citizens of India;
 the fulfilment of obligations under the Charter of the United Nations for the
maintenance of international peace and security;
 the implementation of any treaty, agreement or convention with any
country;
 the compliance of imported goods with any laws which are applicable to
similar goods produced or manufactured in India;
 the prevention of dissemination of documents containing any matter which
is likely to prejudicially affect friendly relations with any foreign State or is
derogatory to national prestige;
 the prevention of the contravention of any law for the time being in force;
and
 any other purpose conducive to the interests of the general public.
The Central Government has issued a large number of notifications under
section 11, prohibiting, restricting or conditionally permitting import or export
of various goods.
Any prohibition or restriction or obligation relating to import or export of
any goods or class of goods or clearance thereof provided in any other law
for the time being in force, or any rule or regulation made or any order or
notification issued thereunder, shall be executed under the provisions of
that Act only if such prohibition or restriction or obligation is notified
under the provisions of this Act, subject to such exceptions, modifications
or adaptations as the Central Government deems fit.(To be notified)

3. DETECTION OF ILLEGALLY IMPORTED

GOODS AND PREVENTION OF THE
DISPOSAL THEREOF [CHAPTER IVA]
Reasons for insertion of this Chapter: With an idea to keep a check over the
large scale smuggling of silver out of the country and various consumer
articles smuggled into the country, this chapter was inserted in the Customs
Act, in 1969. This Chapter is for detection of those goods which have been
imported illegally into India.
DEFINITIONS [SECTION 11A]
(a) “Illegal import” means “the import of any goods in contravention of

provisions of this Act or any other law for the time being in force”.
(b) “Notified date”, in relation to goods of any description, means the date on
which the notification in relation to such goods is issued under section 11B.
(c) “Notified goods” means goods specified in the notification issued under
section 11B.
(d) “Intimated place” means a place intimated under sub-section (1)/(2)/(3) of

section 11C.
POWER OF CENTRAL GOVERNMENT TO NOTIFY GOODS [SECTION 11B]

If the Central Government is satisfied that it is expedient in the public interest
to take special measures for the purpose of
- checking the illegal import,
- checking circulation or disposal of such goods, or
- facilitating the detection of such goods,
it may, by notification in the Official Gazette, specify goods of such class or
description. Such notification shall be issued having regard to the magnitude
of the illegal import of goods of any class or description.
However, it may be noted that at present, no goods are specified as
“notified goods”.

10.6 CUSTOMS & FTP
PERSONS POSSESSING NOTIFIED GOODS TO INTIMATE THE PLACE OF

STORAGE, ETC. [SECTION 11C]
Intimation of possessing notified goods: Every person who owns,
possesses or controls, on the notified date, any notified goods, shall, within
seven days from that date, deliver to the proper officer a statement in such
form and manner and containing such particulars as specified by rules made
in this behalf in relation to the notified goods owned, possessed or
controlled by him and the place where such goods are kept or stored.
Every person who acquires any notified goods, after the notified date,
before making such acquisition,
- shall deliver to the proper officer an intimation containing the
particulars of the place where such goods are proposed to be kept or
stored after such acquisition and
- shall, immediately on such acquisition, deliver to the proper officer a
statement in relation to the notified goods acquired by him.
However, a person who has delivered a statement, in relation to any notified
goods, owned, possessed, controlled or acquired by him, shall not be
required to deliver any further statement in relation to any notified goods
acquired by him, after the date of delivery of the said statement, so long as
the notified goods so acquired are kept or stored at the intimated place.
Intimation of shifting of any notified goods: If any person intends to
shift any notified goods to any place other than the intimated place, he
shall, before taking out such goods from the intimated place, deliver to the
proper officer an intimation containing the particulars of the place to which
such goods are proposed to be shifted. No person shall, after the expiry of
seven days from the notified date, keep or store any notified goods at any
place other than the intimated place.
Sale or transfer of notified goods: Where any notified goods have been
sold or transferred, such goods shall not be taken from one place to
another unless they are accompanied by the voucher referred to in section
11F.
No notified goods (other than those which have been sold or transferred) shall
be taken from one place to another unless they are accompanied by a
transport voucher prepared by the persons owning, possessing or controlling
such goods.

PRECAUTIONS TO BE TAKEN BY PERSONS ACQUIRING NOTIFIED

GOODS [SECTION 11D]
No person shall acquire (except by gift or succession, from any other
individual in India), after the notified date, any notified goods -
unless such goods are accompanied by, -
(a) the voucher referred to in section 11F or the memorandum referred to
in sub-section (2) of section 11G, as the case may be, or
(b) in the case of a person who has himself imported any goods, any
evidence showing clearance of such goods by the Customs
Authorities; and
unless he has taken, before acquiring such goods from a person other
than a dealer having a fixed place of business, such reasonable steps as
may be specified by rules made in this behalf, to ensure that the goods
so acquired by him are not goods which have been illegally imported.
PERSONS POSSESSING NOTIFIED GOODS TO MAINTAIN ACCOUNTS

[SECTION 11E]
Every person who, on or after the notified date, owns, possesses, controls or
acquires any notified goods shall maintain (in such form and in such manner
as may be specified by rules made in this behalf) a true and complete account
of such goods and shall, as often as he acquires or parts with any notified
goods, make an entry in the said account in relation to such acquisition or
parting with, and shall also state therein the particulars of the person from
whom such goods have been acquired or in whose favour such goods have
been parted with, as the case may be, and such account shall be kept, along
with the goods, at the place of storage of the notified goods to which such
accounts relate.
However, it shall not be necessary to maintain separately accounts in the form
and manner specified by rules made in this behalf in the case of a person who
is already maintaining accounts which contain the particulars specified by the
said rules.
Every person who owns, possesses or controls any notified goods and who uses
any such goods for the manufacture of any other goods, shall maintain (in such
form, in such manner and containing such particulars as may be specified by rules
made in this behalf) a true and complete account of the notified goods so used

10.8 CUSTOMS & FTP
by him and shall keep such account at the intimated place.
SALE, ETC., OF NOTIFIED GOODS TO BE EVIDENCED BY VOUCHERS

[SECTION 11F]
On and from the notified date, no person shall sell or otherwise transfer any
notified goods, unless every transaction in relation to the sale or transfer of
such goods is evidenced by a voucher in such form and containing such
particulars as may be specified by rules made in this behalf.
SECTIONS 11C, 11E AND 11F NOT TO APPLY TO GOODS IN PERSONAL

USE [SECTION 11G]
Nothing in sections 11C, 11E and 11F shall apply to any notified goods which are-
(a) in personal use of the person by whom they are owned, possessed or
controlled, or
(b) kept in the residential premises of a person for his personal use.
If any person, who is in possession of any notified goods referred to in sub-
section (1), sells, or otherwise transfers for a valuable consideration, any such
goods, he shall issue to the purchaser or transferee, as the case may be, a
memorandum containing such particulars as may be specified by rules made in
this behalf and no such goods shall be taken from one place to another unless
they are accompanied by the said memorandum.
4. PREVENTION OR DETECTION OF ILLEGAL

EXPORT OF GOODS [CHAPTER IV B]
REASON FOR INSERTION OF THIS CHAPTER: Chapter IV B was
introduced in the Customs Act to prevent or detect the export of goods
illegally out of India.
DEFINITIONS [SECTION 11H]

Definitions of some of the terms relevant for this Chapter are given below:
(a) "Illegal export" means the export of any goods in contravention of the
provisions of this Act or any other law for the time being in force;
(b) "Intimated place" means a place intimated under sub-section (1), sub-
section (2) or sub-section (3), as the case may be, of section 11J;

(c) "Specified area"

includes the Indian customs waters, and
such inland area, not exceeding 100 kms in width from any coast or other
border of India, as the Central Government may, having regard to the
vulnerability of that area to smuggling, by notification in the Official Gazette,
specify in this behalf.
However, where a part of any village, town or city falls within a specified area,
the whole of such village, town or city shall, notwithstanding that the whole
of it is not within one hundred kms from any coast or other border of India,
be deemed to be included in such specified area.
(d) “Specified date”, in relation to specified goods, means the date on which
any notification is issued under section 11-I in relation to those goods in
any specified area;
(e) “Specified goods” means goods of any description specified in the
notification issued under section 11-I in relation to a specified area.
POWER OF CENTRAL GOVERNMENT TO SPECIFY GOODS [SECTION 11I]

Central Government is empowered to specify goods by notification in the
Official Gazette, having regard to the magnitude of the illegal export of goods
of any class or description for the purpose of checking the illegal export or
facilitating the detection of goods which are likely to be illegally exported.
At present, acetic anhydride, drug formulations containing codeine or its salts
and ephedrine and pseudo-ephedrine have been so notified.
PERSONS POSSESSING SPECIFIED GOODS TO INTIMATE THE PLACE OF

STORAGE, ETC. [SECTION 11J]
Every person who owns, possesses or controls any specified goods on the
specified date, the market price of which exceeds ` 15,000 shall, within
seven days from that date, deliver to the proper officer an intimation
containing the particulars of the place where such goods are kept or stored
within the specified area.
Every person who acquires (within the specified area), after the specified
date, any specified goods, -
(i) the market price of which, or

10.10 CUSTOMS & FTP
(ii) the market price of which together with the market price of any
specified goods of the same class or description, if any, owned,
possessed or controlled by him on the date of such acquisition,
exceeds ` 15,000 shall, before making such acquisition, deliver to the proper
officer an intimation containing the particulars of the place where such
goods are proposed to be kept or stored after such acquisition.
If any person intends to shift any specified goods, to any place other than
the intimated place, he shall, before taking out such goods from the
intimated place, deliver to the proper officer an intimation containing the
particulars of the place to which such goods are proposed to be shifted.
TRANSPORT OF SPECIFIED GOODS TO BE COVERED BY VOUCHERS

[SECTION 11K]
Transport of specified goods has to be covered by vouchers, in such form and
containing such particulars as may be specified by rules made in this behalf.
PERSONS POSSESSING SPECIFIED GOODS TO MAINTAIN ACCOUNTS

[SECTION 11L]
Every possessor of specified goods is required to maintain accounts in the
prescribed form, inter alia, showing details of receipts and disposal.
STEPS TO BE TAKEN BY PERSONS SELLING OR TRANSFERRING ANY

SPECIFIED GOODS [SECTION 11M]
Except where he receives payment by cheque drawn by the purchaser, every
person who sells or otherwise transfers within any specified area, any specified
goods, shall obtain, on his copy of the sale or transfer voucher, the signature
and full postal address of the person to whom such sale or transfer is made
and shall also take such other reasonable steps as may be specified by rules
made in this behalf to satisfy himself as to the identity of the purchaser or the
transferee, as the case may be, and if after an inquiry made by a proper officer,
it is found that the purchaser or the transferee, as the case may be, is not
either readily traceable or is a fictitious person, it shall be presumed, unless
the contrary is proved, that such goods have been illegally exported and the
person who had sold or otherwise transferred such goods had been concerned
in such illegal export.

However, nothing in this section shall apply to petty sales of any specified
goods if the aggregate market price obtained by such petty sales, made in the
course of a day, does not exceed two thousand and five hundred rupees.
Meaning of “petty sale”

In this section “petty sale” means a sale at a price which does not exceed ` 1,000.
5. EXEMPTIONS FROM THE OPERATION OF

CHAPTERS IV A & IV B [CHAPTER-IVC]
Section 11N empowers the Central Government to exempt generally, either
absolutely or subject to such conditions as may be specified in the notification,
goods of any class or description from all or any of the provisions of Chapter
IVA or Chapter IVB.

10.12 CUSTOMS & FTP
UNIT II-SEARCHES, SEIZURE AND ARREST

POWERS OF CUSTOMS OFFICERS
1. POWER TO SEARCH SUSPECTED PERSONS

ENTERING OR LEAVING INDIA, ETC.
[SECTION 100]
If the proper officer has reason to believe that any person to whom this
section applies has secreted about his person, any goods liable to confiscation
or any documents relating thereto, he may search that person [Sub-section
(1)].
Persons who can be searched: This section applies to the following persons,
namely : –
(a) any person who has landed from or is about to board, or is on board any
vessel within the Indian customs waters;
(b) any person who has landed from or is about to board, or is on board a
foreign-going aircraft;
(c) any person who has got out of, or is about to get into, or is in, a vehicle,
which has arrived from, or is to proceed to any place outside India;
(d) any person not included in clauses (a), (b) or (c) who has entered or is about
to leave India;
(e) any person in a customs area [Sub-section (2)].
2. POWER TO SEARCH SUSPECTED PERSONS

IN CERTAIN OTHER CASES [SECTION 101]
Without prejudice to the provisions of section 100, if an officer of customs
empowered in this behalf by general or special order of the Principal
Commissioner/Commissioner of Customs, has reason to believe that any
person has secreted about his person any goods* of the description specified
in sub-section (2) which are liable to confiscation, or documents relating
thereto, he may search that person [Sub-section (1)].

*Specified goods
The goods referred to in sub-section (1) are the following: –
(a) gold
(b) diamonds
(c) manufactures of gold or diamonds
(d) watches
(e) any other class of goods which the Central Government may, by notification
in the Official Gazette, specify [Sub-section (2)].
Distinction between the provisions of section 100 and section 101
S.No. Section 100 Section 101

1. A person can be searched if he has A person can be searched if he has
secreted any goods liable to secreted specified goods liable to
confiscation/any documents confiscation/documents relating
relating thereto in his person. thereto in his person.
2. Proper officer is empowered to Officer of customs can search the
search the person. person only if he is empowered in
this behalf by general or special
order of the Principal Commissioner/
Commissioner of Customs.
3. PERSONS TO BE SEARCHED MAY REQUIRE

TO BE TAKEN BEFORE GAZETTED OFFICER OF
CUSTOMS OR MAGISTRATE [SECTION 102]
(a) Person may require to be searched before Gazetted Officer/Magistrate:
When any officer of customs is about to search any person under the
provisions of section 100 or section 101, the officer of customs shall, if such
person so requires, take him without unnecessary delay to the nearest
gazetted officer of customs or magistrate [Sub-section (1)].
If such requisition is made, the officer of customs may detain the person
making it until he can bring him before the gazetted officer of customs or
the magistrate [Sub-section (2)].

10.14 CUSTOMS & FTP
(b) Gazetted Officer/Magistrate may discharge the person/direct the

search to be made: The gazetted officer of customs or the magistrate
before whom any such person is brought shall, if he sees no reasonable
ground for search, forthwith discharge the person but otherwise shall direct
that search be made [Sub-section (3)].
(c) Two or more persons to attend and witness search : Before making a
search under the provisions of section 100 or section 101, the officer of
customs shall call upon two or more persons to attend and witness the
search and may issue an order in writing to them or any of them so to do;
and the search shall be made in the presence of such persons and a list of
all things seized in the course of such search shall be prepared by such
officer or other person and signed by such witnesses [Sub-section (4)].
(d) Female to be searched only by a female: No female shall be searched by
any one excepting a female [Sub-section (5)].
4. POWER TO SCREEN OR X-RAY BODIES OF

SUSPECTED PERSONS FOR DETECTING
SECRETED GOODS [SECTION 103]
(a) Detention of the person referred to in section 100(2): Where the proper
officer has reason to believe that any person referred to in sub-section (2)
of section 100 has any goods liable to confiscation secreted INSIDE HIS
BODY, he may detain such person and produce him without unnecessary
delay before the nearest magistrate [Sub-section (1)].
(b) Magistrate may discharge the person: A magistrate before whom any
person is brought under sub-section (1) shall, if he sees no reasonable
ground for believing that such person has any such goods secreted inside
his body, forthwith discharge such person [Sub-section (2)].
(c) Magistrate may order to X-ray the body of such person: Where any such
magistrate has reasonable ground for believing that such person has any such
goods secreted inside his body and the magistrate is satisfied that for the purpose
of discovering such goods it is necessary to have the body of such person
screened or X-rayed, he may make an order to that effect [Sub-section (3)].
Hence, a person [referred to in section 100(2)] can be screened/X-rayed only
if he is suspected to have secreted any goods INSIDE HIS BODY.
Otherwise, he can only be searched.

