2022 (11) TMI 636 - AT - Customs

Smuggling - Gold/studded jewellery - baggage rules - discharge of burden to prove - preponderance of probability - section 123 of Customs Act, 1962 - whether a person who was intercepted once with such goods for proceedings under the regular law and whose suggested facilitation of unaccounted stock of such goods at the premises of another is intended to be penalized by recourse to this special provision in relation to another set of such goods alleged to have been smuggled even earlier? HELD THAT - The studded jewellery impugned in the appeal were not intercepted in a customs area; it is also not in doubt that it was not an interruption of a transaction of the appellants that commenced these proceedings. Under the normal procedure of confiscation under the statute, it would be necessary to present evidence, even if not necessarily direct, of the impugned goods having been in the baggage of Mrs Vihari Sheth during one or more of her inbound travels to invoke the penal provisions against the three appellants; section 123 of Customs Act, 1962 obviates that in relation to goods considered by the State as warranting such recourse. The scope for invoking of section 123 of Customs Act, 1962 must now be turned to. Section 123 of Customs Act, 1962 is all about responsibility for discharging onus of licit possession and, in terms of the law as it stands today, it is cast on the person from whom the suspectedly smuggled goods were seized and, in the event of any such assertion, on the person claiming ownership. It is on record that the impugned goods were neither seized from any, or all, of the appellants and nor have any of them claimed to be the owner; the first is incontrovertible fact and the second is not one that can be foisted for reason of an established past, or probability of a future, incident of offence - the goods, nonetheless, are studded jewellery which is a description, in common parlance, of precious stones set in articles of precious metals, most commonly gold, and to those not familiar with the chronological mutation of section 123(2) of Customs Act, 1962 coverage of the impugned goods therein may even be acceptable. In the absence of recourse to section 123 of Customs Act, 1962, the linkage of the several inferences and suppositions must be established with material and/or oral evidence to be compliant with normative requirement of customs officials having to establish that one or the other reasons for confiscation under section 111 of Customs Act, 1962 are manifest. The essential requirement of evidencing association with goods liable for confiscation has not been discharged. Licit possession in the course of domestic transaction having been satisfactorily furnished, without being controverted by the lower authorities, on the part of owners of the impugned goods, the arbitrary arrogation of empowerment to subject the sellers to the presumption of having been in possession of smuggled goods sans authority of law to do so deprives the finding of liability to penalty under section 112 of Customs Act, 1962 of legal sanctity. Without evincing illicit trafficking, in the form in which it was recovered from customers, from outside the country, even by the stretched framework of preponderance of probability, there is no onus on the appellants to establish that the conjectures entertained by customs authorities are incorrect. Appeal allowed.

Issues Involved:
1. Confiscation of diamond-studded jewelry and penalties under Customs Act, 1962.
2. Application of Section 123 of the Customs Act, 1962 regarding the burden of proof.
3. Jurisdiction and maintainability of the appeal before the Tribunal.
4. Valuation of the confiscated goods.
5. Procedural and evidentiary requirements for confiscation and penalties.

Detailed Analysis:

Confiscation of Diamond-Studded Jewelry and Penalties:
The case involves the interception of a young lady carrying diamond-studded jewelry and a Hublot wristwatch valued at Rs. 2,45,00,000 at Mumbai airport. Subsequent investigations revealed unaccounted jewelry valued at Rs. 2,05,21,000 from her uncle's establishments. The lady and her uncle were implicated in smuggling activities. The original authority confiscated the goods under Section 111 of the Customs Act, 1962, but allowed redemption under Section 125, imposing penalties under Section 112.

Application of Section 123 of the Customs Act, 1962:
The Tribunal examined the applicability of Section 123, which shifts the burden of proof to the person from whom the goods were seized. The goods were not seized from the appellants but from customers who had documented their purchases. The Tribunal noted that Section 123 applies only to specific goods and circumstances, and the appellants were not in possession of the goods at the time of seizure. Thus, the presumption under Section 123 could not be applied.

Jurisdiction and Maintainability of the Appeal:
The Tribunal addressed the issue of jurisdiction, noting that the confiscated goods were not treated as baggage under the Baggage Rules, 1998. The adjudicating authority had clearly excluded the goods from being assessed as personal baggage, thus validating the Tribunal's jurisdiction to hear the appeal.

Valuation of the Confiscated Goods:
The valuation by the 'approved valuer' was contested. The first appellate authority had disapproved of the original valuation method, and the Tribunal found that the valuation did not conform to the relevant valuation rules. The Tribunal emphasized that the invoice price in a domestic sale is not the 'transaction value' as envisaged in the Customs Valuation Rules.

Procedural and Evidentiary Requirements:
The Tribunal scrutinized the evidence and procedural adherence in the confiscation process. It found that the evidence marshaled by the customs authorities was insufficient to establish that the goods were smuggled. The Tribunal highlighted the necessity of proving the association of the appellants with the goods liable for confiscation, which was not satisfactorily demonstrated.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief. The decision underscored the importance of adhering to statutory requirements for confiscation and penalties, the proper application of Section 123, and the necessity of robust evidence to support allegations of smuggling.

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