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Adjudication Under Customs Act, 1962
November, 20th 2015

Section 122 of the Customs Act, 1962 (‘Act’ for short) provides for adjudication of confiscation and penalties imposed under Chapter XIV of the Act.  The following Officers are empowered to adjudicate confiscation or penalty-

  • Principal Commissioner of Customs/Commissioner of Customs/Joint Commissioner of Customs – Without limit;
  • Assistant Commissioner of Customs/Deputy Commissioner of Customs – If the value of the goods liable for confiscation does not exceed ₹ 5 lakhs (with effect from 01.04.2012) ;
  • Gazetted Officer of Customs lower in rank than the Assistant Commissioner of Customs/Deputy Commissioner of Customs – If the value of the goods liable for confiscation does not exceed ₹ 50,000/- (with effect from 01.04.2012).

Adjudication Procedure

Section 122A provides for the procedure for adjudication.  The Section provides that the Adjudicating Authority shall, in any proceedings-

  • Under Chapter XIV of the Act; or
  • Any other provisions of the Act

give an opportunity of being heard to a party in any proceeding, if the party so desires.

The Adjudicating Authority is given power to give time to the parties to the proceedings from time to time if sufficient cause is shown for this purpose.  The hearing may be adjourned for reasons to be recorded in writing.  Such adjournment is restricted to only for three times.

Burden of proof

Section 123 provides that 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 –

  • in a case where such seizure is made from the possession of any person, -
  •  on the person from whose possession the goods were seized; and
  • 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;
  • in any other case, on the person, if any, who claims to be the owner of the goods so seized.

This section shall apply to gold, and manufactures thereof, watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify.

Issue of show cause notice

Section 124 of the Act provides 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 with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty;
  • 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
  • is given a reasonable opportunity of being heard in the matter :

The notice and the representation may, at the request of the person concerned be oral.

Redemption fine

Section 125 provides that Whenever confiscation of any goods is authorized 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.   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.

Where any fine in lieu of confiscation of goods is imposed), the owner of such goods or the person shall, in addition, be liable to any duty and charges payable in respect of such goods.

Case laws

The various case laws involving various issues in adjudication are discussed as below:

Taking assistance

In ‘Lakhanpal National Limited V. Union of India’ – 1992 (9) TMI 94 - BOMBAY HIGH COURT the High Court held that it would be permissible for the Collector of Customs to take assistance of an authorized representative.   It is the opinion of the High Court that no prejudice whatsoever could be caused to the petitioners.   The petitioners are represented by several Advocates.   As against this, the Collector has to deal with several complex questions and if he thought fit to take assistance from an authorized representative in the facts and circumstances of the presence case, the High Court did not find any irregularity.

Cross examination

In ‘Swiber Offshore Construction Private Limited V. Commissioner of Customs, Kandla’ – 2013 (11) TMI 1232 - CESTAT AHMEDABAD the witnesses whose statements were relied under Section 108of the Customs Act before Gazetted Officers of the Customs and opinion of Chief Guest were relied on in show cause notice.  The request to summon them for their cross examination by importer relying on Section 138B was denied without objective formation of opinion based on materials on record for conclusion that circumstance specified in Section 138B(1)(a) entitled for denial of cross examination.   The Tribunal held that the denial of the request was unjustified.

In ‘Basudev Garg V. Commissioner of Customs’ – 2013 (5) TMI 350 - DELHI HIGH COURT the High Court held that the statement against assessee cannot be used without giving them opportunity of crossing deponent.   The cross examination is a valuable right of accused/notice in quasi judicial proceeding which can have adverse consequences for them.   However it can be taken away in exceptional circumstances specified in Section 138 B of the Customs Act.   Unless such circumstances exist, notice would have right to cross-examination.

Unjust enrichment

In ‘Mangilipalli Pradeep Ramu V. Commissioner of Customs’ – 2013 (1) TMI 506 - CESTAT NEW DELHI  the Tribunal held that the adjudicating authority imposed very mild penalty and redemption fine while there was an attempt made by appellant to be enriched at the cost of the country in violation of import policy.   Such a mild dose of fine and penalty sends messages to the society that there is a weak administration in Customs and the officers holding high posts in customs which is very sensitive act to the determine of interest of the country.   The Board should issue guidelines to the customs authority to properly deal with the smuggled goods under law of Customs without any lenient consideration to safeguard the economy.