(d) Person to be X-rayed to be taken before radiologist: Where a magistrate

has made any order under sub-section (3), in relation to any person, the
proper officer shall, as soon as practicable, take such person before a
radiologist possessing qualifications recognized by the Central Government
for the purpose of this section, and such person shall allow the radiologist
to screen or X-ray his body [Sub-section (4)].
(e) Radiologist shall forward report to magistrate: A radiologist before
whom any person is brought under sub-section (4) shall, after screening or
X-raying the body of such person, forward his report, together with any X-
ray pictures taken by him, to the magistrate without unnecessary delay
[Sub-section (5)].
(f) Magistrate may direct to bring out such goods: Where on receipt of a
report from a radiologist under sub-section (5) or otherwise, the magistrate is
satisfied that any person has any goods liable to confiscation secreted inside
his body, he may direct that suitable action for bringing out such goods be
taken on the advice and under the supervision of a registered medical
practitioner and such person shall be bound to comply with such direction.
However, in the case of a female no such action shall be taken except on the
advice and under the supervision of a female registered medical practitioner
[Sub-section (6)].
Where any person is brought before a magistrate under this section, such
magistrate may for the purpose of enforcing the provisions of this section
order such person to be kept in such custody and for such period as he may
direct [Sub-section (7)].
(g) No screening if person himself admits that goods are secreted in his
body: Nothing in this section shall apply to any person referred to in sub-
section (1), who admits that goods liable to confiscation are secreted inside
his body, and who voluntarily submits himself for suitable action being
taken for bringing out such goods [Sub-section (8)].
Meaning of registered medical practitioner

“Registered medical practitioner” means any person who holds a qualification
granted by an authority specified in the Schedule to the Indian Medical Degrees
Act, 1916, or notified under section 3 of that Act, or by an authority specified in
any of the Schedules to the Indian Medical Council Act, 1956.

10.16 CUSTOMS & FTP
5. POWER TO ARREST [SECTION 104]

To tackle the menace of smuggling and other serious economic offences
including commercial frauds effectively, apart from penal action in departmental
adjudication, the Customs Act, also provides for criminal prosecution action. The
persons involved can be arrested and prosecuted in a Court of Law. Prosecution
action can also be taken for providing false documents/ declarations to Customs
and for obstructing Customs officers working intentionally.
A customs officer duly authorised by the Principal Commissioner/ Commissioner
can arrest any person, in India or within the Indian customs waters, who is guilty
of an offence punishable under section 132 or section 133 or section 135 or
section 135A or section 136 of the Customs Act [Section 104(1)].
Under the law, the person being arrested is entitled to be informed about the
grounds for such arrest under the law. The said section also enjoins that
provides that every person arrested under the Act has to be taken without
unnecessary delay to the nearest Magistrate [Sub-section (2)].
Where an officer of customs has arrested any person under sub-section (1), he
shall, for the purpose of releasing such person on bail or otherwise, have the
same powers and be subject to the same provisions as the officer-in-charge of a
police-station has and is subject to under the Code of Criminal Procedure, 1973
[Sub-section (3)].
The threshold limits for arrest have been enhanced vide Circular No. 28/2015
Cus dated 23.10.2015 pursuant to the enhancement in threshold limits for
prosecution. The threshold limits for arrest are also the same as mentioned in
case of initiating prosecution [Refer Unit-IV]. It has been clarified that powers
of arrest should be exercised in exceptional situation.
However, such threshold limit would not apply in case of offences relating to
FICN, arms, ammunitions and explosives, antiques, art treasures, wild life items
and endangered species of flora and fauna. In such cases, arrest, if required
on the basis of facts and circumstances of the case, may be considered
irrespective of value of offending goods involved.
6. POWER TO SEARCH PREMISES [SECTION 105]

Section 105 provides that if the Assistant/Deputy Commissioner of Customs or
in any area adjoining the land frontier or the coast of India an officer of
customs specially empowered by name in this behalf by the Board, has reason

to believe that any goods liable to confiscation, or any documents or things

which in his opinion will be useful for or relevant to any proceeding under this
Act, are secreted in any place, he may authorise any officer of customs to
search or may himself search for such goods, documents or things.
The provisions of the Code of Criminal Procedure, 1898 relating to searches
shall, so far as may be, apply to searches under this section.
7. POWER TO STOP AND SEARCH

CONVEYANCES [SECTION 106]
Section 106 (1) provides that where the proper officer has reason to believe that
any aircraft, vehicle or animal in India or any vessel in India or within the
Indian customs waters has been, is being, or is about to be, used in the
smuggling of any goods or in the carriage of any goods which have been
smuggled, he may at any time stop any such vehicle, animal or vessel or, in the
case of an aircraft, compel it to land, and -
(a) rummage and search any part of the aircraft, vehicle or vessel;
(b) examine and search any goods in the aircraft, vehicle or vessel or on the
animal;
(c) break open the lock of any door or package for exercising the powers
conferred by clauses (a) and (b), if the keys are withheld.
Sub-section (2) of section 106 provides that where for the purposes of sub-
section (1)
(a) it becomes necessary to stop any vessel or compel any aircraft to land, it
shall be lawful for any vessel or aircraft in the service of the Government
while flying her proper flag and any authority authorised in this behalf by
the Central Government to summon such vessel to stop or the aircraft to
land, by means of an international signal, code or other recognized means,
and thereupon, such vessel shall forthwith stop or such aircraft shall
forthwith land; and if it fails to do so, chase may be given thereto by any
vessel or aircraft as aforesaid and if after a gun is fired as a signal the vessel
fails to stop or the aircraft fails to land, it may be fired upon;
(b) it becomes necessary to stop any vehicle or animal, the proper officer may
use all lawful means for stopping it, and where such means fail, the vehicle
or animal may be fired upon.

10.18 CUSTOMS & FTP
8. POWER TO INSPECT [SECTION 106A]

Any proper officer authorised in this behalf by the Principal
Commissioner/Commissioner of Customs may, for the purpose of ascertaining
whether or not the requirements of this Act have been complied with, at any
reasonable time, enter any place intimated under Chapter IVA or Chapter IVB,
as the case may be, and inspect the goods kept or stored therein and require
any person found therein, who is for the time being in charge thereof, to
produce to him for his inspection the accounts maintained under the said
Chapter IVA or Chapter IVB, as the case may be, and to furnish to him such
other information as he may reasonably require for the purpose of
ascertaining whether or not such goods have been illegally imported, exported
or are likely to be illegally exported.]
9. POWER TO EXAMINE PERSONS [SECTION

107]
Any officer of customs empowered in this behalf by general or special order of
the Principal Commissioner/Commissioner of Customs may, during the course
of any enquiry in connection with the smuggling of any goods, -
(a) require any person to produce or deliver any document or thing relevant to
the enquiry;
(b) examine any person acquainted with the facts and circumstances of the case.
10. POWER TO SUMMON PERSONS TO GIVE

EVIDENCE AND PRODUCE DOCUMENTS
[SECTION 108]
Any Gazetted officer of Customs shall have power to summon any person whose
attendance he considers necessary either to give evidence or to produce a
document or any other thing in any inquiry which such officer is making under
this Act. A summons to produce documents or other things may be for the
production of certain specified documents or things or for the production of all
documents or things of a certain description in the possession or under the
control of the person summoned. All persons so summoned shall be bound to
attend either in person or by an authorised agent and state the truth upon any
subject respecting which they are examined or make statements and produce

such documents and other things as may be required. Every such inquiry as
aforesaid shall be deemed to be a judicial proceeding within the meaning of
section 193 and section 228 of the Indian Penal Code, 1860.
11. OBLIGATION TO FURNISH INFORMATION

[SECTION 108A]
Any specified person who is responsible for maintaining record of registration or
statement of accounts or holding any other information under any of the Acts
which is considered relevant, shall furnish such information to the proper officer
in such manner as may be prescribed by rules.
Further, where the proper officer considers that the information furnished is
defective, he may intimate the defect to the person who has furnished such
information. The opportunity of rectifying the defect shall be given within a
period of 7 days from the date of such intimation or within such further period
which may be allowed by the proper officer on an application made in this behalf.
In case the defect is not rectified within the said period of 7 days or, further
period, as the case may be, so allowed, then, notwithstanding anything contained
in any other provision of this Act, such information shall be deemed as not
furnished and the provisions of this Act shall be applicable.
Where a person who is required to furnish information has not furnished the
same within the specified time, the proper officer may serve upon him a notice
requiring him to furnish such information within a period not exceeding 30 days
from the date of service of the notice .
12. PENALTY FOR FAILURE TO FURNISH

INFORMATION RETURN [SECTION 108B]
If the person who is required to furnish information under section 108A fails to do
so within the period specified in the notice, the proper officer may direct such
person to pay, by way of penalty, a sum of one hundred rupees for each day of
the period during which such failure continues.

10.20 CUSTOMS & FTP
13. POWER TO REQUIRE PRODUCTION OF

ORDER PERMITTING CLEARANCE OF GOODS
IMPORTED BY LAND [SECTION 109]
Any officer of customs appointed for any area adjoining the land frontier of
India and empowered in this behalf by general or special order of the Board,
may require any person in possession of any goods which such officer has
reason to believe to have been imported into India by land, to produce the
order made under section 47 permitting clearance of the goods:
However, this section shall not apply to any imported goods passing from a
land frontier to a land customs station by a route appointed under clause (c)
of section 7.
14. POWER TO UNDERTAKE CONTROLLED

DELIVERY [SECTION 109A]
The proper officer or any other officer authorised by him in this behalf,
may undertake controlled delivery of any consignment of such goods in
the prescribed manner, to —
(a) any destination in India; or
(b) a foreign country, in consultation with the competent authority of
such country to which such consignment is destined.
“Controlled delivery” means the procedure of allowing consignment of
such goods to pass out of, or into, the territory of India with the
knowledge and under the supervision of proper officer for identifying the
persons involved in the commission of an offence or contravention under
this Act.
15. SEIZURE OF GOODS DOCUMENTS AND

THINGS [SECTION 110]
An officer of Customs can seize any goods, if he has reason to believe that the
same are liable to confiscation, under the Customs Act. Whenever goods are
being seized, the proper officer must also pass an appropriate order (seizure
memo/order/etc.) in addition to panchnama, clearly mentioning the reasons to
believe that the goods are liable for confiscation. Where it is not practicable

to seize any such goods, the proper officer may serve on the owner of the
goods an order that he shall not remove, part with, or otherwise deal with the
goods except with the previous permission of such officer. In such cases,
investigations should be fast-tracked to expeditiously decide whether to place
the goods under seizure or to release the same to their owner. The proper
officer may also seize any document or things that may be relevant to any
proceedings under the Custom Act. However, the person from whom these
documents are seized is entitled to make copies of the same.
The person from whom the goods are seized is issued a show cause notice,
usually within six months.
The Principal Commissioner/Commissioner of Customs, may for reasons to
be recorded in writing, can extend the time period for issue of show cause
notice, by further period not exceeding 6 months and inform the person from
whom such goods were seized before the expiry of the period so specified.
However, where any order for provisional release of the seized goods has been
passed under section 110A, the specified period of six months shall not apply.
In case the seized goods are perishable or hazardous in nature or is prone to
depreciate in value over time or for reasons of constraints in space, the
government can notify these goods and these goods can be disposed off
before the conclusion of the proceedings eg. All electronic goods, currency,
liquors, P&P medicine, Gold, Silver etc. [Section 110]
16. SEIZED GOODS, DOCUMENTS AND THINGS

PENDING ADJUDICATION TO BE RELEASED
PROVISIONALLY [SECTION 110A]
Any goods, documents or things seized under section 110, may, pending the
order of the adjudicating authority, be released to the owner. Such release
shall be made when the owner executes a bond in the proper form with such
security and conditions as the adjudicating authority may require.
Illustration
Examine, with the help of a decided case law, whether it is mandatory for the
Customs Officers to make available the seized documents to the person (from
whose custody such documents were seized) for making copies thereof.

10.22 CUSTOMS & FTP
Answer
Section 110(4) of the Customs Act, 1962 provides that the person from whose
custody any documents are seized under sub-section (3) shall be entitled to
make copies thereof or take extract therefrom in the presence of a officer of
Customs. Thus, Customs Officers are required to make available the seized
documents to the person from whose custody such documents were seized, if
such person wants to make copies thereof.
The above mentioned issue came up for consideration before the Bombay
High Court in case of Manish Lalit Kumar Bavishi v. Addl. Dir. General, DRI 2011
(272) E.L.T. 42. The High Court held that from the language of section 110(4),
it was apparent that the Customs officers were mandatorily required to make
available the documents asked for. It was the party concerned who had the
choice of either asking for the document or seeking extract.
If any document was seized during the course of any action by an officer under
the provisions of the Customs Act, that officer was bound to make available
those documents. The denial by the Revenue to make the documents
available was clearly an act without jurisdiction.

UNIT III-CONFISCATION & PENALTIES

CONFISCATION OF GOODS AND CONVEYANCES AND IMPOSITION OF
PENALTIES [CHAPTER XIV]
Confiscation means seizure of private property by the Government without
compensation to the owner, often as a consequence of conviction for crime, or
because possession or use of the property was contrary to law.
This chapter deals with confiscation of goods and conveyances and imposing
penalties. The provisions are contained in sections 111 to 127.
1. CONFISCATION OF IMPROPERLY IMPORTED

GOODS, ETC. [SECTION 111]
The following goods brought from a place outside India shall be liable to
confiscation. They are improperly imported goods:
 any goods imported by sea or air which are unloaded or attempted to be
unloaded at any place other than a customs port or customs airport
appointed under clause (a) of section 7 for the unloading of such goods;
 any goods imported by land or inland water through any route other than a
route specified in a notification issued under clause (c) of section 7 for the
import of such goods;
 any dutiable or prohibited goods brought into any bay, gulf, creek or tidal
river for the purpose of being landed at a place other than a customs port;
 any goods which are imported or attempted to be imported or are brought
within the Indian customs waters for the purpose of being imported,
contrary to any prohibition imposed by or under this Act or any other law
for the time being in force;
 any dutiable or prohibited goods found concealed in any manner in any
conveyance;
 any dutiable or prohibited goods required to be mentioned under the
regulations in an arrival manifest or import manifest or import report which
are not so mentioned;
 any dutiable or prohibited goods which are unloaded from a conveyance in
contravention of the provisions of section 32, other than goods

10.24 CUSTOMS & FTP
inadvertently unloaded but included in the record kept under sub-section

(2) of section 45;
 any dutiable or prohibited goods unloaded or attempted to be unloaded in
contravention of the provisions of section 33 or section 34;
 any dutiable or prohibited goods found concealed in any manner in any
package either before or after the unloading thereof;
 any dutiable or prohibited goods removed or attempted to be removed
from a customs area or a warehouse without the permission of the proper
officer or contrary to the terms of such permission;
 any dutiable or prohibited goods imported by land in respect of which the
order permitting clearance of the goods required to be produced under
section 109 is not produced or which do not correspond in any material
particular with the specification contained therein;
 any dutiable or prohibited goods which are not included or are in excess of
those included in the entry made under this Act, or in the case of baggage
in the declaration made under section 77;
 any goods which do not correspond :-
 in respect of value or in any other particular with the entry made under this
Act or
 in the case of baggage with the declaration made under section 77 in
respect thereof, or
 in the case of goods under transhipment, with the declaration for
transhipment referred to in the proviso to sub-section (1) of section 54;
 any dutiable or prohibited goods transitted with or without transhipment or
attempted to be so transitted in contravention of the provisions of Chapter
VIII;
 any goods exempted, subject to any condition, from duty or any prohibition
in respect of the import thereof under this Act or any other law for the time
being in force, in respect of which the condition is not observed unless the
non-observance of the condition was sanctioned by the proper officer;
 any notified goods in relation to which any provisions of Chapter IVA or of
any rule made under this Act for carrying out the purposes of that Chapter
have been contravened.

