2004 (4) TMI 474 - AT - Customs

Seizure - Reasonable belief - Confiscation and penalty - Power of - Smuggling - Diamonds - Non-notified item - Penalty - Quantum of

Issues Involved:
1. Legality of the seizure of diamonds.
2. Admissibility and reliability of retracted statements.
3. Burden of proof under Section 123 of the Customs Act.
4. Application of Section 106 of the Evidence Act.
5. Correlation of seized diamonds with legally imported rough diamonds.
6. Imposition and quantum of penalties on various appellants.

Detailed Analysis:

1. Legality of the Seizure of Diamonds:
The Collector confiscated 5,837.15 cts. of diamonds under Section 111(d) of the Customs Act, 1962, and imposed penalties under Section 112. The seizure was based on the belief that the diamonds were smuggled into the country. The Tribunal upheld the Collector's decision, stating that under Section 110 of the Customs Act, a proper officer has the power to seize goods if there is a reasonable belief that they are liable to confiscation. The Tribunal referenced multiple judgments, including Indru Ramchand Bharwani v. UOI and State of Gujarat v. Mohanlal J. Porwal, to support the notion that the sufficiency of material for reasonable belief is not open to judicial review. The Tribunal concluded that the circumstances, such as unaccounted diamonds and loose papers indicating unrecorded transactions, justified the reasonable belief that the diamonds were smuggled.

2. Admissibility and Reliability of Retracted Statements:
The appellants argued that the statements recorded were not voluntary and should not be relied upon. The Tribunal referred to Supreme Court judgments, including Surjit Singh Chabra v. UOI and Naresh J. Sukhwani v. UOI, which held that statements made before Customs officers are admissible even if retracted. The Tribunal found that the retractions did not affect the evidentiary value of the statements, especially since some statements were not retracted at all. The Tribunal upheld the Collector's reliance on these statements.

3. Burden of Proof under Section 123 of the Customs Act:
The Tribunal noted that diamonds are not notified under Section 123 of the Customs Act, so the burden of proving that the seized diamonds were not smuggled did not lie on the appellants. However, the department had discharged its burden by establishing a high degree of probability that the diamonds were smuggled. The Tribunal referenced the Supreme Court's decision in CC, Madras v. D. Bhoormull, which stated that the department need not discharge the burden with mathematical precision but must establish a degree of probability that a prudent man would believe.

4. Application of Section 106 of the Evidence Act:
The appellants contended that the Collector misapplied Section 106 of the Evidence Act. The Tribunal referred to the Supreme Court's judgment in Collector of Customs v. D. Bhoormull, which held that the department would be deemed to have discharged its burden if it adduces sufficient evidence to raise a presumption in its favor. The Tribunal found that the Collector had correctly applied the principles underlying Section 106 and had given detailed reasoning for rejecting the appellants' contentions.

5. Correlation of Seized Diamonds with Legally Imported Rough Diamonds:
The appellants claimed that the seized diamonds were the result of cutting and polishing rough diamonds imported under advance licenses. The Tribunal found that the appellants failed to provide a satisfactory explanation at the time of seizure and that the correlation statements submitted later were manipulated. The Tribunal upheld the Collector's finding that the seized diamonds could not be linked to the imported rough diamonds.

6. Imposition and Quantum of Penalties on Various Appellants:
The Tribunal reviewed the penalties imposed by the Collector:
- M/s. Y.D., Rajeev K. Patel, and Karsan K. Patel: The penalties were reduced to Rs. 5 lakhs each for the firm and the two partners.
- Deepak B. Upadhaya: The penalty was reduced to Rs. 25,000.
- Prakash J. Modi and M.J.A. Kalam: The penalties were sustained.
- Vipul L. Shah, Ashwin S. Shah, Vallabh N. Patel, and Rajesh N. Shah: The penalties were set aside as no case was made out against them.

Conclusion:
The Tribunal upheld the confiscation of the diamonds and modified the penalties imposed by the Collector, providing detailed reasoning for each decision. The appeals were disposed of in the specified terms.

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