TMI Blog2007 (9) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... same Order-in-Original for unconditional release of 2.035 MT Copper Cathodes and 41.600 MT Copper Scrap. As both the matters are interlinked and arising out of common order-in-original, they are being disposed of by a common order. 2. Brief facts of the case are that appellant Shri Sultan Dharani (Importer) is carrying on business in the name and style of M/s. Gemini Impex and M/s. Ecomet Corporation, both being his proprietary concerns. While M/s. Gemini Impex is into imports and trading of interalia imported goods, M/s. Ecomet Corporation is acting as Indenting Agent, earning commission from abroad. 3. Officers of the DRI gathered an intelligence that certain firms had imported goods at Nhava Sheva port and cleared the same without payment of duty by filing a Bill of Entry for warehousing and that the goods were diverted to market instead of taking it to the bonded warehouse. It was found that the importers had filed re-warehousing certificates to the authorities in Bond Section of JNCH, Nhava Sheva for getting the Bonds cancelled and release of supporting Bank Guarantees, which were furnished at the time of filing the Into Bond Bills of Entry for warehousing. However, upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionally. The Appellant referred the stock of 2.035 MT Copper cathodes as old stock, however could not produce any documents for licit acquisition of the same. 6. The Appellant filed a Writ-Petition No. 3912 of 2006 in the High Court, Mumbai inter alia praying for release of the goods detained since 29-3-2006 in the godowns at Bhiwandi. After hearing the Appellant and the Revenue, the above petition was dismissed in limine by a Division Bench of the Hon ble High Court by order dated 7-7-2006. 7. The above decision of the Hon ble High Court was challenged by the Appellant before Hon ble Supreme Court under SLP No. 12401 of 2006. On 11-9-2006, after hearing both the sides, the Hon ble Supreme Court directed the Department to issue a Show Cause Notice urgently and directed the Appellant to file reply in such event. 8. On scrutiny of the documents with regard to import/purchase of Zinc Ingots during the year 2005-06, it was revealed that 100.443 M.T.s of Zinc ingots covered under four (4) Bills of Entry viz. 690906, 690907, 690908 690909 all dated 8-2-2006, as per Bills of Lading were of CMM brand of Brazil origin, as against physically verified stock of 88.935 MT CPM brand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2025 Kgs of Copper Cathode (i.e. goods at Sr. no. 1 above) have been found to be untenable and it has appeared in the investigations that these goods have been illegally imported and/or acquired by Shri Sultan Dharani. Therefore, the seizure was made on a reasonable belief that these goods were illegally imported and/or acquired by the Appellant. It is contention of the Revenue that in respect of prime quality of 88.935 MTs of Zinc ingots bearing markings CPM , neither he had any authentic documents to support the licit importation of the said stock of ingots lying with him nor he could furnish documents supporting licit acquisition. Moreover, contrary to his claim, on investigations, it was ascertained that Shri Sultan Dharani had procured only bills worth Rs. 69 lakhs approx. for a fabricated purchase deal of unwrought zinc ingots without corresponding supply of physical goods. Further, it has also been ascertained that on the strength of Central Excise invoices of M/s. Arat Electro Chemicals, he had issued invoices, for the unwrought zinc whereas actually the goods supplied to M/s. Novelty Galvanisers were zinc ingots of prime quality. Therefore, it appears that these good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Metal Link Alloys and despite the godown being sealed on 29-3-2006, these documents show deliveries on 29-3-2006 as well as 30-3-2006 from the same godown; moreover despite LRs being of two different transporters, they were written in same hand-writing as opined by hand writing expert, no value can be attached to statements of Bhawarlal Jain Rajkamal Jain of M/s. Metal Link Alloys Ltd. in face of impossibility of removal of copper scrap from the said godowns of the Appellant; he had never indented any consignment of Zinc Ingots or Copper Cathodes, there was no specific allegation that the seized goods were part of any particular consignment of Copper Scrap, Zinc Ingots or Copper Cathode imported by any Delhi based importer; DRI itself differentiated the seized goods from the goods cleared free of duty under Bills of Entry for Warehousing filed by the Delhi based importers; the reply to the SCN was limited to the allegations levelled only in respect of seized goods on the basis of evidences supplied as per Annexure-A to SCN; he, however, denied any conscious involvement in any manner in any fraudulent evasion of Customs Duty or abetting in any manner in any smuggling activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort showing the existence on LRs of different transporters of the same handwriting, is ignored, the document cannot be relied to prove transport of the goods. This contradiction alone is sufficient to drain out any authenticity or truthfulness into the statements of the two directors of M/s. Metal Link Alloys to the effect that they had received the entire Copper Scrap covered by these two Bills of Entry, and had consumed it for production. The transport documents actually cast suspicion on the eligibility of M/s. Metal Link to Cenvat Credits. There is no other evidence to show that the goods lying in the godown did not relate to the produced Bill of Entry. Thus initial burden of proving illicit import remains undischarged. 15.3 Regarding 88.935 MT Zinc Ingots : The stock lying in the godown was found to bear CPM marks, whereas the corresponding Bills of Lading mentioned the CMM mark. The space against column marks and nos. in the Bills of Entry were blank. As per Invoice and Packing List, there were not marks on goods. Customs Authorities have not noticed any wrong marks, and in case of wrong marks goods could not have been cleared from port. No proof of any application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 112(a) and (b). Thus it was held that the seized goods viz. 2.035 MTs Copper Cathodes and 41.600 MTs Copper Scrap were not liable to be confiscated and ordered its release unconditionally; he ordered confiscation of 88.935 MTs Zinc Ingots u/s. 111(d) of the Customs Act, 1962, but allowed redemption on payment of fine of Rs. 17,00,000/- (Rupees Seventeen lakhs) under Section 125 of Customs Act, 1962; further, ordered that in terms of section 125(2), appropriate duty be recovered if and when, the confiscated goods are released on payment of redemption fine; imposed a penalty of Rs. 10,00,000/- (Rupees Ten lakhs only) on Shri Sultan Dharani under Section 112(a) and (b) of the Customs Act, 1962. 17. Thus both the parties are aggrieved by the Order-in-Original. Hence importer has filed the above Appeal whereas the revenue filed appeal in pursuance of directions given after reviewing the order by the Committee of Chief Commissioners. 18. The ld. Counsel for the Appellant drew attention to the grounds urged in the Appeal and inter alia submitted that the seized Zinc Ingots were legally imported vide the four Bills of Entry submitted during investigations. He submitted that the Bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign origin as well as illegal importation of the goods, and thus burden was correctly held as not discharged. He placed reliance on judgment of Constitution Bench of Hon ble Supreme Court in Amba Lal v. Union of India - 1983 (13) E.L.T. 1321 (S.C.) to show that onus of proof is on Customs Authorities and section 106 of the Evidence Act does not shift the burden of proof from Customs Authorities to Appellant. Several decisions of Hon ble Supreme Court, various High Courts and Tribunal were cited. 19. The ld. DR submitted that the ld. Commissioner correctly observed that there can not be two views about the contention that the burden to prove smuggled nature of goods is on the department. However, the Ld. Commissioner ought to have considered that the verification of stock was being conducted pursuant to findings of investigations, which had brought to the light the deep rooted indulgence and complicity of the Appellant, in the large scale fraudulent import effected by abusing the Warehousing facilities, particularly when the goods were similar to those fraudulently imported and cleared under the warehousing scheme. The Department proved that Copper cathode imported under the Bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Customs, Kolkata (vii) 2004 (177) E.L.T. 1031 (Tri-Del) in the case of Commissioner of Central Excise Indore v. Bhupendra Kisnani (viii) 2004 (174) E.L.T. 493 (Tri.-Mumbai) in the case of Nazir-Ur-Rahman v. CC, Mumbai 20. After considering the material on record, the submissions made by both the sides, including the case laws relied upon, we are to observe the following. There is absolutely no evidence on record to establish the fact that the seized goods were smuggled into India without payment of duty by misusing warehousing scheme by Delhi based importers, which according to the department is the basis of sealing of godown on 29-3-2006. The role of the appellant beyond indenting legitimately, nothing fraudulent is established. No evidence is forthcoming to establish the conscious knowledge of the appellant regarding modus operandi of the unscrupulous importers. It is found that none of the seized goods were amongst notified goods under sec. 123(2) of the Customs Act, l962. It is undisputed settled position of law that, in respect of non notified goods, the burden lies on the department to prove that the goods seized are smuggled in nature. 