2. CONFISCATION OF GOODS ATTEMPTED TO BE

IMPROPERLY EXPORTED, ETC. [SECTION 113]
The following export goods shall be liable to confiscation. They are goods
attempted to be improperly exported:
 any goods attempted to be exported by sea or air from any place other than
a customs port or a customs airport appointed for the loading of such
goods;
 any goods attempted to be exported by land or inland water through any
route other than a route specified in a notification issued under clause (c) of
section 7 for the export of such goods;
 any goods brought near the land frontier or the coast of India or near any
bay, gulf, creek or tidal river for the purpose of being exported from a place
other than a land customs station or a customs port appointed for the
loading of such goods;
 any goods attempted to be exported or brought within the limits of any
customs area for the purpose of being exported, contrary to any prohibition
imposed by or under this Act or any other law for the time being in force;
 any goods found concealed in a package which is brought within the limits
of a customs area for the purpose of exportation;
 any goods which are loaded or attempted to be loaded in contravention of
the provisions of section 33 or section 34;
 any goods loaded or attempted to be loaded on any conveyance, or water-
borne, or attempted to be water-borne for being loaded on any vessel, the
eventual destination of which is a place outside India, without the
permission of the proper officer;
 any goods which are not included or are in excess of those included in the
entry made under this Act, or in the case of baggage in the declaration
made under section 77;
 any goods entered for exportation which do not correspond in respect of
value or in any material particular with the entry made under this Act or in
the case of baggage with the declaration made under section 77 in respect
thereof;

10.26 CUSTOMS & FTP
 any goods entered for exportation under claim for drawback which do not
correspond in any material particular with any information furnished by the
exporter or manufacturer under this Act in relation to the fixation of rate of
drawback under section 75;
 any goods on which import duty has not been paid and which are entered
for exportation under a claim for drawback under section 74;
 any goods cleared for exportation which are not loaded for exportation on
account of any wilful act, negligence or default of the exporter, his agent or
employee, or which after having been loaded for exportation are unloaded
without the permission of the proper officer;
 any specified goods in relation to which any provisions of Chapter IVB or of
any rule made under this Act for carrying out the purposes of that Chapter
have been contravened.
3. CONFISCATION OF CONVEYANCES [SECTION 115]

A. Conveyances liable to confiscation: The following conveyances shall be
liable to confiscation:
(a) any vessel which is or has been within the Indian customs waters, any
aircraft which is or has been in India, or any vehicle which is or has
been in a customs area, while constructed, adapted, altered or fitted in
any manner for the purpose of concealing goods;
(b) any conveyance from which the whole or any part of the goods is
thrown overboard, staved or destroyed so as to prevent seizure by an
officer of customs;
(c) any conveyance which having been required to stop or land under
section 106 fails to do so, except for good and sufficient cause;
(d) any conveyance from which any warehoused goods cleared for
exportation, or any other goods cleared for exportation under a claim for
drawback, are unloaded, without the permission of the proper officer;
(e) any conveyance carrying imported goods which has entered India and
is afterwards found with the whole or substantial portion of such
goods missing, unless the master of the vessel or aircraft is able to
account for the loss of, or deficiency in, the goods.

B. Confiscation of conveyance/animal used for smuggling: Any conveyance

or animal used as a means of transport in the smuggling of any goods or in
the carriage of any smuggled goods shall be liable to confiscation, unless
the owner of the conveyance or animal proves that it was so used without
the knowledge or connivance of the owner himself, his agent, if any, and the
person in charge of the conveyance or animal.
C. Option to pay fine in lieu of confiscation of conveyance: Where any such
conveyance is used for the carriage of goods or passengers for hire, the
owner of any conveyance shall be given an option to pay in lieu of the
confiscation of the conveyance a fine.
Maximum amount of fine: The amount of such fine shall not exceed the market
price of the goods which are sought to be smuggled or the smuggled goods, as
the case may be.
Meaning of market price

In this section, “market price” means market price at the date when the goods
are seized.
4. CONFISCATION OF PACKAGES AND THEIR

CONTENTS [SECTION 118]
(a) Confiscation of goods IMPORTED in a package: Where any goods imported
in a package are liable to confiscation, the package and any other goods
imported in that package shall also be liable to confiscation [Clause (a)].
(b) Confiscation of goods ATTEMPTED TO BE EXPORTED in package: Where
any goods are brought in a package within the limits of a customs area for the
purpose of exportation and are liable to confiscation, the package and any
other goods contained therein shall also be liable to confiscation [Clause (b)].
5. CONFISCATION OF GOODS USED FOR

CONCEALING SMUGGLED GOODS [SECTION
119]
As per this section, any goods* used for concealing smuggled goods shall also
be liable to confiscation.
*In this section, “goods” does not include a conveyance used as a means of transport.

10.28 CUSTOMS & FTP
6. CONFISCATION OF SMUGGLED GOODS AND

THEIR SALE PROCEEDS [SECTION 120-121]
These two provisions specifically relate to smuggled goods like gold etc. where
there is a change in their physical form or characteristics.
(a) Change in the physical form or characteristics of smuggled goods:
Smuggled goods are liable to confiscation even if after smuggling there is a
change in their physical form or characteristics.
For example, if smuggled gold idols are later on made into gold ornaments,
they shall still be liable to confiscation.
(b) Smuggled goods mixed with other goods in inseparable manner: Where
smuggled goods are mixed with other goods in such manner that the
smuggled goods cannot be separated from such other goods, the whole of
the goods shall be liable to confiscation.
However, where the owner of such goods proves that he had no knowledge
or reason to believe that they included any smuggled goods, only such part
of the goods the value of which is equal to the value of the smuggled
goods shall be liable to confiscation.
(c) Confiscation of sale-proceeds of smuggled goods: Where any smuggled
goods are sold by a person having knowledge/reason to believe that the
goods are smuggled goods, the sale-proceeds thereof shall be liable to
confiscation.
PENALTIES ON PERSONS
The personal penalty is a heavy punishment. The entire Customs Act being in
the nature of an indirect tax, no person can be penalised unless he is known to
have personally committed the offence with full knowledge of the illegality of
his action. However, this element of mens rea would defeat the very objective
of deterrent action against persons involved in smuggling. Therefore, the
persons involved in smuggling have been categorised into two, namely,
1. those directly involved in doing any act or omission which legally
constitutes smuggling and
2. others, who wittingly or unwittingly get themselves involved in the various
stages of smuggling.

PENAL PROVISIONS UNDER THE CUSTOMS ACT

The word ‘penalty’ means punishment under the law, i.e., such punishment as
is provided in penal laws. It also means the sum payable as a punishment for a
default.
7. PENALTIES IN RESPECT OF IMPROPER

IMPORTATION OF GOODS, ETC. [SECTION
112]
(1) Any person who, in relation to any goods, does or omits to do any act which
act or omission would render such goods liable to confiscation under
section 111, or abets the doing or omission of such an act,
OR
(2) Any person 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 under section 111, shall
be liable to penalty in the following manner:
S.No. Goods Maximum Penalty

1. In the case of prohibited (a) Value of the goods
goods or
(b) ` 5,000,
whichever is greater
2. In the case of dutiable (a) 10% of the duty sought to be
goods other than evaded on such goods
prohibited goods or
(b) ` 5,000,
whichever is greater.
Further, such penalty will be subject to
the provisions of section 114A.
However, where such duty as
determined under section 28(8) and
the interest payable thereon under

10.30 CUSTOMS & FTP
section 28AA is paid within 30 days

from the date of communication of
the order of the proper officer
determining such duty, the amount of
penalty liable to be paid by such
person under this section shall be 25%
of the penalty so determined.
3. In the case of goods in (a) Difference between the declared
respect of which:- value and the value thereof
(i) Value stated in Bill of or
entry (b) ` 5,000,
or whichever is greater
(ii) in the case of
baggage, in the
declaration made under
section 77 (in either
case hereafter in this
section referred to as
the declared value)
is higher than the value
thereof.
4. In case the goods are (a) Value of the goods
prohibited and value is or
mis-declared (b) Difference between the declared
value and the value thereof
or
(c) ` 5,000,
whichever is highest.
5. In case the goods are (a) Duty sought to be evaded on
dutiable (other than such goods
prohibited goods), and or
the value is mis- (b) Difference between the declared
declared value and the value thereof
or
(c) ` 5,000,
whichever is highest.

8. PENALTIES IN RESPECT OF ATTEMPT OF

IMPROPER EXPORTATION OF GOODS, ETC.
[SECTION 114]
Improper exportation of goods, which would render such goods liable to
confiscation under section 113 of the Customs Act, is liable to penalty under
section 114 of the Act as under:
S. No. Goods Maximum Penalty

1. In case of (a) Three times the value of the goods declared
prohibited goods by the exporter
or
(b) Three times the value as determined under
the Customs Act,
2. In case of (a) 10% of the duty sought to be evaded on such
dutiable goods, goods
other than or
prohibited goods (b) ` 5,000,
Further, such penalty will be subject to the
provisions of section 114A.
However, where such duty as determined under
section 28(8) and the interest payable thereon
under section 28AA is paid within 30 days from
the date of communication of the order of the
proper officer determining such duty, the amount
of penalty liable to be paid by such person under
this section shall be 25% of the penalty so
determined.
3. In case of any (a) Value of the goods declared by the exporter
other goods or
(b) Value as determined under the Customs Act,
Thus, under section 112, in each case, the minimum penalty is ` 5,000.

10.32 CUSTOMS & FTP
9. MANDATORY PENALTY FOR SHORT-LEVY

OR NON-LEVY OF DUTY IN CERTAIN CASES
[SECTION 114A]
(a) Penalty for non-levy/short levy of duty/where the interest has not been
charged/ paid/has been part paid or duty/interest has been
erroneously refunded: In cases of non-levy or short levy of duty or where
the interest has not been charged or paid or has been part paid or the duty
or interest has been erroneously refunded by reason of:-
(i) collusion or
(ii) any wilful mis-statement or
(iii) suppression of facts
person who is liable to pay the duty or interest, as the case may be, as
determined under sub-section (8) of section 28 shall also be liable to pay a
penalty.
(b) Amount of penalty: Amount of penalty shall be equal to the duty or interest
so determined.
(c) Benefit of reduced penalty available if duty/interest and interest on
delayed payment of duty paid within thirty days: Where such duty or interest,
as the case may be, and the interest on delayed payment of duty, is paid within
thirty days from the date of the communication of the order, the amount of
penalty to be paid shall be reduced to 25% of the duty or interest.
However, aforementioned benefit of reduced penalty is available only if the
amount of penalty so determined has also been paid within the said period
of thirty days.
(d) Increase/decrease in the amount of duty/interest payable
determined: If the duty or interest determined to be payable is reduced
or increased by the Commissioner (Appeals), the Appellate Tribunal or, as
the case may be, the Court, then, the duty or interest as reduced or
increased, as the case may be, shall be taken into account.
(e) Benefit of reduced penalty available if increased duty/interest and
interest on delayed payment of duty and 25% of consequentially
increased penalty paid within thirty days: In a case where the duty or
interest determined to be payable is increased by the Commissioner

(Appeals), the Appellate Tribunal or, as the case may be, the Court, then,
the benefit of reduced penalty shall be available if the amount of the
duty or the interest so increased, along with the interest on delayed
payment of duty, and 25% of the consequential increase in penalty have
also been paid within thirty days of the communication of the order.
(f) Section 112/114 not to apply: Where any penalty has been levied under
this section, no penalty shall be levied under section 112 or section 114.
10. USE OF FALSE AND INCORRECT MATERIAL

TO BE PENALIZED [SECTION 114AA]
Section 114AA lays down that if a person knowingly or intentionally:-
• makes,
• signs or uses, or
• causes to be made,
• signed or used,
any declaration, statement or document which is false or incorrect in any
material particular, in the transaction of any business for the purposes of the
Customs Act, shall be liable to a penalty.
Maximum penalty: Penalty shall not exceed 5 times the value of goods.
11. PENALTY FOR NOT ACCOUNTING FOR

GOODS [SECTION 116]
If:-
(i) any goods loaded in a conveyance for importation into India, or
(ii) any goods transshipped under the provisions of this Act or
(iii) coastal goods carried in a conveyance
are not unloaded at their place of destination in India, or if the quantity
unloaded is short of the quantity to be unloaded at that destination, and
if the failure to unload or the deficiency is not accounted for to the
satisfaction of the Assistant/Deputy Commissioner of Customs, the person-in-
charge of the conveyance shall be liable to penalty as follows:-

10.34 CUSTOMS & FTP
S. No. In case of Amount of penalty shall not exceed

1. goods loaded in a twice the amount of duty that would
conveyance for importation have been chargeable on the goods
into India or goods not unloaded or the deficient goods,
transhipped under the as the case may be, had such goods
provisions of this Act been imported
2. coastal goods amount of export duty that would
have been chargeable on the goods
not unloaded or the deficient goods,
as the case may be, had such goods
been exported
12. PENALTIES FOR CONTRAVENTION,

ETC.,NOT EXPRESSLY MENTIONED –
RESIDUAL PENALTY [SECTION 117]
Any person who contravenes any provision of this Act or abets any such
contravention or who fails to comply with any provision of this Act with which it
was his duty to comply, where no express penalty is elsewhere provided for such
contravention or failure, shall be liable to a penalty not exceeding ` 1,00,000.
ADJUDICATION OF CONFISCATIONS AND PENALTIES
13. ADJUDICATION OF CONFISCATION AND

PENALTIES [SECTION 122]
Where anything is liable to confiscation or any person is liable to a penalty,
such confiscation or penalty may be adjudged as under -
S.No. Particulars Adjudicating officer

1. Up to such limit Such officers to be notified by the Board
3. Without limit Principal Commissioner/ Commissioner/ Joint
Commissioner of Customs
Mens rea: Generally, ‘mens rea’ is not required to be proved for the imposition
of penalty under the provisions of the Customs Act. The amount of penalty
depends on the gravity of the offence and is to act as the deterrent for future.

14. ADJUDICATION PROCEDURE [SECTION

122A]
1. Section 122A provides that Adjudicating Authorities shall give an
opportunity of being heard to a party in a proceeding if the party so desires.
2. The Adjudicating Authority may, if sufficient cause is shown, at any stage of
proceeding, grant time, from time to time, to the parties and adjourn the
hearing for reasons to be recorded in writing.
3. However, such adjournment shall not be granted for more than three times
to a party during the proceeding.
15. BURDEN OF PROOF IN CERTAIN CASES

[SECTION 123]
Where any goods to which this section applies* are seized under this Act in
the reasonable belief that they are smuggled goods, the burden of proving
that they are not smuggled goods shall be
(a) in a case where such seizure is made from the possession of any person
(i) on the person from whose possession the goods were seized; and
(ii) if any person, other than the person from whose possession the goods
were seized, claims to be the owner thereof, also on such other person;
(b) in any other case
on the person, if any, who claims to be the owner.
*This section applies to gold, and manufactures thereof, watches, and any other
class of goods which the Central Government may by notification in the Official
Gazette specify. Central Government has specified the following classes of goods
under this section:-
(a) Silver bullion
(b) Cigarettes
Under this section, the burden of proof is on the accused and not on the
Department. It implies that where the goods notified under section 123 are
seized under reasonable belief that these are smuggled goods, the owner has
to prove that the same are not smuggled goods.