Principles of Natural Justice

In ‘Okwy Shedrack Pkpuba V. Union of India’ – 2010 (10) TMI 6 - BOMBAY HIGH COURT  the High Court held that there was no violation of principles of natural justice as show cause notice was waived off since the probability was that foreign national had waived off the show cause notice because he would have been in a hurry to get adjudication process completed quickly to go back to his country.  It is trite that the principles of Natural Justice cannot be put in a straight jacket formula as to invoke them or chant them like a mantra, as the person who alleges violation of principles of natural justice has to demonstrate that prejudice has been caused to him on account of violation.

In ‘Abhirup Exports Private Limited V. Union of India’ – 2013 (1) TMI 669 - BOMBAY HIGH COURTthe principal challenge is that the show cause notice was issued on the basis of the report submitted by the office of Commissioner of Central Excise & Customs, Nagpur, that report was not supplied in spite of a demand and hence there has been a breach of the principles of Natural Justice.   The High Court held that the charges against the petitioner are serious involving a fraudulent claim of duty drawback but that does not obviate the need to comply with the principles of Natural Justice.   A failure to comply with the principles of Natural Justice results in a situation where, in a challenge under Article 226 of theConstitution, the High Court is constrained to set aside the order and to remand the proceedings back to the Adjudicating Authority.

Power to adjudicate advance bill of entry

In ‘Libra Natural Resources (P) Limited V. Commissioner of Customs (Import), Mumbai’ – 2013 (8) TMI 209 - CESTAT MUMBAI the appellant filed advance Bill of Entry and undertook to comply with the undertaking as per para 3 of CBE&C’s circular No. 22/97-Cus, dated 04.07.1997.   The Customs Manual 2010-11 also provide for faster clearance of goods to allow filing of billing of entry prior to arrival of goods as per Section 46 of the Customs Act, 1962.   The Tribunal held that the Commissioner is empowered to adjudicate the advance bill of entry.

Powers of Preventive Officer

In ‘Shree Ganesh Steel Rolling Mills Limited V. Commissioner of Customs’ – 2012 (10) TMI 424 - MADRAS HIGH COURT the show cause notice was challenged by the petitioner as void ab-initio relying on Supreme Court’s decision in the case ‘Commissioner of Customs V. Sayed Ali’ – 2011 (2) TMI 5 - Supreme Court as impugned order is issued by a Preventive Officer.   Subsequent to this judgment Notification was issued by Government of India empowering even the Preventive Office to issue show cause notice for the purpose of Section17 and 18 of the Act.   The petitioner submitted reply to show cause notice and test reports done by MSME which is also in their favor.   The Court is not inclined to impugn the show cause notice especially when respondents are seized of the matter and the petitioner has also given its own inputs in coming to the proper court.  The Court directed the Commissioner of Customs to pass appropriate orders including confessions raised before Court by placing reliance on Supreme Court’s order.

Show cause notice

In ‘Sidhharth Shankar Roy V. Commissioner of Customs, Mumbai’ – 2011 (8) TMI 579 - CESTAT, MUMBAI a propose to impose penalty under Section 112 of   Customs Act for breach of Section 13(2) of FERA read with Section 11 ibid would remain outside the scope of Section 50 of FERA and for that matter, outside the scope of show cause notice issued by the Director of ED.  The show cause notice issued by customs department was exclusive to each other.   Thus order-in-original passed by DD of ED under Section 51 of FERA and order-in-original passed by Commissioner of Customs in adjudication of relevant show cause notice under Section 124 ibid would occupy mutually exclusive domains.   The plea raised that the order passed by Dy. Director of ED is binding on Commissioner of Customs that later ought to have simply relied on decision of former is not acceptable.

Jurisdiction

In ‘Amba Expo Fab V. Commissioner of Customs (Import), Nhava Sheva’ – 2012 (12) TMI 395 - CESTAT MUMBAI the show cause notice was issued by one Commissioner of Customs (Adj) but he did not pass any order.   The impugned order was passed by Commissioner of Customs (Import), Nhava Sheva who recorded that he has got the power to adjudicate the impugned show cause notice videNotification No. 112/2005-Cus.  In the Notification nowhere it is shown that the impugned show cause notice has been assigned to Commissioner of Customs (Import), Nhava Sheva for adjudication.  The Tribunal held that the impugned order being passed without jurisdiction is set aside.

Personal hearing

In ‘ETA General Private Limited V. Commissioner of Customs, Chennai’ – 2012 (12) TMI 163 - MADRAS HIGH COURT notice for personal hearing was issued several times on address available on record.   Despite that importer failed to appear.   The High Court held that failure to appear in response to notice was peril of importer and consequences had to follow

 
 
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