Gold Imported In Violation Of Restrictions Is 'Prohibited Goods' Under Customs Act: Calcutta High Court

On Thursday, 10 September, the Calcutta High Court held that gold imported into India in violation of applicable import restrictions can be treated as “prohibited goods” under Section 2(33) of the Customs Act, 1962, even though gold is not absolutely prohibited from being imported into the country.

A Division Bench comprising Justices Debangsu Basak and Aryak Dutt allowed the Customs Department's appeals and dismissed the appeals filed by Gopal Saha and Ajgar Seikh, setting aside the Single Judge's judgment and restoring the adjudication order imposing penalties on them. The judges held:

“In order to assess whether, the seized goods were prohibited goods within the meaning of the Act of 1962 or not, not only prohibition issued under the Act of 1962 is required to be considered but also any prohibition that have been issued under any other law for the time being in force.”

The Directorate of Revenue Intelligence (DRI) had intercepted and seized 36.856 kg of gold in April 2013, valued at around Rs. 10.07 crore. According to the DRI, the gold had been smuggled into India through an unauthorised route along the Indo-Bangladesh border. The investigation alleged that Saha was the prospective recipient of the gold, while Seikh was involved in supplying it.

The Commissioner of Customs (Preventive) subsequently confiscated the gold under Section 111(b) of the Customs Act and imposed a penalty of Rs. 10.07 crore each on Saha and Seikh under Section 112. The Single Judge had earlier held that gold was not “prohibited goods” and interfered with the penalty, remanding the matter for reconsideration of its quantum.

The Division Bench noted that the import of gold into India is regulated, with bulk imports governed by RBI circulars and notifications and passenger imports governed by the Baggage Rules. Neither of the writ petitioners was an agency authorised by the RBI to import gold in bulk.

It explained that Section 2(33) covers goods whose import is prohibited not only under the Customs Act but also under “any other law for the time being in force.” Thus, goods need not be completely banned from import to qualify as “prohibited goods” for customs purposes. Importing them in breach of a legally imposed prohibition or restriction is sufficient to bring them within the definition.

Further, the judges held that once the seized goods fall within Section 2(33), proceedings initiated after issuance of a show cause notice under Section 124 can attract Section 112(i). It therefore found that the Adjudicating Authority had correctly imposed the penalty applicable to prohibited goods.

The Bench also rejected the argument that the penalty order was invalid because the Adjudicating Authority had not specifically identified the relevant provision of Section 112. It observed that merely quoting an incorrect provision would not invalidate an order where the authority otherwise had the power to pass it.

Accordingly, the High Court held that the gold was “prohibited goods” within the meaning of the Customs Act in the circumstances of the case and upheld the penalty imposed under Section 112(i).

For Gopal Saha and Ajgar Seikh: Mr. Arijit Chakraborti, Advocate; Mr. Nilotpal Chowdhury, Advocate; and Mr. Prabir Bera, Advocate.

For the Customs Department / Union of India: Mr. Bhaskar Prosad Banerjee, Senior Advocate; Mr. Abhradip Maity, Advocate; Ms. Elora Pandit, Junior Advocate; and Ms. Pooja Basak, Advocate.