2013 (4) TMI 87 - HC - Customs

Reason for initiating search proceedings - Department conducted a search proceedings u/s 105 of Customs Act on a legal opinion formed by the department itself pursuant to which confiscation of goods has been initiated. Officer in the proceedings has submitted before the Court that he has invited attention to original records to show the material looked into has been correctly shown there and on the strength of that material honestly, the responsible Officers have reached a particular belief. He contends that name of the person, who gave secret information cannot be disclosed and, therefore, it has not been recorded. Held that - The law as laid down by Honorable Apex Court in judgement of Income Tax Officer v. Lakhmani Mewal Das 1976 (3) TMI 1 SUPREME Court has been used in it. - the authority which had issued warrant which was ultimately executed had not applied its mind to form reasonable belief and the material on record does not support any such satisfaction. - The Search carried on, therefore, cannot be said to be in accordance with law. The same is accordingly quashed and set aside. - Decided in favor of assessee

Summary

Issues:
1. Whether the competent authority had formed a legal opinion before ordering a search under Section 105 of the Customs Act?
2. Was there a reason to believe that the search would lead to goods liable to confiscation or relevant documents?
3. Whether the warrant for search issued under Section 105 was based on valid grounds?
4. Whether the material looked into by the authority authorizing the search supported a "reason to believe" as required by law?

Analysis:

Issue 1: The court examined whether the competent authority had formed a legal opinion before ordering a search under Section 105 of the Customs Act. The petitioner argued that the satisfaction record in the warrant did not match the files produced. The respondent contended that the responsible officers had reached a belief based on material and intelligence reports, justifying the search.

Issue 2: The court scrutinized whether there was a valid reason to believe that the search would lead to goods liable for confiscation or relevant documents. The petitioner highlighted discrepancies in the authorization process, while the respondent pointed to incriminating evidence found post-search, such as cash and admissions of clandestine operations.

Issue 3: The validity of the warrant issued under Section 105 was questioned. The court analyzed the chain of authorization leading to the search and found discrepancies in the process, indicating a lack of clear authority reaching the required legal standards for issuing the warrant.

Issue 4: The court assessed whether the material considered by the authorizing authority supported a "reason to believe" as mandated by law. It was observed that the material did not demonstrate a valid basis for the search, as the satisfaction required under Section 105 was not adequately established, leading to the search being deemed invalid.

The judgment referenced relevant legal provisions and precedents, emphasizing the necessity for a lawful basis and proper authorization before conducting searches under the Customs Act. Citing the lack of a valid reason to believe and discrepancies in the authorization process, the court quashed the search conducted on the specified date, ruling it as not in accordance with the law. The decision was made absolute with no costs awarded.