2018 (3) TMI 1073 - AT - Customs

Diversion of imported goods into local market - violation of actual user condition - clandestine removal - onus of proof - Held that - The negative onus cannot be cast on the assessee that they have not procured the goods from the advance license holders - Revenue has admitted in the present case that there is no direct evidence but has referred to the circumstantial evidence on record, by submitting that since part of the goods were found to be out of the duty free imports made against advance license, it has to be held that the balance quantity was also out of the very same kind of imports. Admittedly, the observations and findings of the adjudicating authority are in the nature of assumption and presumption, which cannot be upheld - No evidence stand produced by the Revenue to substantiate its stand - The entire case of the Revenue is based upon doubt which cannot take the place of the legal evidence. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confiscation of fabrics and imposition of penalties based on alleged diversion of imported fabrics.
2. Burden of proof on the Revenue to establish clandestine activity by the appellant.
3. Evaluation of circumstantial evidence and presumption in absence of direct evidence.
4. Adjudication of the case based on assumption and presumption without concrete evidence.

Analysis:
1. The appellant, engaged in trading man-made fabrics, faced proceedings initiated by the Revenue based on the belief that fabrics imported under advance licenses were diverted to the local market. The Revenue confiscated fabrics and imposed penalties amounting to approximately ?30.82 lakhs, with an option for redemption on payment of ?3 lakhs, along with additional duty and a penalty of ?2 lakhs under the Customs Act, 1962. The appellant challenged this order through the present appeal.

2. The Tribunal noted that separate proceedings were initiated against the appellant for a specific quantity of fabrics where the Revenue established diversion of duty-free imports. However, in the current appeal concerning the remaining fabrics seized from the appellant's godown, the Revenue relied on circumstantial evidence to link them to the diverted imports. The Commissioner observed that the Revenue's case was based on circumstantial evidence, and the appellant failed to rebut this presumption.

3. The Tribunal disagreed with the Revenue's stance, emphasizing that the burden of proving clandestine activity rested on the Revenue. The absence of direct evidence compelled the Revenue to rely on circumstantial evidence, alleging that since part of the seized fabrics was diverted from duty-free imports, the remaining quantity must also be from the same source. However, the Tribunal held that such assumptions and presumptions without concrete evidence were untenable. The lack of circumstantial evidence and reliance solely on doubt undermined the Revenue's case.

4. Ultimately, the Tribunal set aside the impugned order, granting relief to the appellant due to the absence of substantial evidence supporting the Revenue's claims. The decision highlighted the importance of concrete evidence over assumptions and emphasized that doubts or circumstantial evidence alone cannot form the basis for confiscation and penalties. The judgment underscored the necessity for the Revenue to meet the burden of proof in establishing allegations of wrongdoing, especially in cases involving complex trade activities and customs violations.