21. In respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst cheque received from the Appellant can at the most raise suspicion about the proper acquisition of the zinc ingots sold to M/s. Novelty Galvaniser, but can in no manner prove illegal importation of the seized Zinc Ingots. Therefore, it is to be stated that the illegal importation of seized Zinc Ingots is not established. The Revenue failed to discharge the burden cast upon it to prove smuggled nature of 88.935 MT of Zinc Ingots. Therefore, the finding of the ld. Commissioner that the Appellant obtained custody of goods of foreign origin with knowledge that those were smuggled goods, and concerned himself with depositing, keeping, concealing, selling and purchasing the goods with complete knowledge that the same were liable to confiscation, is based only on surmises and conjectures, without any evidence to support the alleged unauthorized importation of the goods. 22. In respect of 2.035 MT of Copper Cathodes : (a) It is found that the department did not establish the fact that copper cathodes were of foreign origin. The weight of copper cathodes was ascertained as 2.035 MT as per weigh slip no. 141. The Panchnama dated 11-5-2006 nowhere reflected that the goods are of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd this also raises suspicion on the bona fides of the investigations. (d) The ld. Commissioner rightly observed that these documents cannot be relied to prove transport of the goods; and that this contradiction alone is sufficient to drain out any authenticity or truthfulness into statements of the directors of M/s. Metal Link, and that no value can be attached to these statements in face of impossibility of removal of goods from the said godown of the Appellant. (e) The ld. Commissioner was also correct in observing that apart from the statements and records of M/s. Metal Link Alloys Ltd., there was no other evidence to show that the goods lying in the godown did not relate to the produced Bills of Entry. (f) The contentions raised in the Revenue s Appeal that the ld. Commissioner did not take into consideration that one of the consignments covered by Bill of Entry no. 680246 dated 25-1-2006 was covered by LR dated 14-2-2006 to 16-2-2006, or that LRs were spread over a period, is bereft of any merit. A table showing all these deliveries appears in the findings in para 55.3 of the impugned order. The Revenue s submission that there was a possibility that the goods were lifte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. 26. Central Board of Excise Customs issued vide Circular No. 04/149/65-Cus-III dated 14-12-1965 clear guidelines regarding onus of proof in cases of Town Seizure of non-notified goods. The guidelines inter alia reads as under : (a) Except for the commodities which attract the provisions of Section 178A of SCA or Section 123 of the Customs Act, the burden to prove that the goods seizure are smuggled is on the Customs authorities. (b) When the goods are recovered from a person who is not proved to be the importer of the goods and claims to be a purchaser of the imported goods, onus is always on the customs authorities to establish that the goods were imported contrary to any import or prohibition or restriction and they have to bring home the guilt to the person alleged to have committed a particular offence by adducing satisfactory evidence. (c) From the above it will be seen that there are three essential Ingredients of the offence under Section 167(8) of the SCA or under Section 123 of the Customs Act and they are: (1) that the importation of certain goods has been prohibited or restricted, (2) that the goods in question, belonging to such category, have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the contrary, the Appellant has produced evidence of licit import of Zinc Ingots and Copper Scrap. It is settled law that the Board s Instructions are binding on department as held by the Hon ble Supreme Court in a catena of decisions. However, in the facts of this case, it appears that the investigating agency has not at all followed the guidelines framed by the Board, which are binding upon them. 28. Para 73A of the Manual of Departmental Instructions on Adjudication issued by the Board, is also based on the above instructions issued on 14-12-1965. As per para 1 of this Manual, the instructions contained in the manual are for the guidance of the Departmental Officers competent to seize and to adjudicate offences inter alia under the Customs Act, 1962. These instructions are supplemental to and should be read in conjunction with the Customs Act and Rules made thereunder, and should not be departed, and that departure from these instructions should immediately be reported to the Board. 