Introduction
The movement of goods and passengers in and out of the country is controlled by legislation, following international norms. The Customs Act, 1962 is the fundamental legislation that oversees and controls the arrival and departure of various types of vessels, products, passengers, etc., into or out of the country. The Act governs the entry and exit of ships, products, passengers, etc. All products entering or departing the nation must be disclosed to Customs at specified entry stations. The Customs Department enforces this Act and other national and international laws related to it. Importers/exporters must pay duties and follow rules encompassed in the Act.
The law allows Customs agents to inspect, arrest, sell, or dispose off seized property, and prosecute offenders. The customs authorities cannot dispose off confiscated goods until the owner has exhausted all the available remedies provided under law. However, the authorities misinterpret the confiscation as their right to sell. They should be under moral and legal obligation to notify the person whose property is confiscated before disposal. The Act covers illegal conduct and omissions, thereby prescribing departmental and court sanctions.
Absolute Prohibition
According Section 2(33) of the Act,[1] the term “Prohibited Goods” is defined as goods that are prohibited from being imported or exported under any other prevailing law, including the Customs Act.
The Export and Import Policy, established by the DGFT, Ministry of Commerce & Industry, identifies certain commodities as restricted categories for import and export. The Central Government has the authority to regulate such commodities as per Section 3 and 5 of the Foreign Trade (Development and Regulation) Act of 1992.[2]
There are certain items that are prohibited for import and export, while others are not, but necessary authorization is required for the same. For instance, a notification has been issued by the Ministry of Commerce, which requires imported products to comply with the Indian Quality Standards (IQS). To meet this requirement, exporters of these products to India must register with the Bureau of Indian Standards (BIS).
Additional legislation, such as the Arms Act, Environment Protection Act, Wild Life Act, and Indian Trade and Merchandise Marks Act, may place limitations or bans on the import and export of specific goods. The commodities in question will be subject to the penal provisions of sections 111 (d) and 113 (d) of the Customs Act.[3]
Statutory Provisions Dealing with Confiscation of Goods and Conveyances:-
Sections 111 to 127 of the Customs Act cover the laws that govern the seizure of goods, conveyance, as well as the fines that are imposed for violating these restrictions. Not only does the Act contain provisions for the confiscation of items that have been illegally imported or exported, but it also includes measures for the forfeiture of commodities that were attempted to be imported or exported illegally. It allows the authorities to confiscate the following:
- Improper Imports: Section 111 of the Act allows seizures of “improperly imported products” brought into India from outside India that do not comply with laws. Importing or attempting to import prohibited items, evading duty payment, violating foreign trade policy, providing false information, or violating rules for moving, storing, unloading, or using imported goods will result in the confiscation of the goods.[4]
- Improper Exports: Section 113 of the Act gives specifics on commodities that are regarded ‘improperly exported items’ and are liable to forfeiture.[5]
- Conveyance Confiscation: It comprises cases in which the mode of transportation has been used to conceal objects, or in which products have been thrown into the water in order to escape being confiscated, or in which it has failed to halt or disembark in accordance with section 106, and so on.[6]
- Seizure of Parcels: If any items that are brought into a nation or that are attempted to be removed out of the country in a package are subject to confiscation, then the package itself and any further products that are brought in that package are also liable to seizure.[7]
- Concealed Property Taken into Possession: Any goods (with the exception of vehicles that are utilized for transportation) that are utilized to conceal illegal products are also subject to confiscation.[8]
- Seizure of illegal goods that were distributed with other types of commerce: Illegal goods can be confiscated even if they have undergone a change in their appearance or if they are mingled with other commodities in such a way that they cannot be differentiated from one another.[9]
- The confiscation of revenues obtained from the sale of goods that were illegally imported: The confiscation of the money gained from the sale of goods if the person selling the items is aware of or has a reasonable belief that the commodities being sold are illegal.[10]
Penalties
A: Penalties in respect of improper importation of goods:
Section 112 of the Act specifies the implications of illegal importing of commodities.[11] The penalty levied is based on the gravity of the offence. Penalties for various offences under Section 112 are as follows:
(i) Penalties may be levied for products forbidden by the Customs Act or any other applicable law. The penalty will not exceed the value of the items or Rs.5000/-, whichever is greater.
(ii) For dutiable items, excluding restricted commodities, a penalty equal to or more than the duty intended to be evaded on those products may be levied, up to a maximum of Rs.5000/-.
(iii) If the declared worth of items exceeds their real value, a penalty shall be equal to the difference between the declared and real value, or Rs.5,000/-, whichever is greater.