10.36 CUSTOMS & FTP
16. ISSUE OF SHOW CAUSE NOTICE (SCN)

BEFORE CONFISCATION OF GOODS ETC.
[SECTION 124]
No order confiscating any goods or imposing any penalty on any person shall
be made under this Chapter unless following conditions are satisfied-
(a) Issue of SCN: The owner of the goods or such person is given a notice in
writing with the prior approval of the officer of customs not below the rank
of Assistant Commissioner of Customs informing him of the grounds on
which it is proposed to confiscate the goods or to impose a penalty.
(b) Opportunity of making presentation: The owner of the goods or such
person is given an opportunity of making a representation in writing within
such reasonable time as may be specified in the notice against the grounds
of confiscation or imposition of penalty mentioned therein; and
(c) Opportunity of being heard: The owner of the goods or such person is
given a reasonable opportunity of being heard in the matter.
Waiver of show cause notice and representation: The notice referred to in
clause (a) and the representation referred to in clause (b) may, at the request
of the person concerned be oral.
Issue of supplementary notice: The proper officer may issue a
supplementary notice in the prescribed manner under prescribed
circumstances irrespective of the issue of notice under this section.
Illustration
A Customs Officer has issued an order for confiscation of goods. However, the
owner of the goods alleges that the order is not valid as no show cause notice
has been issued.
Examine the situation with reference to section 124 of the Customs Act, 1962.
Answer
Section 124 of the Customs Act, 1962 provides that before confiscating goods
or imposing any penalty on any person, a show cause notice [SCN] must be
issued to the owner of goods giving grounds for confiscation or imposition of
penalty and he should be given an opportunity to make representation and
being heard. The show cause notice can be issued only with the prior approval
of the officer of customs not below the rank of Assistant Commissioner of

Customs. The notice and the representation, at the request of the person
concerned, can be oral.
Therefore, since no show cause notice has been issued, the order of confiscation
of goods is not valid.
17. OPTION TO PAY FINE IN LIEU OF

CONFISCATION [SECTION 125]
Whenever confiscation of any goods is authorised by this Act, the officer adjudging it
MAY in the case of any goods, the importation or exportation whereof is
prohibited under this Act or under any other law for the time being in force, and
SHALL in the case of any other goods give to the owner of the goods or,
where such owner is not known, the person from whose possession or custody
such goods have been seized, an option to pay in lieu of confiscation such fine
as the said officer thinks fit.
ANALYSIS
Section 125(1) deals with two situations:-
(1) Importation or exportation of prohibited goods and
(2) Importation or exportation of any other goods
(1) Importation or exportation of prohibited goods: In case of importation
or exportation of prohibited goods, where the goods were confiscated, the
word used is “may”. Hence, in case of prohibited goods, it is at the
discretion of the officer to release the confiscated goods.
(2) Importation or exportation of any other goods: In the case of any other
goods, which are confiscated, the word used is “shall”. Thus, in case of other
goods, the officer is bound to release the goods.
Meaning of redemption fine
On confiscation, goods are vested in the Central Government. Central

Government can sell/auction the goods. However, the owner of the goods /the
person from whom the goods are seized may be given an option to get the
goods back by paying a fine. This fine is known as redemption fine

10.38 CUSTOMS & FTP
Non-applicability of provisions:
Where the proceedings are deemed to be concluded under section 28(2) or
section 28(6) in respect of the goods which are not prohibited or
restricted, the provisions of this section shall not apply.
Maximum amount of fine:
Further, without prejudice to the provisions of the proviso to sub-section (2) of
section 115, such fine shall not exceed the market price of the goods
confiscated, less in the case of imported goods the duty chargeable thereon.
Maximum amount of redemption fine = MP of the goods confiscated – Duty

chargeable
Liability to pay duty and charges payable on goods does not extinguish:
Where any fine in lieu of confiscation of goods is imposed, the owner of such
goods or the person referred to in sub-section (1), shall, in addition, be liable to
any duty and charges payable in respect of such goods.
Non-payment of fine: Where the fine is not paid within a period of 120 days
from the date of option, such option shall become void, unless an appeal
against such order is pending.
Illustration
A person attempts to illegally export an antique sculpture which is banned for
export. In adjudication he contends that under law the item must be released to
him on fine in lieu of confiscation. The contention is not correct. The
adjudicating officer in this case is not bound to accede to his request as the case
falls under the category where the officer ‘may’ release the goods on payment of
fine and is not bound to do so. The adjudicating officer will take a view on the
matter and decide whether to release the goods or to confiscate them.
Illustration
Briefly write a note on whether an exporter who has been held guilty of
exporting ‘prohibited goods’ is entitled to an option to pay fine in lieu of
confiscation under section 125 of the Customs Act, 1962.
Answer
As per section 125 of the Customs Act, 1962, whenever confiscation is ordered,
the adjudicating officer may provide an option to the owner of the goods to
pay redemption fine in lieu of confiscation if the importation or exportation of
goods is prohibited. However, if importation or exportation of goods is not

prohibited, the option to pay redemption fine shall be given to the owner of
goods.
Therefore, an exporter guilty of exporting prohibited goods is not entitled as
such to an option to pay fine in lieu of confiscation under section 125 of the
Customs Act, 1962. It is at the discretion of the adjudicating officer to give or
not to give such an option to the exporter guilty of exporting prohibited
goods. However, the owner of the goods importing or exporting non-
prohibited goods shall be entitled to such an option.
18. ON CONFISCATION, PROPERTY TO VEST IN

CENTRAL GOVERNMENT [SECTION 126]
When any goods are confiscated under this Act, such goods shall thereupon
vest in the Central Government. The officer adjudging confiscation shall take
and hold possession of the confiscated goods.
19. AWARD OF CONFISCATION OR PENALTY BY

CUSTOMS OFFICERS NOT TO INTERFERE
WITH OTHER PUNISHMENTS [SECTION 127]
The award of any confiscation or penalty under this Act by an officer of
customs shall not prevent the infliction of any punishment to which the person
affected thereby is liable under the provisions of Chapter XVI of this Act or
under any other law.

10.40 CUSTOMS & FTP
UNIT IV OFFENCES AND PROSECUTION

OFFENCES
The scheme of offences under the Customs Act can be understood with the
help of the following diagram:
Offences under the Customs Act, 1962
Cognizable and Non-cognizable offences Bailable and Non-bailable offences
Cognizable Non-cognizable Non-bailable Bailable offences:

Offences offences [Section offences: [Section [Section 104(7)]
[Section 104(4)] 104(5)] 104(6)] Except the offences
Except the offences Offences specified above, all
specified above, all punishable under other offences are
other offences are section 135 bailable offences .
non-cognizable relating to –
offences.
Offences relating to
Evasion or attempted evasion of
Prohibited goods
duty exceeding ` 50 lakh
Offences relating to evasion or

attempted evasion of duty Prohibited goods notified under
exceeding ` 50 lakh section 11 which are also notified
under section 135(1)(i)(C)]
Import/export of any goods which

have not been declared in
accordance with the provisions of this
Act and the market price of which
exceeds ` 1 crore
Fraudulently availing of or attempt to

avail of drawback or any exemption
from duty provided under this Act, if
the amount of drawback or exemption
from duty exceeds ` 50 lakh

Illustration
A case involving customs duty evasion of ` 53 lakhs is booked against Mr X and
he is arrested. When taken before the magistrate for remand to custody, Mr X
shows an arithmetical error in the worksheet by which the alleged evasion would
come down to ` 43 lakhs. The court orders his release as the offence becomes
non-cognizable and bailable by virtue of involving less than ` 50 lakhs in
alleged duty evasion.
Illustration
Explain briefly the offences which are cognizable and bailable under section 104
of the Custom Act, 1962.
Answer
As per section 104(4) of the Customs Act, 1962, following offences are
cognizable offences:
(a) offences relating to prohibited goods; or
(b) offences relating to evasion or attempted evasion of duty exceeding ` 50
lakh.
As per section 104(6) of the Customs Act, 1962, all offences under the Customs
Act, 1962 are bailable offences.
PROSECUTION:
No prosecution proceedings can be launched in a Court of Law against any
person under Customs Act, and no cognizance of any offence under sections
132 to 135 of the Customs Act, 1962 can be taken by any Court, except with
the previous sanction of concerned Principal Commissioner/Commissioner of
Customs. Based upon the results of investigations and evidence brought on
record, Principal Commissioner/Commissioners of Customs apply their mind
before sanctioning prosecution- after being satisfied that there are sufficient
reasons justifying prosecution. Criminal complaint is thereafter filed in
appropriate Court of law and followed up with a view to get expeditious
orders/conviction.
Revised guidelines have been issued on prosecution under Customs Act, 1962 vide
Circular No. 27/2015 Cus dated 23.10.2015. The significant aspects of the
guidelines are:
(a) Person liable to be prosecuted: As per the provisions of the Customs Act,

10.42 CUSTOMS & FTP
prosecution may be launched against any person including legal person for
offences covered under sections 132, 133, 134, 135, 135A or 136 of the
Customs Act, 1962.
(b) Threshold limits for launching of prosecution: CBIC has laid down the
following threshold limits for launching prosecution:
S.No. Particulars Threshold limits
(i) Baggage and Outright smuggling cases:
(a) Cases involving unauthorized CIF value of the goods

importation in baggage/ cases under involved is ` 20 lakh or
Transfer of Residence Rules more
(b) Outright smuggling of high value Value of offending goods

goods such as precious metal, is ` 20 lakh or more
restricted items or prohibited items
notified under section 11 of the
Customs Act, 1962 or goods notified
under section 123 of the Act or offence
involving foreign currency
(ii) Appraising Cases/ Commercial Frauds

(a) Importation of trade goods CIF value of the offending
involving willful mis- goods is ` 1 crore or more
declaration in value/
description of goods/
concealment of restricted
goods/ goods notified under
section 11 of the Act
(b) Fraudulent availment of Amount of drawback or
drawback or attempt to avail exemption from duty is
of drawback or any exemption ` 1 crore or more
from duty provided under the
Customs Act, 1962
(c) Exportation of trade goods FOB value of the
involving willful mis- offending goods is ` 1

declaration in value/ crore or more

description, concealment of
restricted goods or goods
notified under section 11 of
the Customs Act, 1962
(c) Exceptions:
Threshold limit will not apply in following cases:
(i) In case of habitual offenders or where criminal intent is evident in
ingenious way of concealment, where prosecutions can be considered
irrespective of the value of goods/currency involved in such
professional or habitual offenders, etc. provided the cumulative value of
3 or more such offences in past 5 years from the date of the decision
exceeds the threshold limit(s) indicated in above table.
(ii) In cases involving offences relating to items i.e., fake Indian currency
notes (FICN), arms, ammunitions and explosives, antiques, art treasures,
wild life items and endangered species of flora and fauna, prosecution
would be launched invariably, irrespective of value of offending goods
involved.
(iii) In respect of cases involving non-declaration of foreign currency by
foreign nationals and NRIs detected at the time of departure back from
India, exceeding the threshold limits of ` 20 lakh, if it is claimed that
the currency has been legally acquired and brought into India,
prosecution would not be considered as a routine.
Prosecutions will not be launched as a matter of routine and/or in
cases of technical nature, where the additional claim for duty is based
solely on a difference of interpretation of the law.
(d) Authority to sanction prosecution: Prosecution may be launched after due
sanction by the Commissioner / Principle Commissioner or Additional
Director General / Principle Additional Director General of Revenue
Intelligence (collectively known as ‘sanctioning authority’). However, in case of
habitual offenders and appraising cases/commercial frauds, prior approval of
the Chief Commissioner/Principal Chief Commissioner or Director
General/Principal Director General of Revenue Intelligence, as the case may be,
will be required for launching prosecution.

10.44 CUSTOMS & FTP
(e) Stage for launching of prosecution: Normally, prosecution may be launched

immediately on completion of adjudication proceedings.
Exceptions:
(i) Prosecution in respect of cases involving offences relating to items i.e.
gold, FICN, arms, ammunitions and explosives, antiques, art treasures,
wild life items and endangered species of flora and fauna may
preferably be launched immediately after issuance of show cause
notice.
(ii) If the party deliberately delays completion of adjudication proceedings,
prosecution may be launched even during the pendency of the
adjudication proceedings, where offence is grave and qualitative
evidences are available [in view of the decision of Supreme Court in
case of Radhe Shyam Kejriwal 2011(266) ELT 294*.
Further, in following cases investigation may be completed in time bound
manner preferably within six months and adjudication may be expedited
to facilitate launching of prosecution. These cases are:
(A) Case where arrest has been made during investigation (for
commercial fraud cases as well as outright smuggling cases) or in
the case of a habitual offender.
(B) Case where arrest has not been made but it relates to outright
smuggling of high value goods such as precious metal, restricted
items or prohibited items notified under section 11 or goods
notified under section 123 of the Customs Act, 1962 or foreign
currency where the value of goods is ` 20 lakh or more.
*The Supreme Court of India in the case of Radhe Shyam Kejriwal 2011
(266) ELT 294 (SC) had, inter alia, observed that
(i) adjudication proceedings and criminal proceedings can be
launched simultaneously;
(ii) decision in adjudication proceedings is not necessary before
initiating criminal prosecution;
(iii) adjudication proceedings and criminal proceedings are
independent of each other in nature and

(iv) the findings against the person facing prosecution in the

adjudication proceedings is not binding on the proceeding for
criminal prosecution.
[Circular No. 27/2015 Cus dated 23.10.2015]

Specific Provisions: Adjudication and appellate remedies are measures,
which sometimes may not be adequate to contain smuggling and evasion of
custom duty. As an exemplary measure it becomes necessary in certain
situations to initiate criminal proceedings and impose stiffer actions against
the offenders. Apart from prosecution in a court of law the Government had
introduced the COFEPOS ACT in 1974 to preventively detain such smugglers
and foreign exchange racketeers.
Sections 132 to 140 contain detailed provisions regarding the offences which
are liable to prosecution in a criminal court of law, the cognisance of the
offences, the procedure to try these offences and the presumption that can be
had in such proceedings. These provisions are briefly discussed below:
1. FALSE DECLARATION, FALSE DOCUMENTS,

ETC [SECTION 132]
Whoever makes, signs declaration, statement or document in the transaction
of any business relating to the customs, knowing or having reason to believe
that such declaration, statement or document is false in any material
particular, shall be punishable with imprisonment for a term which may extend
to 2 years, or with fine, or with both.
2. OBSTRUCTION OF OFFICER OF CUSTOMS

[SECTION 133]
If any person intentionally obstructs any officer of customs in the exercise of any
powers conferred under this Act, such person shall be punishable with
imprisonment for a term, which may extend to two years, or with fine, or with both.
3. REFUSAL TO BE X-RAYED [SECTION 134]

If any person resists or refuses to allow a radiologist to screen or to take X-ray
picture of his body in accordance with an order made by a Magistrate under

10.46 CUSTOMS & FTP
section 103, or resists or refuses to allow suitable action being taken on the
advice and under the supervision of a registered medical practitioner for
bringing out goods liable to confiscation secreted inside his body, as provided
in section 103, he shall be punishable with imprisonment for a term which may
extend to six months, or with fine, or with both.
4. EVASION OF DUTY OR PROHIBITIONS

[SECTION 135]
If any person—
(a) is in relation to any goods in any way knowingly concerned in
misdeclaration of value or in any fraudulent evasion or attempt at evasion
of any duty chargeable thereon or of any prohibition for the time being
imposed under this Act or any other law for the time being in force with
respect to such goods; or
(b) acquires possession of or is in any way concerned in carrying, removing,
depositing, arbouring, 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 under section 111 or section 113, as the
case may be; or
(c) attempts to export any goods which he knows or has reason to believe are
liable to confiscation under section 113; or
(d) fraudulently avails of or attempts to avail of drawback or any exemption
from duty provided under this Act in connection with export of goods,
then,
Particulars Punishment
(A) in the case of an offence relating to
(i) any goods the market price of which Imprisonment for a term
exceeds one crore of rupees which may extend to 7 years
and with fine
(ii) the evasion or attempted evasion of Imprisonment for a term

duty exceeding ` 50 lakh which may extend to 7 years
and with fine

(iii) such categories of prohibited goods as Imprisonment for a term

the Central Government may, by which may extend to 7 years
notification in the Official Gazette, and with fine
specify
(iv) fraudulently availing of or attempting Imprisonment for a term

to avail of drawback or any exemption which may extend to 7 years
from duty referred to in clause (d), if and with fine
the amount of drawback or exemption
from duty exceeds ` 50 lakh
(B) in any other case Imprisonment for a term

which may extend to 3 years,
or with fine, or with both
However, in the absence of special and adequate reasons to the contrary to

be recorded in the judgment of the court, such imprisonment (mentioned in
point (i) above) shall not be for less than 1 year.
If any person is convicted for a second time, he shall be punishable for the
second and subsequent offence with imprisonment for a term which may
extend to seven years and with fine.
The following shall not be considered as special and adequate reasons for
awarding sentence of imprisonment for less than one year:
1. the accused is convicted for the first time
2. the accused has been ordered to pay a penalty or the goods which are
the subject matter of such proceedings have been ordered to be
confiscated or any other action has been taken against him for the
same act
3. the accused was not the principal offender and was a secondary party
to the commission of the offence
4. the age of the accused.
5. PREPARATION [SECTION 135A]