29. The Appellant has placed reliance on the judgment of Hon ble Bombay High Court in the matter of C.C. (Prev), Mumbai v. Shri Ganesh Enterprises - 2006 (199) E.L.T. 208 (Bom.). In this mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of SCN, results of any inquiries, if at all conducted, to verify the authenticity of the documents submitted by the Appellant is also not forthcoming. The revenue can not first show laxity in the investigations and then seek to shift the burden on the Appellant to prove that the goods are not smuggled, especially when there is not even any presumptive evidence produced to show illegal importation of the seized non-notified goods, and suggesting their non-duty paid nature. There is no evidence to show or even to presume as to when and which customs barrier was breached, to illegally import the seized goods. In the facts of the instant case, therefore, the department is not relieved of its burden to establish that the seized goods have entered into the country illegally and that the same were smuggled. 30. The contention of the Revenue, that it is for the appellant to produce the evidence of duty payment and non-smuggled nature of the goods cannot be upheld, even according to Section 106 of the Evidence Act, in view of Constitution Bench s decision in the case of Amba Lal v. Union of India - 1983 (13) E.L.T. 1321 (S.C.) wherein, the Apex Court had held - 3. We cannot also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, be held liable for confiscation in the facts of this case. 31. The Revenue seeks to place reliance en the following judgments of Hon ble Supreme Court, which we find are not applicable to the facts and circumstances of the instant case. (1) Re: D. Bhoormull s case :- As stated above, the said judgment is in favour of the Appellant. The Revenue is required to adduce some evidence to suggest illegal entry of the goods in India, or breach of Customs barrier or smuggled nature of the goods. (ii) Re: State of Maharashtra v. Mohd. Yakub and others [1983 (13) E.L.T. 1637 (S.C.)]: It was a case of attempted smuggling of notified silver ingots, out of India, by concealing in two vehicles under cover of darkness. The goods were seized close to seashore, and the sea-craft in which the goods were to be loaded, suddenly disappeared on interception of the vehicle. The observations relied by the ld. Commissioner were given in the above facts and circumstances. However, there is no allegation in the instant case, that the goods were seized while attempting smuggling; nor any circumstantial evidence pointing out towards any attempt to smuggle the goods under seizure are forthcoming in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proved to be smuggled one without payment of duty. In this case, even the first ingredient has not been established. If the Revenue is unable to disclose even the name of the foreign country where these goods are allegedly manufactured and at the same time, is unable to produce any body who actually smuggled any part of the goods from Bangladesh.............. the Tribunal did not commit any illegality in setting aside the order of confiscation, penalty etc. imposed by the Commissioner. (ii) Shobha Ramesh Parekh v. State of Maharashtra Ors. [1982 (1) Bom. C.R. 669]: Hon ble Bombay High Court, while considering validity of a preventive detention order issued under COFEPOSA Act, 1974, observed that - 10. The Detaining Authority in its affidavit-in-reply does not dispute the facts that the goods mentioned in Annexure H to the petition which were seized from the detenu s house did not fall under Chapter IVA or Section 123 of the Customs Act... 14. The provisions of Clause 11 of Import Control Order show that the goods of foreign origin would not make the goods smuggled goods subject to certain conditions. Burden of proving that those conditions do not exist in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner, and instead sought to shift the burden upon the Appellant to prove that the goods were not smuggled. Such a course was not available to them as per settled position of law. We hold that in the instant case, concerning the seized goods, not even a shred of evidence is adduced by the Department to show their illegal importation by breach of any customs barrier, and the onus cannot be shifted on the Appellant. The formal seizure of Copper cathode and Zinc Ingots after more than 4 months of their verification and just 2 days prior to issuance of SCN, that too after the Appellant plated on record the Board Instructions dated 14-12-1965 in the SLP filed by him, shows glasing abuse of power by DRI. It is evident that even such belated seizure is without any firm reasonable belief and, therefore, is illegal. 35. In the light of aforesaid discussions, we hold that 88.935 MT of Zinc Ingots are not liable to confiscation, and no liability of duty, fine or penalty can be imposed. Therefore, the said goods are to be released forthwith unconditionally. The appeal filed by the appellant is allowed accordingly. The cross-objections filed by the Revenue are disposed of accordingly. 36. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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