2002 (8) TMI 494 - AT - Customs

Interpretation of statutes - Smuggling - Burden of proof - Interpretation of notification - Confiscation - Exemption

Summary

Issues Involved:

1. Applicability of Customs Notification No. 204/84-Cus. and Notification No. 205/84-Cus.
2. Proof of foreign origin and liability of confiscation of goods supplied by indigenous suppliers.
3. Confiscation liability of goods supplied by M/s. Lakshmi Watches Pvt. Ltd.
4. Violation of principles of natural justice due to denial of cross-examination.
5. Legality of confiscation of 4895 watches under Section 120 of the Customs Act.
6. Jurisdiction of the Collector to pass the order.
7. Sustainability of the penalty imposed on HMT.

Detailed Analysis:

1. Applicability of Customs Notification No. 204/84-Cus. and Notification No. 205/84-Cus.:

The Collector concluded that the term "Watch movements" in the notifications includes all stages of assembly, including completely disassembled components. However, the Tribunal found this interpretation erroneous, emphasizing that "watch movements" should not include completely disassembled parts. The Tribunal relied on the Bureau of Indian Standards (BIS) certificate, which indicated that the goods were components of watch movements and not complete movements, thus not covered by the notifications.

2. Proof of foreign origin and liability of confiscation of goods supplied by indigenous suppliers:

The Tribunal noted that the department failed to prove the foreign origin of the goods supplied by R.R. Corporation and Vespa Trading Co. The lack of labels or markings indicating foreign origin and the absence of critical parts like the winding stem led to the conclusion that these were watch parts, not movements. The burden of proof under Sections 11B and 123 of the Customs Act was not discharged by the department, thus the goods were not liable for confiscation.

3. Confiscation liability of goods supplied by M/s. Lakshmi Watches Pvt. Ltd.:

The goods supplied by M/s. Lakshmi Watches were cleared under Notification No. 43/85-Cus., which exempts components of wristwatches but not CKD packs. The Tribunal found that the goods were components, not CKD packs, and thus not liable for confiscation under Section 111(o). The duty demand on M/s. Lakshmi Watches nullified the exemption, removing the basis for confiscation.

4. Violation of principles of natural justice due to denial of cross-examination:

The Tribunal observed that the denial of cross-examination of key witnesses like Mr. Sunil Kothari and Mr. Vaman Gupta violated the principles of natural justice. This denial weakened the department's case as it did not allow HMT to challenge the evidence against them effectively.

5. Legality of confiscation of 4895 watches under Section 120 of the Customs Act:

The Tribunal found no justification for the confiscation of 4895 watches under Section 120, as the goods were not proven to be smuggled. The department's failure to establish the foreign origin of the components used in these watches invalidated the confiscation order.

6. Jurisdiction of the Collector to pass the order:

The Tribunal did not find it necessary to delve into the jurisdictional issue of the Collector signing the order after his transfer, as the primary findings already invalidated the confiscation and penalties imposed.

7. Sustainability of the penalty imposed on HMT:

Given that the confiscation orders were set aside, the penalties imposed on HMT were also deemed unsustainable. The Tribunal emphasized that the department failed to prove its case, and thus, no penalties could be justified.

Conclusion:

The appeal was allowed, setting aside the confiscation, redemption fines, and penalties imposed on HMT. The Tribunal found that the department did not discharge its burden of proof regarding the foreign origin and smuggled nature of the goods, and the principles of natural justice were violated.