If a person makes preparation to export any goods in contravention of the
provisions of this Act, and from the circumstances of the case it may be

10.48 CUSTOMS & FTP
reasonably inferred that if not prevented by circumstances independent of his

will, he is determined to carry out his intention to commit the offence, he shall
be punishable with imprisonment for a term which may extend to three years,
or with fine, or with both.
6. POWER OF COURT TO PUBLISH NAME,

PLACE OF BUSINESS, ETC., OF PERSONS
CONVICTED UNDER THE ACT [SECTION
135B]
Where any person is convicted under this Act for contravention of any of the
provisions thereof, it shall be competent for the court convicting the person to
cause the name and place of business or residence of such person, nature of
the contravention, the fact that the person has been so convicted and such
other particulars as the court may consider to be appropriate in the
circumstances of the case, to be published at the expense of such person in
such newspapers or in such manner as the court may direct.
No publication shall be made until the period for preferring an appeal against the
orders of the court has expired without any appeal having been preferred, or such
an appeal, having been preferred, has been disposed of. The expenses of any
publication shall be recoverable from the convicted person as if it were a fine
imposed by the court.
7. OFFENCES BY OFFICERS OF CUSTOMS

[SECTION 136]
The officers of Customs also cannot escape serious action including
prosecution action, if they are found abusing their powers or are shown to be
colluding/conniving with tax evaders. In the following cases, prosecution
proceeding against a customs officer may be initiated under section 136 of the
Customs Act:-
S. No. Offence by Customs Officers Punishment
(i) If a customs officer enters into or Imprisonment up to three

acquiesces in any agreement to do, years, or with fine, or with
abstains from doing, permits, conceals both

or connives at any act or thing whereby

any fraudulent export is effected or any
duty of customs leviable on goods [or
any prohibition for the time being in
force under this Act or any other law
for the time being in force with respect
to any goods] is or may be evaded
[Sub-section 1].
(ii) If a customs officer requires any person Imprisonment upto six

to be searched for goods liable to months, or with fine
confiscation or any document relating extendible upto ` 1,000, or
thereto, without having reason to with both
believe that he has such goods or
document secreted about his person
[Sub-section 2(a)].
(iii) If a customs officer arrests any person

without having reason to believe that
he has been guilty of an offence
punishable under section 135, he may
be punishable [sub-section 2(b)]
(iv) If a customs officer searches or

authorises any other officer of customs
to search any place without having
reason to believe that any goods,
documents or things of the nature
referred to in section 105 are secreted
in that place [Sub-section 2(c)]
(v) If any officer of customs, except in the

discharge in good faith of his duty as
such officer or in compliance with any
requisition made under any law for the
time being in force, discloses any
particulars learnt by him in his official
capacity in respect of any goods [Sub-
section 2]

10.50 CUSTOMS & FTP
8. COGNIZANCE OF OFFENCES [SECTION 137]

No court shall take cognizance of:
(a) any offence under section 132, section 133, section 134 or section 135 or
section 135A except with the previous sanction of the Principal
Commissioner/Commissioner of Customs.
(b) any offence under section 136
- where the offence is alleged to have been committed by an officer not
lower in rank than Assistant Commissioner of Customs, except with
the previous sanction of the Central Government.
- where the offence is alleged to have been committed by an officer of
lower in rank than Assistant Commissioner of Customs, except with
the previous sanction of the Principal Commissioner/Commissioner of
Customs.
Compounding of Offences: Sub-section (3) of section 137 provides for
compounding of offences, either before or after the institution of prosecution,
by Principal Chief Commissioner/Chief Commissioner of Customs on payment
of the prescribed compounding amount in the prescribed manner. Such
amount shall be paid to the Central Government by the person accused of the
offence. Section 156 empowers Central Government to make rules for
specifying the amount to be paid for compounding and the manner of
compounding of offences under section 137.
However, in the case of following persons the provisions relating to
compounding of offences will not apply: -
(a) a person who has been allowed to compound once in respect of any
offence under sections 135 and 135A;
(b) a person who has been accused of committing an offence under this Act
which is also an offence under any of the following Acts, namely:—
(i) the Narcotic Drugs and Psychotropic Substances Act, 1985;
(ii) the Chemical Weapons Convention Act, 2000;
(iii) the Arms Act, 1959;
(iv) the Wild Life (Protection) Act, 1972;
(c) a person involved in smuggling of goods falling under any of the following,

namely:—
(i) goods specified in the list of Special Chemicals, Organisms, Materials,
Equipment and Technology in Appendix 3 to Schedule 2 (Export
Policy) of ITC (HS) Classification of Export and Import Items of the
Foreign Trade Policy, as amended from time to time, issued under
section 5 of the Foreign Trade (Development and Regulation) Act,
1992;
(ii) goods which are specified as prohibited items for import and export in
the ITC (HS) Classification of Export and Import Items of the Foreign
Trade Policy, as amended from time to time, issued under section 5 of
the Foreign Trade (Development and Regulation) Act, 1992;
(iii) any other goods or documents, which are likely to affect friendly
relations with a foreign State or are derogatory to national honour;
(d) person who has been allowed to compound once in respect of any offence
under this Chapter for goods of value exceeding rupees one crore;
(e) person who has been convicted under this Act on or after 30.12.2005.
9. OFFENCES TO BE TRIED SUMMARILY

[SECTION 138]
Notwithstanding anything contained in the Code of Criminal Procedure, 1898,
an offence under this Chapter (ie., Chapter XVI) may be tried summarily by a
Magistrate. However, the exceptions are:
1. Offence under clause (i) of sub-section (1) of section 135
2. Offence under sub-section (2) of section 135.
Customs Act is a special enactment. This section provides for summary trial of
all offences under the Act. Therefore, the provisions of section 262 of Cr. P.C.,
which allows trial as warrant case of all offences punishable with imprisonment
more than 2 years is inapplicable to the offences under this Act.
Relevant Case Laws
Mere repair of a vessel is not putting the vessel to use in India and would
not result in home consumption as the vessel was not utilized within the
territory of India. Repairs are carried on the vessel and not to utilize the
vessel. It would not amount to utilization or operation of the vessel/rig in

10.52 CUSTOMS & FTP
India. Thus, it cannot be said that the vessel, i.e., the rig, was imported into
India when it had anchored twice in 1996 and once in 1998 for the purpose
of repair, for the element of home consumption is missing even when the
vessel, i.e., the rig, had entered the territorial waters. Thus, it would be
incorrect to hold that mere repair of the vessel in 1996 or in 1998 would
constitute taxable import. CC Vs Aban Loyd Chiles Offshore Ltd 2017
(346) ELT 513 (SC) dated 27.01.2017.
Exempted Imports - Export Obligation - Even if DGFT holds that export
obligation is fulfilled, it is not binding on Customs [CC vs M/s Pennar
Industries Ltd dated 31.07.2015]
The importer could not fulfill export obligation as the manufactured goods
were found to be defective. Arranged export obligation through third party
and DGFT accepted that Export Obligation. However, Customs demands
duty, notwithstanding DGFT order.
Held : The Order-in-Original of DGFT was under the provisions of EXIM
Policy. It is held by this Court in Sheshank Sea Foods Pvt. Ltd that the same
would not be binding on the customs authorities and as far as action taken
under the Customs Act is concerned, the same is to be covered by the
provisions of the Customs Act. Since the conditions of the exemption
notification are not fulfilled and the law requires strict compliance of the
exemption notification, the assessee becomes liable to pay the import duty
which was payable, but for the benefit of exemption Notification No
30/1997, which was obtained by the assesse 2015 (322) ELT 402 (SC).
10. PRESUMPTION OF CULPABLE MENTAL

STATE [SECTION 138A]
As per section 138A of the Customs Act, in prosecution proceedings under the
said Act for an offence under the said Act, the culpable (guilty conscience or
mens rea) on the part of the accused person shall be presumed and it will be
for the accused to prove the fact that he had no such mental state with respect
to the act charged as an offence in that prosecution. When the presumption of
culpable mental state is drawn under this provision, it includes intention,
motive, knowledge, belief as well as reason to belief. The presumption could
be deemed as rebutted only if the proof is beyond reasonable doubt and not
merely when its existence is established by a preponderance of probability.

11. RELEVANCY OF STATEMENTS UNDER

CERTAIN CIRCUMSTANCES [SECTION 138B]
A statement made and signed by a person before any gazetted officer of
customs during the course of any inquiry or proceeding under this Act shall be
relevant, for the purpose of proving, in any prosecution for an offence under
this Act, the truth of the facts which it contains, -
(a) when the person who made the statement is dead or cannot be found, or is
incapable of giving evidence, or is kept out of the way by the adverse party,
or whose presence cannot be obtained without an amount of delay or
expense which, under the circumstances of the case, the court considers
unreasonable; or
(b) when the person who made the statement is examined as a witness in the
case before the court and the court is of opinion that, having regard to the
circumstances of the case, the statement should be admitted in evidence in
the interests of justice.
12. ADMISSIBILITY OF MICRO FILMS, ETC AS

EVIDENCE [SECTION 138C]
The following are deemed to be also a document for the purposes of this Act
and the rules made thereunder and shall be admissible in any proceedings
thereunder, without further proof or production of the original:
1. a micro film of a document or the reproduction of the image; or
2. a facsimile copy of a document; or
3. computer printout.
13. PRESUMPTION AS TO DOCUMENTS IN

CERTAIN CASE [SECTION 139]
Where any document
- is produced by any person or has been seized from the custody, under this
Act or any other law

10.54 CUSTOMS & FTP
- has been received from any place outside India in the course of
investigation of any offence under this Act,
It is presumed, unless the contrary is proved, that the signature and every
other part of such document which purports to be in the handwriting of any
particular person or which the court may reasonably assume to have been
signed by, or to be in the handwriting of, any particular person, is in that
person’s handwriting, and in the case of a document executed or attested, that
it was executed or attested by the person by whom it purports to have been so
executed or attested. The document can be admitted as evidence,
notwithstanding that it is not duly stamped, if such document is otherwise
admissible in evidence. Further the same shall be presumed, unless the
contrary is proved, to be admissible.
14. OFFENCES BY COMPANIES [SECTION 140]

Every person who at the time the offence was committed was in charge of, and
was responsible to, the company for the conduct of business of the company,
as well as the company, shall be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished accordingly. Nothing shall
render any such person liable to such punishment provided in this Chapter if
he proves that the offence was committed without his knowledge or that he
exercised all due diligence to prevent the commission of such offence.
Explanation to sub-section (2) defines “company” as a body corporate and
includes a firm or other association of individuals.
TEST YOUR KNOWLEDGE

1. Mr. Vasu, the assessee, was summoned under section 108 of the Customs Act,
1962, to give his statement in an inquiry. Mr. Vasu, however, did not appear
before the concerned authorities. Instead, he filed the application for
anticipatory bail in the District and Sessions Court which was disposed on the
ground of being premature.
Mr. Vasu later moved to the High Court, which granted him anticipatory bail
with a direction to the authorities that even if the Custom Authorities find any
non-bailable offence against Mr. Vasu, he shall not be arrested “without ten
days prior notice to him”. The Revenue contended that the order passed by
the High Court was illegal and erroneous.

Explain, with the help of a decided case law, if any, whether the stand taken
by the Revenue is sustainable in law?
2. When a ship on its arrival from Dubai was searched by the Customs Officers,
they found 2,000 biscuits of gold kept concealed in the ceiling of one of the
unoccupied cabin. The Chief Cook of the ship admitted the concealing of the
gold. The Captain of the ship deposed in his statement that he alongwith
Chief Engineer and Chief Officer had inspected the vessel for contraband
goods and inspection did not reveal anything. No evidence was also found
that Captain was involved in the smuggling of gold.
Discuss whether the ship is liable to confiscation under the Customs Act.
3. When is redemption fine imposed? Whether a refund of redemption fine can
be claimed if the importer decides to abandon the goods after paying such
fine?
4. M/s SRT Ltd. had imported certain goods and got them cleared for home
consumption. Later the Customs Department found that the goods have been
improperly imported and are liable for confiscation under section 111 of the
Customs Act, 1962 even though the same are cleared and not available for
the seizure. The Customs Department has imposed penalty under section 112
and redemption fine under section 125 of the Customs Act, 1962.
Discuss with a brief note whether the penal action and redemption fine can
be legally upheld in the facts of the case.
5. Importer BOPP Ltd. imported two consignments of ethyl alcohol which were
allowed to be cleared for home consumption on execution of a bond
undertaking to produce licence within a month. Since appellants failed to fulfill
the obligation, proceedings were initiated which culminated in confiscation of the
goods under section 111(d) of the Customs Act, 1962 and imposition of penalty
on the importer under section 112(a) of Customs Act, 1962.
Examine whether provisionally released goods can be confiscated and penalty
imposed thereupon.
6. On the package, received as a post parcel from abroad, contents are indicated
as calculators valued at ` 1,000. However, when the parcel was opened, it
was found to contain ten mobile phones valued at ` 2,50,000. A show cause
notice has been issued to the importer proposing to confiscate the goods and
impose penalty on the importer.

10.56 CUSTOMS & FTP
Examine the legality of action proposed in terms of statutory provisions under

Customs Act, 1962.
7. Mr. Henry was the managing director of a company, which had set up a unit
in the Cochin Export Processing Zone for manufacture of certain equipments
for cent percent export. On the basis of the relevant notifications, the
company was entitled to import capital goods and claim benefit of duty
exemption on proof of total export.
With the passage of time, the business of the company fell and it went into
liquidation. In the meanwhile, the customs authorities confiscated the capital
goods in terms of section 111(o) of the Customs Act, 1962, and imposed
penalty on the company. Penalty under section 112(a)(ii) was also imposed
on Mr. Henry without stating any reasons as he was in control of the affairs of
the company. This was done as the Assistant Commissioner of Customs found
that neither the capital goods nor the raw materials and other goods were
used in the production of goods for export in terms of the relevant
notification.
Briefly discuss, with reference to case law, whether the show cause notice
imposing penalty on Mr. Henry under section 112(a)(ii) is sustainable in law.
8. M/s. Shree Ram Traders had imported certain goods and got them cleared for
home consumption. Later, the Department found that the goods had been
imported in contravention of the relevant law governing import & export of
the goods as applicable at that point of time. Consequently, the goods were
confiscated under section 111(d) of the Customs Act and a penalty under
section 112 of the Act was levied.
You are required to examine the case and offer your views.
9. Two trucks are intercepted by the Customs Department. The officers of the
Customs Department conduct search of the vehicle in the presence of
witnesses and it is found that one of the trucks has a secret compartment and
175 Kgs. of heroine and 39 Kgs. of opium of foreign origin are concealed in
that chamber. During the course of investigation, the statement of ‘P’, the
registered owner of the vehicle, is taken under section 108 of the Customs Act
and 15 witnesses are examined. However, ‘P’ completely denies his culpability
in the crime. He contends that though the vehicle is registered in his name
but he has sold the truck much before the contraband goods are recovered
therefrom.
You are required to examine the situation with the help of case law, if any.

