2025 (6) TMI 432 - AT - Customs

Confiscation of foreign origin Cigarette under Section 111(d) of Customs Act 1962 - levy of penalty u/s 112(b) (i) of the Customs Act 1962 - sufficiency of the Panchnama (seizure memo) drawn during the investigation - admissibility of the statements recorded under Section 108 of the Customs Act 1962 - burden of proof - Valuation of the seized goods. Validity of panchnama - HELD THAT - From the perusal of the Panchama it is found that all the basic and relevant information required at that stage were duly incorporated. The time and place of calling the panch witnesses the identity of the officer has been clearly mentioned the purpose of the whole proceedings was duly intimated. The further details of accompanying the officers at the site in question at the time and place and specific details of the nature of the truck and its registration number which was intercepted have been mentioned in the Panchama. The next important step was the identification of the three persons who were found supervising the unloading of the main truck the driver the helper and agent of the supplier. Further the production of the E- way bill with serial number 491041939631 dated 20.12 .2018 describing the goods as metal planter and on being checked randomly cartons of cigarettes of foreign origin with brand name of Indonesia was found. Similarly the search of the godown resulted in the recovery of foreign origin cigarettes however none was able to produce valid documents for carriage or possession of the said cigarettes. In the case of Mukesh Industries 2008 (8) TMI 667 - CESTAT AHMEDABAD it was noticed that the adjudicating authority himself has held that Panchama so recorded cannot be relied upon as the same was found to be recorded by unfair means which is not the case here. In that case it was held that if the drawal of the Panchama was itself doubtful the entire case booked by the Preventive Branch cannot be allowed to stand on its own legs. Such is not the case here and moreover it is not apparent from the order as to the nature of defects or deficiencies found in the Panchnama. In the case of Anand Kumar it is the Department who filed the appeal against the order of the Commissioner (Appeals) who had found the panchnama to be doubtful. The present case is entirely different and hence no reliance can be placed on the said decision. In view of the settled principle that illegal search and seizure would not be rejected but requires to be examined carefully it is opined that the so-called deficiencies made out by the appellant are not required to be part of the Panchnama and therefore does not affect the reliability of the Panchama. Statements recorded under section 108 of the Act being without any corroboration - HELD THAT - The law on the admissibility of the confessional statement made to the customs officers has been settled in large number of decisions that if found to be voluntary can form the sole basis for conviction. The self-implicatory statement given by the appellant clearly establishes his involvement in smuggling of the seized cigarettes of foreign origin in the absence of any valid documents. The statement has not been retracted by the appellant at any point of time. The goods seized in the present case are cigarettes of foreign origin. From the legal provisions cigarettes can be freely imported subject to the provisions of Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce Production Supply and Distribution) Act 2003 and the Rules framed thereunder which envisages that on the box carton and pouch type of package the specified health warning shall appear on both sides of the packages and shall cover 85% of each side or face of the principal display and 60% shall cover pictorial health warning and 25% shall cover textual health warning. No such compliance was found on the seized foreign origin cigarette packets. Also under the Legal Metrology Packaged Commodities Rules 2011 framed under Legal Metrology Act 2009 it is mandatory to provide the name and address of the manufacturer or importer or packer quantity of the product month and year of manufacturing or pre-packing or importation the retail sale price etc. on the packages of tobacco products which were not found on examination of the goods seized. Burden of proof - HELD THAT - The cartons of cigarettes of foreign origin were seized in the presence of the appellant from the mini truck godown and the residential premises of the appellant. As noted above the appellant failed to produce any document to prove that the cigarettes seized were validly imported. In the absence thereof the authorities below have rightly concluded that the goods in question were smuggled goods and was therefore rightly confiscated. Valuation of the seized goods - HELD THAT - The e-way bill provided at the time of search described the goods as metal planters whereas on search cartons containing cigarettes of foreign origin were recovered which were found to be smuggled goods. It is not a case of rejection of the declared value as there was no declared value and hence the applicability of the Valuation Rules does not arise. The appellant neither produced the documents in support of the import made or the value declared and since the smuggled goods being cigarettes the price thereof was verified on the basis of discrete market enquiry. In the facts and circumstances of the case no interference is called for in the market price arrived at by the department. Conclusion - i) The Panchnama as quoted above clearly sets out the entire procedure of the search and seizure leading to the recovery of smuggled cigarettes for which the applicant was not able to produce any legal documents. ii) Once an admission has been made by the petitioner the denial of right to cross examine the witnesses is justified as no prejudice can be pleaded by such a party. iii) The burden is on the appellant to establish that the seized cigarettes were not smuggled. There is no reason to interfere with the impugned order and hence the same is hereby affirmed. The appeal is accordingly dismissed.

