2023 (5) TMI 903 - AT - Customs

Smuggling - 5, 700 kg. cut betel nut alleged illegally imported to be of third country origin - basis of impugned seizure under Section 110 of the Customs Act 1962 has to be on a reasonable belief that the goods are smuggled of foreign origin and therefore liable for seizure - failure to establish foreign origin of seized goods - onus to prove on Department - provisional release of seized goods - penalty - HELD THAT - From the facts of the case it appears that this belief is largely based on this specific information with the authorities it may have been further strengthened by non-production of transport documents at the time of interdiction of vehicle. Cut betel nuts are non-notified goods and therefore in terms of Section 123 of the Customs Act the onus to prove foreign origin and smuggled nature of the goods is on the department. The appellants have discharged their share of burden by presenting to the department an invoice No. 133 dated 13th March 2016 - There is nothing expressly indicated in the order appealed to confirm the existence of a reasonable belief. Be it the seizure may be on an alleged specific information but beyond the point of seizure by police and the goods being handed over to the Customs department and the supply of documents of purchase of goods through M/s Shree Shai Systems in turn from Customs auction at Forsebganj accounting for the entire 5700 kgs by way of cut uncut betel nuts the appellants have discharged there initial onus. There is no shred of evidence to establish or even state that the goods were smuggled. Having lent a credence to the goods to be procured out of Customs auction it is for the department to affirmatively negate the same. There is no word in the order in respect of the various unanswered questions framed by the Commissioner as to the investigations in regard to those primary questions. Moreover smuggled character of goods is to be led and established by positive evidence and cannot be assumed on the basis of some unanswered probabilities as to non-supply of carriage documents or that of long storage or the character of the goods. It is observed from the investigations undertaken that the department has thus miserably failed in establishing the foreign origin of the seized confiscated and provisionally released cut betel nuts. There being no shred of any positive piece of evidence led by the revenue to establish the smuggled nature of the goods being non notified goods the onus is on the department to establish smuggled foreign origin of the cut betel nuts. The appellants have discharged their burden on the basis of invoice tendered and related procurement source. Moreover it is not the case of the department that the goods were not procured in auction by the supplier Shri Arvind Kumar Shahee. The department not being able to discharge the onus cast upon them to establish the smuggled character of the goods the confirmation of sale to the appellants by Shri Arvind Kumar Shahee picking up the betel nuts in the departmental auction the order in appeal is set aside and the appeals allowed.

Summary

Issues Involved:
Seizure of cut betel nuts alleged to be of third country origin, Confiscation of goods under Customs Act 1962, Redemption fine and penalty imposition, Smuggling of cut betel nuts, Burden of proof on department, Failure to establish foreign origin of goods.

Seizure and Confiscation of Goods:
The impugned appeals were filed assailing the order confiscating 5700 kg of cut betel nuts alleged to be of third country origin. The seizure was based on specific information regarding illegal import of cut betel nuts from Nepal. The Customs Officer seized the goods under Section 110 of the Customs Act 1962 and investigations revealed the goods were procured from a supplier in Patna. The Ld. Commissioner (Appeals) upheld the confiscation and imposed redemption fine and penalty on the appellants.

Smuggling Allegations and Burden of Proof:
The Ld. Commissioner found the appellants involved in smuggling of cut betel nuts of third country origin. The appellants claimed the goods were purchased from a supplier in Patna and were part of a Customs auction. However, the Ld. Commissioner dismissed this claim as a "concocted story" and ordered confiscation of the goods. The onus to prove foreign origin and smuggled nature of the goods was on the department, but they failed to establish this, leading to the appeals being allowed.

Failure to Establish Foreign Origin:
The department failed to provide any positive evidence to establish the foreign origin of the seized cut betel nuts. The appellants presented an invoice and procurement details, but the department did not discharge its burden of proof. Questions raised by the department, such as storage duration and lack of transportation documents, did not conclusively prove smuggling. The department's assumptions and presumptions were not supported by cogent evidence, leading to the appeals being allowed due to the failure to discharge the burden of proof.

Conclusion:
The department's inability to establish the smuggled nature of the goods, coupled with the appellants' presentation of invoice and procurement details, led to the appeals being allowed. The confirmation of sale to the appellants from the supplier in Patna picking up the goods in a departmental auction was a key factor in setting aside the order in appeal and allowing the appeals.