10. Champalal & Co. had smuggled rough diamonds into the country
clandestinely without payment of duty. The Department issued a notice to
Champalal & Co. proposing confiscation of the diamonds under clause (d) of
section 111 of the Customs Act, 1962 and imposing penalties on various
persons concerned.
However, the said goods were unconditionally exempted from payment of
import duty vide an exemption notification. So, Champalal & Co. claimed the
benefit of the said exemption notification. The Department, however, refused
to grant the benefit of exemption meant for imported goods to smuggled
goods.
Do you think that Department’s action is valid in law?
11. Write a short note on applicability of penal provisions in customs law on
attempt to export goods improperly.
12. Mr. X is a dealer of smuggled goods. However, he himself does not import the
goods. Duty has been demanded from Mr. X under sections 28 and 125(2) of
the Customs Act, 1962 although no smuggled goods have been seized from
him.
Discuss, with the help of a decided case law, if any whether such demand of
duty is valid in law.
13. Cargo Logistics Pvt. Ltd. (Cargo Logistics) is a duly appointed steamer agent
of the vessel Queen Mary Utah. 110 containers of MS Scrap were imported in
the said vessel by an Indian importer. Cargo Logistics had affixed the seal on
the said containers after stuffing and took charge of the sealed containers.
On the entry of the Vessel in India, Cargo Logistics filed the Import General
Manifest and also dealt with the Customs Department for appropriate orders
that had to be passed in terms of section 42 of the Customs Act, 1962.
Section 42 prescribes that no conveyance can leave without a written order.
Customs Department, on finding that 40 of the said containers were empty,
levied a penalty on Cargo Logistics under section 116 of the Customs Act,
1962 for short landing of the goods. Cargo Logistics is of the view that
penalty for short landing of the goods can only be imposed on the person-in-
charge of the vessel and not on a steamer agent.
Discuss with the help of a decided case law, if any, whether penalty for short
landing of goods can be imposed on the steamer agent of a vessel.
14. Duplicate Photocopier Ltd. imported old and used main frames of digital copy

10.58 CUSTOMS & FTP
printers assemblies. The Commissioner assessed the goods and imposed penalty
and redemption fine. The importer got the goods released by depositing the
amount of duty, fine and penalty with a view to save cost of detention and
demurrage as also to save goods from deterioration in value and quality.
However, subsequent to the release of the goods, the importer filed an appeal
with the CESTAT to reduce the quantum of fine and penalty. The CESTAT
dismissed the appeal, on the ground that the importer had already got the
goods released on payment of redemption fine and penalty.
Discuss, whether the CESTAT was justified in dismissing the appeal with the
help of a decided case law (if any).
15. Differentiate between power to search persons under section 100 and 101 of
Customs Act 1962.
16. Write a short note on “power to arrest” with reference to the Customs Act, 1962.
17. A person makes an unauthorised import of goods liable to confiscation. After
adjudication, Assistant Commissioner provides an option to the importer to pay
fine in lieu of confiscation. It is proposed to impose fine (in lieu of confiscation)
equal to 50% of margin of profit. The following particulars are made available:
• Assessable value ` 3,00,000
• Total duty payable ` 1,20,000
• Market value ` 5,00,000
You are required to calculate amount of fine and total payment to be made
by importer to clear the consignment.
18. Write a brief note with respect to levy of penalty under the Customs Act for
improper exportation of non-prohibited dutiable goods.
19. Briefly explain how is seizure effected under section 110 of the Customs Act,
1962.
20. Write a short note on provisional release of goods, documents and things
seized, pending adjudication.
21. Discuss briefly the provisions in respect of mandatory penalty for short-levy or
non-levy of duty in certain cases.
22. Explain the provisions in respect of confiscation of a conveyance under section
115 of the Customs Act, 1962.

ANSWERS/HINTS
1. The stand taken by the Revenue is valid. A similar issue has been dealt by
the Supreme Court in the case of Union of India v. Padam Narain Aggarwal
2008 (231) ELT 397 wherein the Apex Court has observed that the power to
arrest by a Custom Officer under section 104 of the Customs Act, 1962 is
statutory in character and cannot be interfered with.
Supreme Court pronounced that the direction to issue 10 days prior notice
before arrest even in case of a non-bailable offence could not be said to be
legal or in consonance with law owing to two reasons. Firstly, the order
passed by the High Court was a blanket one and granted protection to
respondents in respect of any non- bailable offence. Secondly, it illegally
obstructed, interfered and curtailed the authority of Custom Officers from
exercising statutory power of arresting a person said to have committed a
non-bailable offence by imposing a condition of giving 10 days prior notice,
a condition not warranted by law. Hence, the order of the High Court was
set aside.
Therefore, in the given case, it can be concluded that the stand taken by the
revenue is sustainable in law.
2. Section 115(2) of the Customs Act, 1962 inter alia provides that any
conveyance used as a means of transport in the smuggling of any goods or
in the carriage of any smuggled goods shall be liable to confiscation.
However, if the owner of the conveyance proves that the conveyance was so
used without the knowledge and connivance of the owner himself, his
agent, and the person in charge of the conveyance, the conveyance shall
not be liable to confiscation. As per section 2(31)(a) of the Customs Act, in
case of a vessel, the master of the vessel is the person-in-charge.
Since, in the problem there is no evidence that the Captain of the ship i.e.,
the master of the vessel had any knowledge about the smuggling of the
gold or he had connived in the smuggling of gold, the ship would not be
liable to confiscation.
In a similar situation, the Supreme Court has set aside the order of
confiscation of a truck carrying forest produce in contravention of the
provisions of the Forest Act as the authorities failed to establish that the
owner of the truck had any knowledge about the truck being so used [Forest
Conservator v. Sharad Ramachandar Kale 2000 (121) E.L.T. 14 (S.C.)].

10.60 CUSTOMS & FTP
Further, in AP Moller Singapore Pvt. Ltd. v. Assistant Director, DRI 2004 (174)
ELT 156 (Bom), the High Court has held that if owner, agent or captain is not
involved in smuggling of goods, the vessel cannot be confiscated, even if
the master of vessel was negligent.
3. After goods are confiscated, they become property of Central Government
and Government can sell/auction the goods. However, in some cases, the
person from whom goods have been seized can get them back on payment
of a prescribed fine. This fine is termed as ‘redemption fine’.
Section 125 of the Customs Act, 1962 empowers a Customs Officer
adjudging the confiscation to give an option to the owner of the goods or
where such owner is not known, the person from whose possession or
custody such goods have been seized to pay a fine as the said officer thinks
fit, in lieu of confiscation of the imported goods. The provisions in this
regard are as follows:
(a) in case of prohibited goods, the proper officer may give an option to
pay a fine in lieu of confiscation;
(b) in case of other goods, the proper officer shall give an option of
payment of fine, in lieu of confiscation;
(c) Where the proceedings are deemed to be concluded under section
28(2) or section 28(6) in respect of the goods which are not
prohibited or restricted, the provisions of this section shall not
apply.
(d) the amount of such fine cannot exceed the market price of the goods
confiscated less import duty chargeable (in the case of imported
goods) thereon;
(e) in addition to the fine imposed, duty and charges would also be
payable in respect of such goods.
(f) Where the fine is not paid within a period of 120 days from the
date of option, such option shall become void, unless an appeal
against such order is pending.
The provisions of section 125 give the importer an option to either allow the
goods to be confiscated or pay redemption fine in lieu of confiscation.
Hence, the redemption fine becomes liable only in lieu of confiscation.
However, where the importer has abandoned the goods, the scope for
payment of any fine in lieu of confiscation comes to an end. Hence, the

redemption fine, if already paid shall be liable to be refunded. This view has
been upheld by the Madras High Court in the case of Purfina Chemicals Pvt.
Ltd v CEGAT, Madras (2004) (167) E.L.T. 145 (Mad.)
4. The High Court in the case of CCus. (Imports) v. Finesse Creation Inc. 2009 (248)
ELT 122 (Bom.) [maintained in Commissioner v. Finesse Creation Inc. - 2010
(255) E.L.T. A120 (S.C.)] has held that redemption fine can only be imposed
when the goods are available and can be redeemed. The High Court has
explained that if the goods are not available, they cannot be confiscated and
consequently, cannot be redeemed. Once goods cannot be redeemed,
redemption fine cannot be imposed.
Therefore, the imposition of redemption fine is not legally correct in the
instant case.
Penalty under section 112 can be imposed inter alia when a person omits to
do any act which would render such goods liable for confiscation under
section 111. Therefore, penalty can be imposed in the given case.
5. When goods are confiscated, ownership of the goods vests in the
Government. Therefore, if goods are not in possession of the importer or
with Government, confiscation will have no meaning.
However, when goods have been provisionally released, confiscation would
be possible since release is provisional and importer gets conditional
possession. The Supreme Court in the case of Weston Components Ltd. v.
CC 2000 115 ELT 278 has also held that goods released under bond can be
confiscated and redemption fine can be imposed. Thus, confiscation of
goods imported by BOPP Ltd. is in consonance with the provisions of the
Customs Act, 1962.
Penalty under section 112 can be imposed inter alia when a person omits to
do any act which would render such goods liable for confiscation under
section 111. Thus, penalty can also be imposed on BOPP Ltd. as the
confiscation of goods is justifiable.
6. The proposed action is legal. Dutiable goods which are not included in the
entry are liable to confiscation under section 111(l) of the Customs Act,
1962 and as per section 82, in the case of a post parcel, any label or
declaration accompanying the goods which contains description, quantity
and value is deemed to be an entry for import.
Therefore in this case, goods become liable to confiscation under section

10.62 CUSTOMS & FTP
111 (l) of Customs Act, 1962 since they are not covered by the entry for
import. Penalty under section 112(a) can be imposed inter alia when a
person omits to do any act which would render such goods liable to
confiscation under section 111. Thus, penalty can also be imposed (as the
confiscation is justifiable) unless importer is able to show that he was not
responsible for import.
7. No, the show cause notice imposing penalty on Mr. Henry under section
112(a)(ii) of the Customs Act, 1962 is not sustainable in law. The facts of the
given case are similar to case of O.T. Enasu v. UOI 2011 (272) E.L.T. 51 (Ker.).
The High Court stated that the non-observance of the conditions of import
of the goods in question gives the jurisdiction to impose an order of
confiscation in terms of Section 111(o) of the Act. However, while
considering the question as to whether penalty has to be imposed on any
person for any commission or omission, which has rendered the goods
liable for confiscation under Section 111(o), it has to be decided as to
whether the goods became liable for confiscation on account of any act of
omission or commission attributable to the person in question. Merely
because a person is the Managing Director of a company, he would not be
fastened with penalty, unless it is shown that he had, by his commissions or
omissions, led the goods to be liable for confiscation.
The High Court noted that under sub-clause (ii) of clause (a) of section 112,
the liability to penalty is determined on the basis of duty sought to be
evaded. Therefore, the jurisdictional fact to impose a penalty in terms of
section 112(a)(ii) includes the essential ingredient that “duty was sought to
be evaded”. The concept of evading involves a conscious exercise by the
person who evades. Therefore, the process of “seeking to evade” essentially
involves a mental element and the concept of the status “sought to be
evaded” is arrived at only by a conscious attempt to evade. The High Court,
therefore, inferred that unless it is established that a person has, by his
omissions or commissions, led to a situation where duty is sought to be
evaded, there cannot be an imposition of penalty in terms of section
112(a)(ii) of the Act.
The High Court, therefore held that since penalty had been imposed on the
managing director without stating any reasons and without any finding that
he was guilty of omissions or commission and had “sought to evade duty”,
the same could not be upheld.

8. The facts of the case are similar to the case of Bussa Overseas & Properties
P. Ltd. v C.L. Mahar, Asstt. C.C., Bombay 2004 (163) E.L.T. 304 (Bom.) wherein
the Bombay High Court observed that once goods are cleared for home
consumption they cease to be imported goods as defined in section 2(25) of
the Customs Act and as per section 111(d) only ‘imported’ goods could be
confiscated. Hence, power to confiscate the goods, after their clearance for
home consumption, could be exercised only in cases where the order of
clearance is revised and cancelled.
Therefore, in the given case the confiscation of the goods by the
Department is illegal.
Section 112 (a) provides that any person who in relation to any goods, does
or omits to do any act which act or omission would render such goods
liable to confiscation under section 111, or abets the doing or omission of
such act, is liable to a penalty. The High Court held that the power to
impose penalty could be exercised not only when the goods are available
for confiscation but when such goods are liable to confiscation. The Court
held that the expression ‘liable to confiscation’ clearly indicates that the
power to impose penalty can be exercised even if the goods are not
available for confiscation. The mere fact that the importers secured such
clearance and disposed of the goods and thereafter goods are not available
for confiscation cannot divest Customs Authorities of the powers to levy
penalty under section 112 of the Act.
Following the judgment of the High Court, penalty levied by the
Department in the given case is correct in law.
Note: This ruling has been maintained by the Supreme Court in Asstt
Collector v. Bussa Overseas & Properties P. Ltd. 2004(163) ELT A160 (SC).
9. The facts of the case are similar to the case of Balwinder Singh v. Asstt.
Commissioner, Customs & Central Excise 2005 (181) E.L.T. 203 (S.C.). In this
case, the Supreme Court stated that the registered owner of the vehicle was
convicted solely for the reason that he was the registered owner of the
vehicle. There was no evidence to prove that he knowingly allowed any
person to use the vehicle for any illegal purpose. There was also no
evidence to prove the conspiracy set up by the prosecution. The Apex Court
held that though the articles were recovered from the truck, there was no
evidence to show that the appellant had any control over the vehicle nor
was he in possession of those drugs. Therefore, the registered owner of the

10.64 CUSTOMS & FTP
vehicle was acquitted of all charges framed against him.

In the given case also, there is no evidence against ‘P’, the registered owner
of the vehicle, and thus he shall not be prosecuted.
10. Yes, the Department’s action is valid in law. The facts of the given case are
similar to the case of CCus. (Prev.), Mumbai v. M. Ambalal & Co. 2010 (260)
ELT 487 (SC), wherein the Apex Court held that the smuggled goods could
not be considered as ‘imported goods’ for the purpose of benefit of the
exemption notification. It opined that if the smuggled goods and imported
goods were to be treated as the same, then there would have been no need
for two different definitions under the Customs Act, 1962.
The Court observed that one of the principal functions of the Customs Act
was to curb the ills of smuggling on the economy. Hence, it held that it
would be contrary to the purpose of exemption notifications to give the
benefit meant for imported goods to smuggled goods.
11. As per section 113 of the Customs Act, 1962, goods attempted to be
exported improperly are liable to confiscation. Further, section 114
stipulates that any person who, in relation to any goods, does or omits to
do any act, which act, or omission would render such goods liable to
confiscation under section 113, or abets the doing or omission of such an
act, shall be liable to penalty as under:
S.No. Goods Maximum Penalty
1. In case of prohibited (a) Three times the value of the

goods goods declared by the exporter
or
(b) Three times the value as
determined under the Customs Act,
2. In case of dutiable (a) upto 10% of the duty sought to

goods, other than be evaded on such goods
prohibited goods or
(b) ` 5,000,
Further, such penalty will be subject
to the provisions of section 114A.