Summary

The core legal questions considered in this appeal include: (1) the validity and sufficiency of the Panchnama (seizure memo) drawn during the investigation and whether any procedural deficiencies vitiate the seizure; (2) the admissibility and voluntariness of the statements recorded under Section 108 of the Customs Act, 1962, particularly the appellant's confessional statement; (3) the applicability of legal provisions relating to smuggling and confiscation under the Customs Act, 1962, including Sections 110, 111(d), and 112(b)(i); (4) whether the seized foreign origin cigarettes were smuggled goods based on compliance with relevant laws such as the Cigarettes and Other Tobacco Products Act, 2003 and the Legal Metrology Act, 2009; (5) the burden of proof regarding the lawful import of the seized goods; (6) the valuation of the seized goods and the correctness of the market price adopted by the authorities; and (7) the appellant's right to cross-examine witnesses and whether denial of such opportunity caused prejudice.

Issue 1: Validity and Sufficiency of the Panchnama

The relevant legal framework requires that seizure memos or Panchnamas record the facts of the seizure and search proceedings, witnessed by independent persons (panch witnesses), and should be signed by all parties present. Precedents cited by the appellant were distinguished on facts: in Mukesh Industries, the Panchnama was held unreliable due to unfair means; Anand Kumar involved a departmental appeal against acceptance of a doubtful Panchnama; Mahalaxmi Dyeing Mills concerned discrepancies not present here; and Kuber Tobacco Products clarified that a Panchnama must record material facts visually perceived during investigation.

The Court examined the Panchnama dated 21.12.2018 in detail, noting that it contained comprehensive information about the surveillance, interception of the mini truck, identification of persons present, discovery of cigarettes, transportation of goods to the DRI office, detailed inventory annexed as Annexures A and B, and signatures of all parties including the appellant. The Panchnama was read over in vernacular and signed, and the appellant admitted its contents.

The Court rejected the appellant's arguments about missing minor details (such as exact manner of opening the godown, identification of laborers, or vehicle details for the 33 cartons) as irrelevant and impractical. It emphasized that the Panchnama is a record of facts visually perceived or experienced and need not include every minute detail.

Further, the Court relied on the principle from State of Haryana v. Raj Mal and Radha Kishan v. State of UP that illegal search does not vitiate seizure if the evidence is otherwise reliable. The Court held that even if there were minor discrepancies, they do not affect the admissibility or reliability of the Panchnama, as the test of admissibility lies in relevancy and absence of prejudice. The appellant failed to establish any prejudice caused by alleged defects.

Regarding the missing Annexure D mentioned in the seizure memo, the Court accepted the explanation of typographical error and found no prejudice to the appellant.

Issue 2: Admissibility and Voluntariness of Statements under Section 108

The appellant challenged the statements recorded under Section 108 of the Customs Act as being without corroboration and allegedly obtained under threat or coercion. The appellant's statement admitted receiving consignments of foreign origin cigarettes from a supplier, storing them in his godown, distributing them to transporters as per instructions, receiving payments through hawala operators, and being aware that the cigarettes were smuggled goods.

