2010 (9) TMI 410 - AT - Customs

Smuggling Burden of proof Yarn of foreign origin Notified goods - respondent produced a copy of the bill of entry and also indicated the source of supply and the importer Onus of proof shifted to Dept to show that goods were illegally imported. Other than the contention that the copies of bills of entry produced by the respondent could not be correlated with the goods because there were no lot numbers and packing details of the goods, there is no other contention by the Revenue. In fact once bill of entry was produced, if the packing list was not available with the department, the department could have obtained the same or made efforts to get the same from the Custom House through which goods were imported. This could have clearly established the case of the department. In our opinion the Commissioner (Appeals) is correct in holding that once the respondent is able to show that the goods were legally imported and he had purchased it from importers and is able to prove the same, the burden of proving that the goods are smuggled shifts to the Revenue which has not been discharged in this case.

Summary

Issues:
1. Seizure of imported PFY without duty paying documents.
2. Confiscation, demand for duty, and penalty imposed on the respondent unit.
3. Appeal against the decision by the Revenue.

Analysis:
1. The respondent company was engaged in manufacturing yarn from indigenous and imported PFY. Upon a visit and search, 21,004 Kgs of foreign-origin PFY were seized due to the lack of duty paying documents. Subsequently, a show cause notice was issued, leading to the confiscation of goods, customs duty demand, and penalties on the respondent and other parties. However, an appeal by the respondent and the Director resulted in the order being set aside for both parties. The Revenue appealed against this decision.

2. During the proceedings, it was noted that while there was no dispute regarding the indigenous yarn, the imported yarn was categorized into four groups. The respondent claimed to have purchased the imported yarn from specific suppliers through brokers, providing relevant documents to support their claim. The burden of proving that the goods were not smuggled and duty paid rested on the respondent as per the Customs Act, 1962. The respondent successfully demonstrated the legal importation of the goods and their purchase from legitimate sources. The Tribunal found that the onus then shifted to the Revenue to prove otherwise, which they failed to do. Consequently, the confiscation, duty demand, and penalties imposed on the respondent were set aside.

3. The Tribunal, after considering the evidence presented by the respondent regarding the legal importation and purchase of the goods, concluded that the Revenue had not discharged its burden of proving that the goods were smuggled. The Tribunal upheld the decision of the Commissioner (Appeals) and rejected the appeal filed by the Revenue. The judgment was pronounced on 3rd September 2010 by the Appellate Tribunal CESTAT, Ahmedabad, with Ms. Archana Wadhwa and Shri B.S.V. Murthy presiding over the case.