However, where such duty as

determined under section 28(8) and
the interest payable thereon under
section 28AA is paid within 30 days
from the date of communication of
the order of the proper officer
determining such duty, the amount of
penalty liable to be paid by such
person under this section shall be
25% of the penalty so determined.
3. In case of any other (a) Value of the goods declared by

goods the exporter
or
(b) Value as determined under the
Customs Act,
whichever is greater.
12. The issue involved in the given case is whether customs duty can be
demanded under section 28 and/or section 125(2) of the Customs Act, 1962
from a person dealing in smuggled goods when no such goods are seized
from him. Recently, the Karnataka High Court addressed this issue in the
case of CCus. v. Dinesh Chhajer 2014 (300) ELT 498 (Kar.). In the instant
case, the High Court made the following significant observations:-
(i) Section 28 applies to a case where the goods are imported by an
importer and the duty is not paid in accordance with law, for which a
notice of demand is issued on the person. In case of notice
demanding duty under section 125(2), firstly the goods should have
been confiscated and the duty demandable is in addition to the fine
payable under section 125(1) in respect of confiscated goods. Thus,
notices issued under sections 28 and 125(2) are not identical and fall
into completely different areas.
(ii) The material on record disclosed that the assessee did not import the
goods but was only a dealer of the smuggled goods. Therefore, there
was no obligation cast on him under the Act to pay duty. Thus, the
notice issued under section 28 of the Act to the assessee is

10.66 CUSTOMS & FTP
unsustainable as he is not the person who is chargeable to duty under

the Act.
(ii) Since no goods were seized, there could not be any confiscation and
in the absence of a confiscation, question of payment of duty by the
person who is the owner of the goods or from whose possession the
goods are seized, does not arise.
Based on the above observations, the High Court held that no duty is
leviable against the assessee as he is neither the importer of the
goods nor was in possession of any goods.
In the given case, Mr. X is only a dealer of smuggled goods; he is not
the importer of these goods and also no such goods have been seized
from him. Therefore, applying the ratio of the above mentioned
decision to the given situation, it can be concluded that customs duty
under section 28 and/or section 125(2) of the Customs Act, 1962
cannot be demanded from Mr. X.
13. Section 116 of the Customs Act, 1962 imposes a penalty on the person-in-
charge of the conveyance inter alia for short-landing of the goods at the
place of destination and if the deficiency is not accounted for to the
satisfaction of the Customs Authorities. Section 2(31) of the Act defines
“person-in-charge” to inter alia mean in relation to a vessel, the master of
the vessel. Section 148 of the Act provides that the agent appointed by the
person-in-charge of the conveyance and any person who represents himself
to any officer of customs as an agent of any such person-in-charge is held
to be liable for fulfillment in respect of the matter in question of all
obligations imposed on such person-in-charge by or under this Act and to
penalties and confiscation which may be incurred in respect of that matter.
The High Court in the case of Caravel Logistics Pvt. Ltd. v. Joint Secretary
(RA) 2013 (293) ELT 342 (Mad.) has held that conjoint reading of sections
2(31), 116 and 148 of Customs Act, 1962 makes it clear that in case of short-
landing of goods, if penalty is to be imposed on person-in-charge of
conveyance/vessel, it can also be imposed on the agent appointed by him.
The High Court observed that if the assessee affixed seal on containers after
stuffing and took their charge, he stepped into shoes of/acted on behalf of
master of vessel (the person-in-charge).

Therefore, in the given case also penalty for short landing of goods can be
imposed on Cargo Logistics Pvt. Ltd., the steamer agent of the vessel,
Queen Mary Utah.
14. No, the CESTAT was not justified in dismissing the appeal in the given case.
The facts of the given case are similar to B. E. Office Automation Products
Ltd. v. CCEx. 2014 (300) ELT 486 (P & H) decided by High Court wherein it
was held that mere payment of redemption fine in no way shrinks the right
of the appellant to challenge not only confiscation but also imposition of
redemption fine and final penalty.
Further, payment of redemption fine by the importer for release of goods at
the earliest in order to save cost of detention and demurrage as also to
avoid further deterioration in value and quality of goods, cannot be said to
be bad or improper.
15. Section 100 sets out the provisions in respect of power to search suspected
persons entering or leaving India etc. whereas, section 101 contains the
provisions in respect of power to search suspected persons in certain other
cases. Search under section 100 is conducted by the proper officer of the
customs, whereas search under section 101 is conducted by the officer of
customs empowered by the Principal Commissioner of Customs or
Commissioner of Customs.
A person can be searched under section 100 if the proper officer has reason to
believe that any goods liable to confiscation or documents relating thereto are
secreted in his possession. However, a person can be searched under section
101 only for certain specified goods which are liable to confiscation or
documents relating thereto. The specified goods are gold, diamonds,
manufactures of gold or diamonds, watches and any other notified goods.
Section 100 applies to only the persons specified therein e.g. any person in
a customs area. However, for search under section 101, there is no
restriction regarding place of such person.
16. Section 104 of the Customs Act, 1962 empowers a proper officer (who is
empowered by general or special order of Principal Commissioner of
Customs or Commissioner of Customs) to arrest any person in India or
within Indian customs waters, if the official has reason to believe that the
person is guilty of an offence punishable under section 132 or section 133
or section 135 or section 135A or section 136 of the Customs Act.

10.68 CUSTOMS & FTP
Such a person should be informed of the grounds of his arrest and taken to
the nearest Magistrate immediately. The Customs Officer is vested with the
powers of an Officer-in-charge of a police station for the purpose of
releasing any person on bail or otherwise.
17. Computation of amount of redemption fine and total payment to be
made by the importer
Margin of profit = Market value – Total cost of the goods to importer
= ` 5,00,000 – (` 3,00,000 + ` 1,20,000) = ` 80,000
Proposed amount of fine = 50% of Margin of profit
= ` 80,000 × 50% = ` 40,000
As per proviso to sub-section (1) of section 125 of the Customs Act, 1962,
redemption fine should not exceed the market price of the goods
confiscated minus the duty chargeable thereon.
Maximum redemption fine = Market price of goods confiscated- Duty
chargeable
= ` 5,00,000 – ` 1,20,000 = ` 3,80,000
Since the proposed amount of fine is less than the maximum amount of fine
permissible under section 125, the redemption fine payable by the importer
would be ` 40,000.
Total payment to be made by the importer to clear the consignment:
= [Total duty payable + Amount of fine]
= ` 1,20,000+ ` 40,000 = ` 1,60,000
18. Provisions relating to penalty for improper exportation of non-prohibited
dutiable goods etc. provides for a penalty not exceeding 10% of the duty
sought to be evaded or ` 5,000, whichever is higher. Further, such penalty
will be subject to the provisions of section 114A of the Customs Act, 1962.
Also, where the duty and the interest are paid within 30 days from the date of
communication of the order, the amount of penalty will be reduced to 25% of
the penalty so determined [Proviso to clause (ii) of section 114 of the
Customs Act, 1962].
19. [Refer para 15 of Unit II]
20. [Refer para 16 of Unit II]
21. [Refer para 9 of Unit III]
22. [Refer para 3 of Unit III]

SIGNIFICANT SELECT CASES

1. Whether the benefit of exemption meant for imported goods can also
be given to the smuggled goods?
CCus. (Prev.), Mumbai v. M. Ambalal & Co. 2010 (260) ELT 487 (SC)
Supreme Court’s Observations: The question which arose before the Apex
Court for consideration was whether goods that were smuggled into the
country could be considered as ‘imported goods’ for the purpose of
granting the benefit of the exemption notification.
The Apex Court held that the smuggled goods could not be considered as
‘imported goods’ for the purpose of benefit of the exemption notification.
It opined that if the smuggled goods and imported goods were to be
treated as the same, then there would have been no need for two different
definitions under the Customs Act, 1962.
The Court observed that one of the principal functions of the Customs Act
was to curb the ills of smuggling in the economy.
Supreme Court’s Decision: Hence, it held that it would be contrary to the

purpose of exemption notifications to give the benefit meant for imported
goods to smuggled goods.
2. Is it mandatory for the Revenue officers to make available the copies of

the seized documents to the person from whose custody such
documents were seized?
Manish Lalit Kumar Bavishi v. Addl. DIR. General, DRI 2011 (272) ELT
42 (Bom.)
Facts of the Case: The assessee sought copies of the documents seized
from his office premises under panchanama and print outs drawn from the
Laptop during his attendance in DRI. However, Revenue officers replied that
the documents would be provided to him on completion of the
investigation.
High Court’s Decision: The High Court held that from the language of
section 110(4), it was apparent that the Customs officers were mandatorily
required to make available the copies asked for. It was the party concerned
who had the choice of either asking for the document or seeking extract,
and not the officer.

10.70 CUSTOMS & FTP
If any document was seized during the course of any action by an officer
and relatable to the provisions of the Customs Act, that officer was bound
to make available copies of those documents. The denial by the Revenue to
make the documents available was clearly an act without jurisdiction.
The High Court directed the Revenue to make available the copies of the
documents asked for by the assessee which were seized during the course
of the seizure action.
3. Whether the smuggled goods can be re-exported from the customs

area without formally getting them released from confiscation?
In Re: Hemal K. Shah 2012 (275) ELT 266 (GOI)
Facts of the Case: Shri Hemal K. Shah, a passenger, who arrived at SVPI
Airport, Ahmedabad, had declared the total value of goods as ` 13,500 in
the disembarkation slip. On detailed examination of his baggage, it was
found to contain Saffron, Unicore Rhodium Black, Titan Wrist watches,
Mobile Phones, assorted perfumes, Imitation stones and bags. Since, the
said goods were in commercial quantity and did not appear to be a bona
fide baggage; the same were placed under seizure. The passenger in his
statement admitted the offence and showed his readiness to pay duty on
seized goods or re-shipment of the said goods. The adjudicating authority
determined total value of seized goods; ordered confiscation of seized
goods under section 111(d) and 111(m) of the Customs Act, 1962; imposed
penalty on Hemal K. Shah; confirmed and ordered for recovery of customs
duty on the goods with interest and gave an option to redeem the goods
on payment of a fine which should be exercised within a period of three
months from date of receipt of the order. On appeal by Hemal K. Shah, the
appellate authority allowed re-export of the confiscated goods. Against this
order, the Department filed a revision application before the Revisionary
Authority under section 129DD of the Customs Act, 1962.
Point of Dispute: The Department questioned the re-export of confiscated
goods. They contended that the goods which had been confiscated were
being smuggled in by the passenger without declaring the same to the
Customs and were in commercial quantity. In view of these facts, the
appellate authority had erred in allowing the re-export of the goods on
payment of redemption fine.

Revisionary Authority’s Decision: The Government noted that the

passenger had grossly mis-declared the goods with intention to evade duty
and to smuggle the goods into India. As per the provisions of section 80 of
the Customs Act, 1962 when the baggage of the passenger contains article
which is dutiable or prohibited and in respect of which the declaration is
made under section 77, the proper officer on request of passenger can
detain such article for the purpose of being returned to him on his leaving
India. Since passenger neither made true declaration nor requested for
detention of goods for re-export, before customs authorities at the time of
his arrival at airport, the re-export of said goods could not be allowed under
section 80 of the Customs Act.
4. Can penalty for short-landing of goods be imposed on the steamer

agent of a vessel if he files the Import General Manifest, deals with the
goods at different stages of shipment and conducts all affairs in
compliance with the provisions of the Customs Act, 1962?
Caravel Logistics Pvt. Ltd. v. Joint Secretary (RA) 2013 (293) ELT 342
(Mad.)
Facts of the Case: In the instant case, the steamer agent (assessee)
authored Import General Manifest and acted on behalf of the master of the
vessel (the person-in-charge) before Customs Authorities to conduct all
affairs in compliance with the Customs Act, 1962. The assessee filed Import
General Manifest, affixed the seal on the containers and took charge of the
sealed containers. It also dealt with the customs department for
appropriate orders that had to be passed in terms of section 42 of the
Customs Act. Penalty under section 116 of the Customs Act was imposed
by the Department on the steamer agent for short landing of goods.
High Court’s Observations: The High Court noted that section 116 of the
Act imposes a penalty on the person- in-charge of the conveyance inter
alia for short-landing of the goods at the place of destination and if the
deficiency is not accounted for to the satisfaction of the Customs
Authorities. Section 2(31) defines “person-in-charge” to inter alia mean in
relation to a vessel, the master of the vessel. Section 148 provides that the
agent appointed by the person-in-charge of the conveyance and any person
who represents himself to any officer of customs as an agent of any such
person-in-charge is held to be liable for fulfillment in respect of the matter
in question of all obligations imposed on such person-in-charge by or

10.72 CUSTOMS & FTP
under this Act and to penalties and confiscation which may be incurred in
respect of that matter.
The High Court observed that if assessee affixed seal on containers after
stuffing and took their charge, he stepped into shoes of/acted on behalf of
master of vessel, the person-in-charge.
High Court’s Decision: The High Court held that conjoint reading of
sections 2(31), 116 and 148 of Customs Act, 1962 makes it clear that in case
of short-landing of goods, if penalty is to be imposed on person-in-charge
of conveyance/vessel, it can also be imposed on the agent appointed by
him. Hence, duly appointed steamer agent of a vessel, would be liable to
penalty. However, steamer agent, if innocent, could work out his remedy
against the shipper for short-landing.
The High Court also clarified that in view of section 42 under which no
conveyance can leave without written order, there is an automatic penalty
for not accounting of goods which have been shown as loaded on vessel in
terms of Import General Manifest. There is no requirement of proving mens
rea on part of person-in-charge of conveyance to fall within the mischief of
section 116 of the Customs Act.
Note: Steamer agent is a person who undertakes, either directly or

indirectly,-
(i) to perform any service in connection with the ship’s husbandry or
dispatch including the rendering of administrative work related thereto;
or
(ii) to book, advertise or canvass for cargo for or on behalf of a shipping
line; or
(iii) to provide container feeder services for or on behalf of a shipping line.
The statutory provisions discussed in the case law are given hereunder:
Section 42 - No conveyance to leave without written order: (1) The
person-in-charge of a conveyance which has brought any imported goods or
has loaded any export goods at a customs station shall not cause or permit
the conveyance to depart from that customs station until a written order to
that effect has been given by the proper officer.
(2) No such order shall be given until –
(a) the person-in-charge of the conveyance has answered the

questions put to him under section 38;

(b) the provisions of section 41 have been complied with;
(c) the shipping bills or bills of export, the bills of trans-shipment, if
any, and such other documents as the proper officer may require
have been delivered to him;
(d) all duties leviable on any stores consumed in such conveyance,
and all charges and penalties due in respect of such conveyance
or from the person-in-charge thereof have been paid or the
payment secured by such guarantee or deposit of such amount as
the proper officer may direct;
(e) the person-in-charge of the conveyance has satisfied the proper
officer that no penalty is leviable on him under section 116 or the
payment of any penalty that may be levied upon him under that
section has been secured by such guarantee or deposit of such
amount as the proper officer may direct;
(f) in any case where any export goods have been loaded without
payment of export duty or in contravention of any provision of
this Act or any other law for the time being in force relating to
export of goods,
(i) such goods have been unloaded, or
(ii) where the Assistant Commissioner of Customs or Deputy
Commissioner of Customs is satisfied that it is not
practicable to unload such goods, the person-in-charge of
the conveyance has given an undertaking, secured by such
guarantee or deposit of such amount as the proper officer
may direct, for bringing back the goods to India.
5. Whether mere dispatch of a notice under section 124(a) would imply
that the notice was “given” within the meaning of section 124(a) and
section 110(2) of the said Customs Act, 1962?
Purushottam Jajodia v. Director of Revenue Intelligence 2014 (307) ELT
837 (Del.)
Facts of the Case: As per section 110(2) of the Customs Act, 1962, a notice
under section 124(a) is required to be “given” to the person from whose
possession they were seized informing him the grounds on which goods are

