2006 (6) TMI 344 - AT - Customs

Summary

Issues Involved:
1. Legality of the seizure of goods based on the belief of smuggling.
2. Evidence supporting the claim of goods being smuggled or deflected from Nepal transit.
3. Validity of confiscation and penalties imposed under the Customs Act, 1962.

Detailed Analysis:

1. Legality of the Seizure of Goods
The operation was conducted based on specific information regarding the deflection of Nepal transit goods. The DRI officers searched two godowns in Delhi and found goods that were allegedly smuggled from Nepal. However, the seizure of goods received from Mumbai was not established to be meant for Nepal or non-duty paid. The judgment states, "When 'the reason to believe' which led to the proper officer to seize the goods does not exist, the seizure or and smuggled nature of the goods i.e. textile rolls, claimed and proved to be transported from Mumbai Port/and JNPT Port area, after payment of duty was not called for as no reasons exit for seizure/confiscation or entertaining the reasons to believe the same to be of smuggled nature."

2. Evidence Supporting the Claim of Smuggling
The goods found in the godowns included rolls of foreign-origin cloth, some with stickers indicating they were in transit to Nepal. The department needed to prove the smuggled nature of the goods and clearance in contravention of the Customs Law. The judgment emphasizes, "The items are not notified under Section 123 of the Customs Act, 1962, therefore, the onus was on the department to prove. The smuggled nature of the goods and clearance of such cargo in contravention of the Customs Law and having been brought to Delhi and its outskirts and stored there. Such onus of breach of Customs Barriers/non-duty payment rest on the Department and is not established and discharged, as was required under law."

3. Validity of Confiscation and Penalties
The adjudicator had ordered the confiscation of goods collectively valued at Rs. 81,43,450/- under various sections of the Customs Act, 1962, and imposed penalties on the individuals and companies involved. However, the judgment concludes, "When confiscation is not being upheld, the penalties as arrived are not called for and cannot be upheld." Consequently, the order of confiscation and penalties was set aside.

Conclusion:
The appellate tribunal found that the department failed to establish the smuggled nature of the goods and that the seizure was not justified. The order of confiscation and penalties imposed by the adjudicator was set aside, and the goods were ordered to be released forthwith. The appeals were allowed, and the redemption fines were also set aside.