CESTAT Delhi Upholds Confiscation and Penalties for Smuggling of Concealed Memory Cards

Overview of the Dispute

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, has sustained an order of the Commissioner of Customs (Import & General), New Delhi, in a matter involving clandestine import of undeclared memory cards concealed within declared goods. The Tribunal dismissed the appeals filed by Mahender Pal Singh and his son Bhupinder Singh Sachdeva, thereby confirming:

  • Confiscation of the imported and seized goods
  • Re-determination of value and recovery of differential customs duty
  • Imposition of penalties under Section 114A of the Customs Act, 1962
  • Redemption of confiscated goods on payment of specified fines

The matter arose from a Directorate of Revenue Intelligence (DRI) investigation into a consignment arriving from Hong Kong, where goods declared as “clips for multimedia card (metal parts)” were found to conceal high-value memory cards that had not been declared in the Bill of Entry.

Background: Intelligence, Import, and Detection

Specific Intelligence and Import Details

The DRI received precise input that a consignment covered by an Airway Bill dated 13.04.2007, arriving on Air India Flight AI 311 from Hong Kong to Delhi, contained undeclared memory cards hidden inside metal clips described as “clips for multimedia card (metal parts)”.

Officers chose to wait until the formal import declaration was filed. On 18.04.2007, a Customs House Agent (CHA), Shri Dharam Veer Sauran, filed a Bill of Entry in the name of M/s Ishan Exports, declaring:

  • 26,800 pieces of “Clip for Multimedia Card (metal parts)”
  • Assessable value declared: Rs. 11,88,285/-

Physical Examination and Actual Goods Found

Upon examination, customs authorities discovered that the imported consignment did not match the declaration. Instead of only metal clips, the following items were found:

  • 26,703 adaptors (in place of 26,800 clips)
  • 3,080 memory cards of 1GB each
  • 37,160 pieces of printed stickers of various kinds

This discrepancy revealed that a substantial quantity of high-value memory cards had been smuggled in by concealing them within the ostensibly low-value metal adaptors/clips and not declaring them in the Bill of Entry.

Role of CHA, IEC Holder and Actual Importers

CHA’s Explanation

The CHA stated that the Bill of Entry had been filed on behalf of M/s Ishan Exports, but he personally did not know the proprietor and that the relevant details were handled by his G-card holder, Shri Anil Kumar.

Shri Anil Kumar clarified that:

  • The Bill of Entry was prepared based on a commercial invoice received by fax
  • The invoice described the goods as metal clips for multimedia cards
  • On examination, however, the goods were found to be different from the declared description

Use of IEC of M/s Ishan Exports

The proprietor of M/s Ishan Exports, Shri Uday Bhan Singh, admitted that:

  • His business activities were not successful
  • He had agreed to let Shri Mahender use his Importer Exporter Code (IEC)
  • He received Rs. 5,000/- per consignment for lending his IEC
  • The imported goods did not belong to him but to Mahender

Further investigation by DRI revealed that:

  • Mahender was orchestrating the imports
  • His son Bhupinder assisted him in running a shop dealing in memory cards and related items
  • The consignment was in reality imported by Mahender and Bhupinder, using the IEC of M/s Ishan Exports as a front

This established that the IEC holder was merely a name lender and that the actual importers were different persons, who arranged the import and attempted to bring in undeclared memory cards concealed within the declared goods.

Issue of Show Cause Notice and Adjudication

Show Cause Notice

After completion of investigation, the DRI issued a show cause notice dated 16.10.2007, proposing:

  • Confiscation of seized goods under various clauses of Section 111 of the Customs Act, 1962
  • Re-determination of value and recovery of differential customs duty and cess under Section 28
  • Imposition of penalties on the persons involved, including Mahender, Bhupinder, and Uday Bhan Singh

Commissioner’s Findings and Original Order

The Commissioner of Customs (Import & General), New Delhi, passed an order dated 03.06.2008, which, inter alia, provided:

  1. Confiscation of main consignment

    • Goods described in Annexure “C” with assessable value of Rs. 12,49,806/-
    • Imported “jointly or severally” by Sh. M.P. Singh and Sh. Uday Bhan Singh of M/s Ishan Exports
    • Confiscated under Section 111(f), Section 111(i), Section 111(l) and Section 111(m) of the Customs Act, 1962

  2. Confiscation of packing and associated material

    • Corrugated cardboard cartons and other items of no commercial value
    • Confiscated under Section 118(a) and Section 119