10.74 CUSTOMS & FTP
proposed to be confiscated, within 6 months (extendable upto one year) of

seizure of the goods. Otherwise, goods need be returned to such person.
However, in the present case, the notice under section 124(a) was
dispatched by registered post on the date of expiry of stipulated period
under section 110(2) and received by the petitioner after the expiry of such
period.
The petitioner contended that since said notice had not been received
before the expiry of the said period of six months (extendable upto one
year), goods should be returned to him. Relying on Supreme Court’s
decision in case of K. Narsimhiah v. H.C. Singri Gowda AIR 1966 SC 330 and
Gujarat High Court’s decision in case of Ambalal Morarji Soni v. Union of
India AIR 1972 GUJ 126, it submitted that by the use of the word "given"
used in section 110(2), the legislative intent was clear that the notice had to
be received by the person concerned or the notice had to be
offered/tendered and refused by the person concerned. Mere dispatch by
post would not be covered by the word "given" as appearing in the above
mentioned provisions of the said Act. Further the expression "given" was
distinct and different from the word "issued" or "served".
Revenue, referring to section 153(a), submitted that the moment a notice is
tendered or sent by registered post or by an approved courier, that
amounts to service of the notice and the actual receipt by the noticee is not
a relevant consideration. Since the notice had been sent by registered post
within the stipulated period as prescribed under section 110(2) of the said
Act, the goods were not liable to be released. They primarily placed reliance
on decision of Calcutta High Court in case of Kanti Tarafdar 1997 (91) ELT
51 (Cal.) and Madhya Pradesh High Court in case of Ram Kumar Aggarwal
2012 (280) ELT 13 (M.P.).
High Court’s Observations: The Delhi High Court observed that section
124(a) clearly stipulates that no order confiscating any goods or imposing
any penalty on any person shall be made unless the owner of the goods or
person from whom goods have been seized is “given a notice” in writing,
“informing him of the grounds on which it is proposed to confiscate the
goods or to impose a penalty”. In case such notice is not given within the
stipulated period of six months or the extended period of a further six
months, seized goods have to be released.
The object of section 124(a) is that the person from whom the goods have
been seized had to be informed of the grounds on which the confiscation of

the goods is to be founded. This can happen only when such person
receives the notice and is capable of reading and understanding the
grounds of the proposed confiscation. On a conjoint reading of section
110(2) and section 124(a) of the said Act, the Court opined that the notice
contemplated in these provisions can only be regarded as having been
“given” when it is actually received or deemed to be received by the person
from whom the goods have been seized.
The Delhi High Court was in complete agreement with the Supreme Court’s
decision in case of K. Narsimhiah as followed by Gujarat High Court in case
of Ambalal Morarji Soni. However, it disagreed with the decision of
Calcutta High Court in case of Kanti Tarafdar. The Delhi High Court pointed
out that the decision in the said case was arrived at on the (wrong) premise
that section 124 requires that a notice be “issued” as against a notice being
“given” when the body of the provision of section 124 nowhere uses the
expression “issue of show cause notice”. The Delhi Court elaborated that it
is only the heading of that section which uses that expression (issue of
show notice) and the body of section 124(a), on the contrary, uses the exact
same expression “given” as used in section 110(2) of the said Act.
Therefore, the Delhi High Court was of the view that very basis of the
Calcutta High Court’s decision in Kanti Tarafdar is incorrect. The Delhi High
Court also disagreed with the Calcutta High Court’s observation that the
word “given” used in section 110(2) and section 124(a) is in any manner
controlled by section 153. The Delhi High Court opined that in the context
of the present cases, section 153 would only define the mode and manner
of service and not the time of service or when a notice can be said to have
been “given”.
Further, Delhi High Court was of the view that Madhya Pradesh High Court,
in case of Ram Kumar Aggarwal, wrongly concluded that when the
legislature had used the words “notice is given” it would “obviously mean
that the notice must be issued within six months of the date of seizure”.
The Delhi High Court, on the other hand, opined that expression “notice is
given” does not logically translate to the conclusion that “notice must be
issued within the stipulated period”.
High Court’s Decision: The High Court held that since the petitioners did
not receive the notice under section 124(a) within the time stipulated in
section 110(2) of the Act, such notice will not considered to be “given” by

10.76 CUSTOMS & FTP
the Department within the stipulated time, i.e. before the terminal date.
Consequently, the Department was directed to release the goods seized.
Note: Section 124(a) of the Customs Act, 1962, inter alia, stipulates that no
order confiscating any goods or imposing any penalty on any person shall be
made under this Chapter unless the owner of the goods or such person is
given a notice in writing informing him of the grounds on which it is
proposed to confiscate the goods or to impose a penalty.
Further, section 110(2) of the Act stipulates that where no such notice is
given within six months of the seizure of the goods, the goods shall be
returned to the person from whose possession they were seized.
6. In case of seizure of goods under section 110 of the Customs Act, 1962,
can the show cause notice [required to be issued under section 124(a)
within six months of seizure] be issued to the Customs House Agent
[now Custom Broker] of the importer instead of importer himself?
Santosh Handlooms v. CCus. 2016 (331) ELT 44 (Del.)
The issue which arose for consideration was whether in case of seizure of
goods under section 110 of the Customs Act, 1962, the show cause notice
[required to be issued under section 124(a) within six months of seizure] can
be issued to the Customs House Agent [now Custom Broker] of the
importer instead of importer himself.
High Court’s observations: The High Court made the following significant
observations:
(i) Finance Act, 2012 had consciously amended section 153 of the
Customs Act, 1962 to do away with the service of orders, decisions,
summons and notices on the agent. The CHA [now Custom Broker], is
an agent, who operates under a special contract with an importer or
exporter, and in this context is authorized to perform various functions
to clear the goods from customs. It is no part of the general duty cast
upon the CHA to accept service of notices, summons, orders or
decisions of the customs authorities, unless he has been specially
authorized to do so.
(ii) A conjoint reading of the definition of a Custom Broker in regulation
2(c) along with regulation 11(a) of the Custom Brokers Licensing
Regulations, 2013, implies that it is no part of the usual and ordinary

duty of the CHA to accept service of orders, summons, decisions or

notices issued by the custom authorities.
In case CHA represents that he has such an authority, he would have
to produce the same before the concerned statutory authority. In the
given case, the Department neither sought production of the authority
from CHA nor did CHA supply any such documents to the custom
authorities, which could, in the ordinary course, had persuaded the
Department to serve the notice on the CHA.
Therefore, in the ordinary course, the customs authorities were
required to follow the provisions of section 153 of the Customs Act,
1962, which required the service to be effected on the importer i.e. the
petitioner in this case.
(iii) With regard to Department’s reliance on sections 146 and 147 of the
Customs Act, 1962, the Court observed that.
(a) section 146 statutorily recognizes the appointment of a CHA and
safeguards this appointment by providing that only that person
will act as a CHA who holds a licence granted in that behalf in
accordance with the Custom Brokers Licensing Regulations,
2013,
(b) section 146A, inter alia, provides that a CHA who has obtained
his licence under section 146 of the Customs Act, can act as an
authorized representative of a person who is entitled to/is
required to appear before an officer of customs or Appellate
Tribunal in connection with proceedings under the Customs Act.
As regards business relating to entry/departure of conveyance is
concerned or import/export of goods to a custom station is
concerned, a CHA regularly acting for and on behalf of the
owner/importer/exporter of goods, may have the implied
authority to act in the matter. However, that will not authorise
the CHA to dawn the robe of an authorized representative, as
envisaged in section 146 of the Customs Act.
(c) section 147 is an omnibus section which generally covers all acts
of agency. Acts of agency, which involve business of
entry/departure of conveyance or import/export of goods at the
custom stations, would be covered under section 147 of the

10.78 CUSTOMS & FTP
Customs Act. Other acts would also be covered, provided there

is due authorization conferred on the agent to act on behalf of
the owner, importer or exporter of goods.
The CHA has no general authority to act in respect of every act
that the owner, importer/exporter is called upon to do or may
be required to do under the provisions of the Act. Keeping in
view of this object and/or the purpose, the legislature has
consciously provided that service of orders, decisions or
summons or notices, can only be effected in the manner
provided in clause (a) of section 153 by serving it upon the
person for whom it is intended, in this case, the noticee. The
intention for notice being served only on the intended person is
to enable him to take a decision as to who would thereafter be
entitled or authorized to appear for him before the concerned
statutory authority.
High Court’s Decision: In the light of above discussion, the High

Court held that the show cause notice served on CHA [now Custom
Broker] is not tenable in law.
Notes:
1. Definition of Custom Broker as per regulation 2(c) of the
Custom Brokers Licensing Regulations, 2013 reads as under:
“Custom Broker” means a person licensed under these regulations
to act as agent for the transaction of any business relating to the
entry or departure of conveyances or the import or export of
goods at any Customs Station.
Further, regulation 11(a) of the Custom Brokers Licensing
Regulations, 2013 reads as under:
A Customs Broker shall obtain an authorisation from each of the
companies, firms or individuals by whom he is for the time being
employed as a Customs Broker and produce such authorisation
whenever required by the Deputy Commissioner of Customs or
Assistant Commissioner of Customs, as the case may be.
2. The aforesaid judgment has been further affirmed in 2016 (337)
ELT 44 (Del.).

7. Whether the expression ‘goods in respect of which any prohibition is in

force’ refers to smuggled goods or prohibited goods?
Gopal Saha v. UOI 2016 (336) ELT 230 (Cal.)
Facts of the Case: The petitioners had smuggled gold bars of foreign
origin, into the country. These gold bars were seized on the belief that they
were illegally imported into the country and were liable for confiscation
under section 111 of the Customs Act, 1962. Further, penalty under section
112(i) had been imposed for improper importation of such gold bars.
Under the relevant provision, a penalty not exceeding the value of the
goods or ` 5,000, whichever is greater can be levied, for improperly bringing
into the country “goods in respect of which any prohibition is in force
under this Act or any other law for the time being in force”.
The primary contentions of the petitioners, against levy of the penalty under
section 112(i), were:
(i) The penalty under section 112(i) could not be imposed on the gold
smuggled by them as gold was not a prohibited item and its import
was not prohibited by virtue of any notification issued under section
11 of the Customs Act, 1962/ any other law for the time being in force.
For the purpose of the expression “goods in respect of which any
prohibition is in force under this Act or any other law for the time being
in force”, there must be an order of prohibition under either the
Customs Act, 1962 or any other statute. Further, such prohibition
would relate to the nature of the goods prohibited and would not
cover the manner of its import/smuggling into the country.
(ii) A distinction needs to be made between the ‘illegal import’ defined
under section 11A(a) of the Customs Act, 1962 and the definition of
‘prohibited goods’ under section 2(33) thereof.
(iii) Sections 104 and 135 suggest that prohibited goods referred under
the Customs Act, 1962 relates to only those goods which are
specifically prohibited from being brought into the country by the said
Act/any other law.
The primary contentions of the Revenue were:
(i) When the import of any goods is permitted by the Customs Act,
1962/any other law in any particular manner and form, any other

10.80 CUSTOMS & FTP
mode/method adopted to bring such goods into the country would

tantamount to conduct infringing the prohibition of import of the
goods in accordance with law. Thus, an act of import in contravention
of the statutory process recognised therefor must be regarded as
conduct in derogation of the prohibition imposed by law.
(ii) It referred the judgement of Supreme Court in case of Om Prakash
Bhatia v. CCus. 2003 (155) E.L.T. 423 (S.C.). In the said case, the Apex
Court, considering the meaning of the expression ‘contrary to any
prohibition imposed by/under this Act/any other law for the time being
in force’ appearing with reference to confiscation of improperly
exported goods and the expression ‘subject to any prohibition under
this Act or any other law’ in the definition of ‘prohibited goods’ in
section 2(33) of the Act, concluded that if the conditions prescribed
for import/export of goods were not complied with, it would be
considered to be prohibited goods.
It further referred the judgment of CCus. (Preventive) v. M. Ambalal
and Co. 2010 (260) E.L.T. 487 (S.C.) wherein the Apex Court held that
smuggled goods could not be regarded as imported goods.
Point of Dispute: Whether the expression ‘goods in respect of which any
prohibition is in force’ refers to any goods which have been smuggled into
the country which may otherwise have been brought into the country by the
appropriate channel upon payment of duty due thereon or goods
specifically prohibited from being brought into the country?
High Court’s Observations: The High Court observed that there is a
distinction between section 111 and section 112. The former provides for
confiscation of improperly imported goods and the latter prescribes the
penalty for improper importation of goods.
The judgments relied upon by the Revenue revealed a liberal construction
of a provision in favour of the Revenue to deal with the mischief for which
the statute and the provision have been enacted.
However, such construction may not apply to a penalty because the
fundamental rule for construing a penal provision is otherwise. In other
words, it is possible for a provision providing for confiscation of goods to
be liberally interpreted, but when a provision provides for punishment, it
has to be strictly construed.

Thus, while the corresponding provision in section 111 permits the

confiscation of the goods on a broader construction of the relevant
expression with reference to the definition of ‘prohibited goods’; the similar
provision in section 112 has to be strictly construed and confined to goods
which are expressly prohibited from being imported into the country.
High Court’s Decision: In the light of the aforesaid discussion, the High
Court inferred that expression ‘goods in respect of which any prohibition is in
force’ in the context of section 112 implies goods which are prohibited from
being imported and not goods which have been smuggled into the country
in contravention of the procedure established by law for the import thereof.
Consequently, the order imposing penalty on the petitioner was set aside
and the matter was remanded for such limited purpose for the imposition of
other permissible penalty.


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10

© The Institute of Chartered Accountants of India

UNIT: I - PROVISIONS RELATING TO PROHIBITED/

2. PROHIBITION ON ILLEGAL IMPORTATION/

Provisions Sections Chapter

General power to prohibit importation and 11 IV

© The Institute of Chartered Accountants of India

Special prohibition relating to detection of 11A to 11G IV A

Prevention or detection of illegal export of 11H to 11 M IV B

Power to exempt from the provisions of 11N IV C

POWER TO PROHIBIT IMPORTATION AND EXPORTATION OF GOODS

© The Institute of Chartered Accountants of India

 the protection of human, animal or plant life or health;

© The Institute of Chartered Accountants of India

3. DETECTION OF ILLEGALLY IMPORTED

DEFINITIONS [SECTION 11A]

(a) “Illegal import” means “the import of any goods in contravention of

(d) “Intimated place” means a place intimated under sub-section (1)/(2)/(3) of

POWER OF CENTRAL GOVERNMENT TO NOTIFY GOODS [SECTION 11B]

© The Institute of Chartered Accountants of India

PERSONS POSSESSING NOTIFIED GOODS TO INTIMATE THE PLACE OF

© The Institute of Chartered Accountants of India

PRECAUTIONS TO BE TAKEN BY PERSONS ACQUIRING NOTIFIED

PERSONS POSSESSING NOTIFIED GOODS TO MAINTAIN ACCOUNTS

© The Institute of Chartered Accountants of India

by him and shall keep such account at the intimated place.

SALE, ETC., OF NOTIFIED GOODS TO BE EVIDENCED BY VOUCHERS

SECTIONS 11C, 11E AND 11F NOT TO APPLY TO GOODS IN PERSONAL

4. PREVENTION OR DETECTION OF ILLEGAL

DEFINITIONS [SECTION 11H]

© The Institute of Chartered Accountants of India

(c) "Specified area"

POWER OF CENTRAL GOVERNMENT TO SPECIFY GOODS [SECTION 11I]

PERSONS POSSESSING SPECIFIED GOODS TO INTIMATE THE PLACE OF

© The Institute of Chartered Accountants of India

TRANSPORT OF SPECIFIED GOODS TO BE COVERED BY VOUCHERS

PERSONS POSSESSING SPECIFIED GOODS TO MAINTAIN ACCOUNTS

STEPS TO BE TAKEN BY PERSONS SELLING OR TRANSFERRING ANY

© The Institute of Chartered Accountants of India

Meaning of “petty sale”

5. EXEMPTIONS FROM THE OPERATION OF

© The Institute of Chartered Accountants of India

UNIT II-SEARCHES, SEIZURE AND ARREST

1. POWER TO SEARCH SUSPECTED PERSONS

2. POWER TO SEARCH SUSPECTED PERSONS

© The Institute of Chartered Accountants of India

Distinction between the provisions of section 100 and section 101

S.No. Section 100 Section 101

3. PERSONS TO BE SEARCHED MAY REQUIRE

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(b) Gazetted Officer/Magistrate may discharge the person/direct the

4. POWER TO SCREEN OR X-RAY BODIES OF

© The Institute of Chartered Accountants of India

(d) Person to be X-rayed to be taken before radiologist: Where a magistrate

Meaning of registered medical practitioner

© The Institute of Chartered Accountants of India

5. POWER TO ARREST [SECTION 104]

6. POWER TO SEARCH PREMISES [SECTION 105]

© The Institute of Chartered Accountants of India