The Court found the statement to be voluntary, self-incriminatory, and consistent with other evidence. The appellant did not retract the statement at any time. The Court referred to settled legal principles that a voluntary confessional statement recorded by customs officers can form the sole basis for conviction. It also noted that admissions need not be further proved and can suffice the burden of proof.

The Court rejected the appellant's plea for cross-examination of witnesses who implicated him, holding that denial of such opportunity does not violate principles of natural justice when the appellant has already made a confession. The Court cited Supreme Court precedents establishing that once a confession is made, cross-examination of other witnesses is not necessary and no prejudice is caused to the accused.

The Court also relied on a recent High Court decision affirming that denial of cross-examination in smuggling cases involving confessional statements does not prejudice the accused.

Issue 3: Classification of Seized Goods as Smuggled and Legal Compliance

The seized goods were foreign origin cigarettes found in the mini truck, godown, and appellant's residence. The cigarettes did not comply with mandatory health warning requirements under the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003, which mandates 85% principal display area coverage with pictorial and textual warnings. They also lacked mandatory declarations under the Legal Metrology (Packaged Commodity) Rules, 2011, such as manufacturer/importer name, quantity, manufacturing date, and retail price.

The appellant failed to produce any valid import or transport documents for the seized goods. The Court noted that cigarettes are notified goods under Section 123 of the Customs Act, placing the burden on the appellant to prove lawful import. The absence of such proof and the illegal packaging and labeling led the authorities to rightly conclude the goods were smuggled and liable for confiscation under Sections 111(b), 111(d), and 111(o) of the Customs Act.

Issue 4: Valuation of Seized Goods

The appellant challenged the valuation on grounds of absence of market survey details. The revenue ascertained the market value at Rs. 14 per cigarette stick based on discrete market enquiry, as no declared value was available due to non-production of import documents. The Court held that since the e-way bill declared the goods as metal planters and the actual goods were smuggled cigarettes, the declared value was irrelevant. The valuation by the revenue was reasonable and no interference was warranted.

Issue 5: Burden and Standard of Proof

The Court reiterated that in customs adjudication proceedings involving evasion of duty, the standard of proof is preponderance of probability, not proof beyond reasonable doubt. It relied on Supreme Court decisions stating that the prosecution need only establish a degree of probability sufficient for a prudent person to believe the fact in issue. Given the evidence and admissions, the Court found the burden satisfactorily discharged by the revenue.

Conclusions and Final Determinations

The Court concluded that the Panchnama was valid, comprehensive, and reliable, and minor alleged deficiencies did not vitiate the seizure. The appellant's confessional statement under Section 108 was voluntary and admissible, forming a strong basis for the findings. The seized cigarettes were smuggled goods as per the applicable laws and regulations, and the appellant failed to prove lawful import. The valuation adopted was fair and justified. The appellant suffered no prejudice by denial of cross-examination of witnesses given his own admissions. The confiscation and penalties imposed under Sections 111(d) and 112(b)(i) of the Customs Act, 1962, were upheld. The appeal was dismissed.

Significant Holdings:

"The Panchnama as quoted above, clearly sets out the entire procedure of the search and seizure, leading to the recovery of smuggled cigarettes for which the applicant was not able to produce any legal documents."

"The appellant had agreed with the contents of the Panchama. Having admitted, it is now not open to the appellant to challenge the contents of the Panchama."

"An illegal search does not vitiate the seizure of the articles. The only requirement of law in such cases is that the court has to examine carefully the evidence regarding the seizure and beyond this no further consequences ensue."

"If the provisions of the Act have not been complied with, the Court has to consider whether as a result thereof any prejudice has been caused to the accused."

"A voluntary confessional statement recorded by customs officers can form the sole basis for conviction."

"Once an admission has been made by the petitioner, the denial of right to cross examine the witnesses is justified as no prejudice can be pleaded by such a party."

"The standard of proof in evasion of customs duty proceedings is preponderance of probability and not proof beyond reasonable doubt."

"The burden is on the appellant to establish that the seized cigarettes were not smuggled."