(iv) If the goods fall within both (i) and (iii), the penalty will not be more than the worth of the items or the difference between the declared value and the real value, whichever is greater.
(v) If goods fall under both (ii) and (iii) categories, the penalty will not exceed the duty intended to be evaded on such products, the difference between the declared and real values, or Rs.5,000/-, whichever is higher.
B: Penalties in respect of improper exportation of goods.
Section 114 outlines the penalties for incorrect exportation of goods.[12] The penalty levied is based on the gravity of the offence.
(i) For products forbidden by the Customs Act or any other applicable law, the penalty may be up to three times the declared value or the value set by the Act, whichever is greater.
(ii) For dutiable products that are not prohibited, the penalty might be up to the amount of duty evaded or Rs.5,000/-, whichever is greater.
(iii) For any other products, the penalty can be up to the declared value or the value specified by the Customs Act, whichever is greater.
Adjudication Procedure:
Section 110 of the Act states that the proper official can seize the commodities if he has grounds to suspect that they are subject to confiscation.[13] The officer in question must satisfy himself that there is reasonable cause to believe before authorizing a valid search.[14] Section 122A of the Act requires the adjudication authority to provide a party chance to be heard if the party desires.[15] The adjudicating authority may, if sufficient cause is shown at any stage of the proceeding, grant time to the parties or any of them and adjourn the hearing for reasons to be recorded in writing; however, no such adjournment shall be granted to a party more than three times during the proceedings.
Section 123 of the Act addresses the burden of proof in specific cases.[16] When goods that fall under this section are seized under the Act on the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods is as follows: (a) if the seizure is made from a person’s possession, the burden lies on that person and any other person claiming ownership of the goods; (b) in any other case, the burden lies on the person claiming ownership of the seized good.[17]
The Supreme Court noted that the authority to conduct searches can be derived from Section 105 of the Act[18]. This section grants powers to search if the Assistant Commissioner of Customs or Deputy Commissioner of Customs has reasonable grounds to believe that goods are subject to confiscation. Section 123 establishes the burden of proof for determining whether goods are smuggled. In this case, the burden of proof falls on the person in possession of the goods to demonstrate that they are not smuggled.[19]
Mere seizure cannot be construed to confer any authority to sell
Chapter XIV of the Custom Act discusses the process of confiscating goods and conveyances and imposing liabilities. Confiscation refers to the legal seizure of prohibited goods being imported into India or the seizure of a conveyance in Indian Customs waters for the purpose of concealing exported goods or engaging in smuggling activities.[20]
Prior to confiscation, it is necessary to initiate the process of seizure. Section 110 of the Act contains the provision that outlines the concept of seizure. This section also allows for the vacation of seizure if a show cause notice is not issued within 6 months, with the possibility of extending the period by another 6 months. In cases involving the confiscation of goods as a penalty, it is necessary to serve a show cause notice solely to the owner of the goods.[21]
The individual should be notified regarding the sale of their property, as stated in Article 300A r/w Article 14[22]. According to Article 300 A[23], individuals cannot be deprived of their property unless authorized by law. The State is only permitted to deprive a citizen of their property through the legally established procedure.[24]
The procedure for disposing of valuable commodities must meet the legal standards, including the constitutional requirements of reasonableness, fairness, and transparency. Additionally, the procedure must also safeguard the property rights recognized by the Constitution under Article 300A. The application of Section 110(1A) must align with the fundamental principles of the Constitution of India, as outlined in Articles 14 and 300A. This ensures that the department can interpret and apply the law in accordance with the basic principles of the land. [25]
In the case of Leyla Mohmoodi vs. The Additional Commissioner of Customs, the Bombay High Court declared that just seizing gold by a Customs Officer does not provide any jurisdiction or authorization to sell it.[26]
In this context, it is submitted that the Delhi High Court ruled in the case of Zhinet Banu Nazir Dadany Vs. Union of India[27] that in the event of the seizure of gold or gold ornaments/items, such goods are neither perishable nor hazardous under Section 110(1A) of the Customs Act and must be disposed of only after a notice is issued to the person from whom the gold was seized.[28] The circular underlined that the notice should be issued even if the goods have been confiscated but the owner’s appeal or legal remedies have not been exhausted.[29][30]
The department’s decision to auction confiscated property without the Tribunal’s consent during the appeal process and without alerting the appellants is a significant error.[31]
Individuals cannot have their property taken away unless it is authorized by law. It is established that Article 300A of the Constitution applies to all individuals, including juristic persons, and is not limited to citizens. The custom authorities have the authority to promptly dispose of confiscated goods in situations where the owner’s chances of a successful appeal are minimal. However, it is important to note that the owner must be compensated for the value of the goods if the order of confiscation is later overturned in an appeal or revision.[32]
Conclusion
Ultimately, the Customs Act of 1962 functions as a thorough legal structure that governs the transportation of goods and individuals. It establishes strict prohibitions on specific items and is supplemented by additional regulations found in various statutes. The adjudication procedure described in the Act ensures a fair and equitable process, providing individuals with an opportunity to present their case and establishing a burden of proof in certain instances. It is essential to emphasize the significance of upholding individuals’ property rights, as protected by the Constitution.
