Union Of India (Uoi) vs Anil Chanana And Anr.

2. On the basis of specific information Anil Chanana-respondent No. 1, who alighted from British Airways' flight from London and walked through Green Channel, was intercepted by DRI Officers at the exit gate of the arrival hall of IGI Airport on 11.8.04. On personal search, two sets of diamond earrings were recovered from his coat pocket along with US$1900. Further, an invoice dated 10.8.04 evidencing sale of such earrings to respondent No. 1-Anil Chanana along with VAT Declaration Form filed by Anil bearing stamp of Customs Authority, London, was also recovered. Further, the search of his baggage resulted in recovery of two empty plastic jewellery boxes kept inside two cardboard boxes (containers). The value of two pair of diamond earrings mentioned in invoice dated 10.8.04 was of 1,40,847.41 equivalent to Rs. 1,16,90,300. On 12.8.04 Anil's statement was recorded under Section 108 of the Customs Act, 1962 in which he stated that the said earrings were gifted to him by his friend in London. The name of his friend was Bhupendra Kansagara whom he had met for the first time three years earlier; that, he got VAT Declaration Form from British Customs so that he could get refund of VAT; that, on arrival he did not declare the value of dutiable goods in the Customs Declaration Form; that though he was a frequent traveller he was not fully aware of Customs Law. On 12.8.04 Anil was placed under arrest for having committed offences punishable under Sections 132 and 135 of the Customs Act, 1962 (for short, "1962 Act") for failure to declare dutiable goods in Customs Declaration Form and for having walked through the Green Channel with intent to evade the payment of duty and for making willful mis-statements and suppression of material facts. On 16.8.04 Anil voluntarily deposited customs duty amounting to Rs. 47,72,521. On 19.8.04 he was granted bail after he had deposited the duty.

4. On 24.9.04 show cause notice was issued demanding duty amounting to Rs. 47,72,521 and for confiscation of seized earrings and imposition of penalty. On 30.9.04 proceedings for prosecution of Anil was launched in the Court of Addl. Chief Metropolitan Magistrate, Patiala House, New Delhi.

8. Aggrieved by the decision of the Compounding Authority dated 25.5.06 Union of India challenged the said order before the Delhi High Court in Writ Petition (c) No. 12912 of 2006 which has been dismissed by the impugned judgment, hence this civil appeal.

13. Before concluding, it may be mentioned that the compounding mechanism in Section 137(3) is to be allowed only in cases of doubtful benefit to the Revenue and to prevent needlessly proliferating litigation and holding up of collections. Compounding cannot be allowed if there are apparent contradictions, inconsistencies or incompleteness in the case of the applicant before the Compounding Authority. It is the duty of the Compounding Authority to ascertain such contradictions before compounding is ordered. In the present case, different versions given by Anil - in his statement under Section 108, in his first bail Application and in his Application for compounding - itself disqualifies Anil from claiming the benefit of compounding under Section 137(3) of the 1962 Act.

14. None of the above aspects have been examined by the Compounding Authority in its order dated 25.5.06 as well as by the High Court in the impugned judgment dated 17.10.06 and they are hereby set aside. Consequently, the Department's civil appeal stands accordingly allowed with no order as to costs.