The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that couriers can’t be penalised for smuggled gold concealed through ingenious methods beyond ordinary detection.
The bench of R. Muralidhar (Judicial Member) ruled that where gold was hidden through sophisticated means that could only be detected by Customs using X-ray technology, the authorised courier could not be held responsible for the smuggling attempt.
The dispute arose after Customs authorities detected 1,250.500 grams of gold concealed inside an international courier consignment. The gold had been ingeniously hidden in the form of foils placed between layers of carbon paper and pasted inside carton boxes containing goods declared as cup sets, chips packets, CFL bulbs, soap, torch, perfume, milk powder and washing powder.
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Following the detection, the Customs Department alleged that the authorised courier had connived in the movement of the contraband goods. A show cause notice dated 1 April 2021 was issued against the courier service, its licence was suspended, and adjudication proceedings were initiated under the Courier Imports and Exports (Clearance) Regulations, 1998.
However, after considering the Inquiry Officer’s report, the Commissioner of Customs, by Order-in-Original dated 12 July 2021, dropped the proceedings against the courier. Aggrieved by this decision, the Revenue preferred an appeal before the Tribunal.
The department argued that the adjudicating authority had erred in dropping the proceedings despite the courier’s alleged failure to discharge its obligations under the Courier Imports and Exports (Clearance) Regulations. According to the Department, the authorised courier ought to have been held accountable for facilitating the movement of the contraband consignment.
The courier contended that the adjudicating authority had thoroughly examined the Inquiry Officer’s report and rightly concluded that there was no evidence linking it to the attempted smuggling.
The department pointed out that in the parallel adjudication proceedings seeking imposition of penalty under Section 112(a) and 112(b) of the Customs Act, 1962, the adjudicating authority had also dropped the proposed penalty through a subsequent Order-in-Original thereby reinforcing the finding that no case existed against the courier.
The Tribunal noted that the Inquiry Officer’s report had categorically identified three individuals as the masterminds behind the attempted smuggling. Those individuals had admitted their role in financing the operation and arranging passport details for facilitating the illegal import.
Importantly, the Inquiry Officer found that no evidence had been brought on record implicating the authorised courier. None of the accused persons had alleged that the courier was aware of the concealed gold. The courier had not wilfully violated the provisions of the Courier Imports and Exports (Clearance) Regulations, 1998 or failed to comply with its regulatory obligations.
The Tribunal agreed with the findings recorded by the adjudicating authority that the concealment method employed by the smugglers was exceptionally sophisticated.
It observed that the gold foils had been concealed between carbon paper layers pasted inside carton boxes in such a manner that the concealment could not have been detected during ordinary handling of the consignment.
The adjudicating authority had found that the courier had no technological means to detect such concealment while receiving the cargo abroad and that the contraband came to light only after the Customs Department subjected the parcel to X-ray examination upon arrival in India.
The Tribunal accepted these findings and observed that except for the person who devised such an ingenious concealment, nobody could reasonably have been expected to detect the hidden gold without specialised equipment.
The Tribunal further noted that the adjudicating authority had correctly concluded that the courier had acted on the bona fide belief that the declared cargo was genuine and free from contraband.
It accepted the finding that the authorised courier had taken effective steps to ensure compliance with legal requirements and had exercised due diligence expected under the regulatory framework. The suspicion against the courier arose solely because of the illegal conduct of the consignor and not because of any negligence or complicity on the courier’s part.
An additional factor that weighed with the Tribunal was that subsequent proceedings initiated for imposition of penalty under Section 112(a) and 112(b) of the Customs Act had also culminated in dropping the proposed penalty against the courier after detailed consideration of the facts and statutory provisions.
The Tribunal held that when both adjudication orders were read together, they consistently established the absence of any material implicating the authorised courier.
Finding no infirmity in the adjudicating authority’s reasoning, the Bangalore Bench of CESTAT held that there was no justification for interfering with the order dropping the proceedings.
The Tribunal dismissed the Revenue’s appeal by affirming that an authorised courier cannot be subjected to punitive action merely because contraband was concealed in a parcel, unless there is evidence establishing knowledge, connivance, or failure to exercise the due diligence required under the law.
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