The Customs Act of 1962 plays a crucial role in governing international trade. However, it is essential that its enforcement aligns with principles of fairness, reasonableness, and transparency, as dictated by the constitutional framework. Finding the right balance is essential to maintain the rule of law and protect the rights of individuals engaged in import and export activities.
Written by Shailja Mantri, 3rd year law student of Nirma University
References:
[1] The Customs Act, 1962, § 2(33), No. 52, Acts of Parliament, 1962 (India).
[2] Foreign Trade (Development and Regulation) Act of 1992, § 3&5 (India).
[3] The Customs Act, 1962, § 111 (d) &113 (d), No. 52, Acts of Parliament, 1962 (India).
[4] The Customs Act, 1962, § 111, No. 52, Acts of Parliament, 1962 (India).
[5] The Customs Act, 1962, § 113, No. 52, Acts of Parliament, 1962 (India).
[6] The Customs Act, 1962, § 115, No. 52, Acts of Parliament, 1962 (India).
[7] The Customs Act, 1962, § 118, No. 52, Acts of Parliament, 1962 (India).
[8] The Customs Act, 1962, § 119, No. 52, Acts of Parliament, 1962 (India).
[9] The Customs Act, 1962, § 120, No. 52, Acts of Parliament, 1962 (India).
[10] The Customs Act, 1962, § 121, No. 52, Acts of Parliament, 1962 (India).
[11] The Customs Act, 1962, § 112, No. 52, Acts of Parliament, 1962 (India).
[12] The Customs Act, 1962, § 114, No. 52, Acts of Parliament, 1962 (India).
[13] Durga Prasad v. HR. Gomes Supdt. (Prevention) Central Excise Nagpur, (1966) SCR (2) 991.
[14] State of Rajasthan v. Rehman, (1960) 1 SCR 991.
[15] The Customs Act, 1962, § 122A, No. 52, Acts of Parliament, 1962 (India).
[16] The Customs Act, 1962, § 123, No. 52, Acts of Parliament, 1962 (India).
[17] Commissioner of Customs, Central Excise & Service Tax, Siliguri v. Ratan Kumar Sethia, (2016) (335) ELT 355.
[18] The Customs Act, 1962, § 105, No. 52, Acts of Parliament, 1962 (India).
[19] UOI & ors. Etc. v. M/S Magnum Steel Ltd., (2015) SCC 444.
[20] Jena, R.C. (2018, August 28). Complete Provisions of Seizure and Confiscation under Customs Act, 1962. TaxGuru. https://taxguru.in/custom-duty/seizure-confiscation-customs-act-1962.html.
[21] Principal Commissioner of Customs (Import), ICD v. Santhosh Handloom, (2016) (5) TMI 125.
[22] INDIA CONSTI. ART. 14.
[23] INDIA CONSTI. ART. 300.
[24] Dharam Dutt v. Union of India, (2004) 1 SCC 712.
[25] State of W.B. v. Sujit Kumar Rana, (2004) 4 SCC 129.
[26] Leyla Mohmoodi v. Commr. of Customs, (2023) SCC OnLine Bom 2742.
[27] Zhinet Banu Nazir Dadany v. Union of India, (2019) SCC OnLine Del 8626.
[28] GirdharlalKalyandas Advani v. Union of India, (1992) (58) ELT 453.
[29] Central Board of Excise and Customs, Circular No. 711/4/2006-Cus, 14.02.2006.
[30] Pashupati Nath Dhandania v. Union of India, (2014) SCC Online Cal· 4557.
[31] Kailash Ribbon Factory Ltd. v. Commr. of Customs & Central Excise, 2002 SCC OnLine Del 275.
[32] State of Gujarat vs Hazi Hussain of Junagadh, (1967) SCC 1885.
