Supreme Court: In a case where the Supreme Court was called upon to decide whether a settlement remedy under Section 127B of the Customs Act, 1962, would be available for the seized goods, which are specified under Section 123 of the said Act, the bench of Krishna Murari and Sanjay Karol, JJ gave a spilt verdict and referred the matter to a larger bench.
Factual Background
An NRI was arrested under Sections 132 and 135 of the Customs Act, at the Delhi International Airport, for trying to smuggle high value goods, mainly 7 wrist watches, through the green channel entrance, in order to escape from paying duty on the same.
It was the petitioner's case that, being an NRI, he has been unable to travel outside India since 06.10.2022 and has been amenable to settle the dispute by approaching the settlement commission under Section 127 of the Customs Act, by paying the dues and any interest accrued thereon to the customs department in accordance with law.
The present case raised an issue of huge importance of personal liberty under Article 21 of the Constitution of India, regarding the right of an accused under the Customs Act, 1962 to settle the dispute as per provisions contained under chapter XIV A of the Customs Act.
Justice Murari's View
Section 123 of the Customs Act, 1962, states that if an accused is caught by the authorities in the act of smuggling goods, the burden of proof, which originally vests with the prosecution, is reversed, and the same is transferred from the prosecution to the defense. This would mean that in such cases, it is the accused who is tasked with proving his innocence, rather than the prosecution proving the accused person's guilt.
Justice Murari opined that the discharge of burden of proof can only happen in cases where there is a reasonable possibility of the accused being innocent. In a scenario, where the impugned goods are found on the person of the accused and within the customs area, any chance of the accused being innocent becomes an impossibility, since the illegal act is caught in the heat of the crime. He said that since the discharge of burden proof, rather, the question of burden of proof itself becomes redundant in cases of seizures within the customs area, by default, the provision that mandates such a task also becomes redundant.
He was, hence, of the opinion that in cases of seizure within the customs area, Section 123 of the Customs Act cannot apply.
On the submission that a non-declaration of goods, as mandated by Section 77 of the Customs Act, ousts the jurisdiction of the Settlement Commission, Justice Murari shed light on the two modes of clearance of incoming passengers, i.e. the red channel mode of entry and the green channel mode of entry. He explained that,
“When an incoming passenger goes through customs verification, he has two options of clearances, which are the red channel mode of entry and the green channel mode of entry. When an incoming passenger avails the red channel mode of entry, it is accepted by the passenger that they have goods that are liable for duty, and hence, by virtue of their own admission, are mandated declare the goods that require duty as per Section 77 of the Customs Act. If a passenger opts for the green channel mode of entry, it implies that the passenger, by virtue of not opting for the red channel mode of entry, is stating that he has no goods that are liable to duty, and hence, it is deemed that they are making a declaration under Section 77 of the Customs Act of carrying “Nil” dutiable goods.”
When a passenger decides to opt for the green channel of entry, but, is still found with goods that are subject to the levy of duty, they become liable to confiscatory and penal action as per the Customs Act. Since they become subject to the penal provisions of the Customs Act, by default, it must also be implied that they are given the benefit of settlement as per the same Act. No surgery in such a scenario can be done, wherein the accused is held liable of the penal consequences of the act, however, is denied the benefit of remedy under the same Act.
He further observed that if he were to accept the proposition that a non-declaration under Section 77 of the Customs Act would automatically bar the incoming passenger from availing the benefit of settlement, in light of our observation that an entry through the green channel mode implies a declaration of “Nil” goods under Section 77 of the Act , the provision of settlement would become irrelevant and defunct, since no accused would ever be able to avail the benefits of settlement.
Therefore, he found no reason as to why such a person cannot opt for a statutory remedy of settlement.
He also rejected the contention that any person who importing the impugned goods at the instance of another person, is a smuggler, and as such, the Settlement Commission cannot be approached in such cases.
Justice Karol's view
Justice Karol went into the interpretation of Sections 127B and 123 of the Customs Act and observed that Section 127B lays down specific conditions for its application, and the proviso to Section 127B(1) specifies certain categories of goods are barred from the jurisdiction of the settlement commission, including goods mentioned under Section 123 and goods relating to the NDPS Act. Therefore, recourse under Section 127B cannot be made if any of these goods are involved.
Hence, it is evident that Section 127B is not meant to be applied in all categories of cases and that only in the following circumstances can an application be made to the settlement commission:
(a) the applicant has filed a bill of entry, or a shipping bill, in respect of the import or export of such goods, as the case may be, and in relation to such bill of entry or shipping bill, a show cause notice has been issued to him by the proper officer;
(b) the additional amount of duty accepted by the applicant in his application exceeds three lakh rupees;
(c) the applicant has paid the additional amount of customs duty accepted by him along with interest due under section 28AB: and
(d) the proviso to Section 127B is not attracted.
He noticed that in the present case, as the recovery from the Petitioner was on crossing the green channel at the Delhi airport, wherein the officers of the Investigating Agency apprehended him with dutiable goods, including watches of admitted foreign origin, which is one of the categories of goods mentioned in Section 123 of the Act, the Petitioner is barred from approaching the Settlement Commission.
[Yamal Manojbhai v. Union of India, 2023 SCC OnLine SC 565, decided on 04-05-2023]
Split verdict by Justice Krishna Murari and Justice Sanjay Karol
Advocates who appeared in this case :
For Petitioner(s): Mr. Ashish Batra, AOR
For Respondent(s): Mr. K.M. Nataraj, Ld. ASG Mr. Sharath Nambiar, Adv. Mr. Vatsal Joshi, Adv. Mr. Vinayak Sharma, Adv. Ms. Indira Bhakar, Adv. Mr. Anuj S. Udupa, Adv. Mr. Chithransh Sharma, Adv. Mr. Nakul Chengappa K.K., Adv. Mr. Arvind Kumar Sharma, AOR Mr. Mukesh Kumar Maroria, AOR