2022 (12) TMI 19 - AT - Customs

Smuggling - Town Seizure - contravention of the various restrictions/prohibitions imposed on the import - seized goods were found not bearing the declaration including MRP as required in General Notes to the Foreign Trade Policy, under which Customs Act read with SWM Act and the Rules - prohibited goods or not - onus to prove - violation of principles of natural justice - HELD THAT - Admittedly, it is a case of town seizure. It is further found that the appellant/assessee have led sufficient evidence that he has purchased the goods from the open market in India and is not the importer. Further, they have led the evidence by producing some documents available with them and also gave name of the parties, who were either traders or importers or manufacturers in India, who had supplied the goods. Further, all such suppliers/importers have corroborated the statement of the appellant/assessee, as to have supplied the goods. Further, admittedly, the documents available with the appellant in support of the goods lying with the appellant in shops/godown were resumed by Revenue officers of DRI on 19.12.2007 about a month before the search by the Customs (Preventive). Thus, as the documents were lying with the Department, the appellant could not produce all the documents in support of his contention. The Court below have erred in not referring to the resumed records lying with them. The goods being not notified goods under Section 123 of the Act, it was onus on the Revenue to establish the smuggled nature of the goods, which the Revenue have miserably failed. Not a single evidence was produced by Revenue in support of allegation of smuggling save and except bald allegation. The allegation made by Revenue as regards violation of the provisions of the SWM Act read with the Rules is bad and wholly without jurisdiction. As in the facts of the present case, the jurisdiction to inspect, search and seize the goods in the open market, was with the Director appointed under the SWM Act. The Customs officers can exercise the jurisdiction under the provisions of SWM Act and the Rules thereunder, only in the Customs area - the impugned order is bad and suffers from the vice of violation of principles of natural justice - Revenue has not been able to establish the smuggled nature of the goods. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legality of the search and seizure conducted by Customs officers.
2. Compliance with the Standard of Weights and Measures (SWM) Act and Packaged Commodity Rules.
3. Onus of proving the smuggled nature of goods.
4. Jurisdiction of Customs officers under the SWM Act.
5. Principles of natural justice and bias in adjudication.
6. Confiscation of Indian currency and penalty imposition.
7. Demand for duty on seized goods under Section 125(2) of the Customs Act.

Detailed Analysis:

1. Legality of the search and seizure conducted by Customs officers:
The appellant, a trader of musical goods, faced two searches: one by DRI officers on 19.12.2007 and another by Customs (Preventive) officers on 5.1.2008. The second search led to the seizure of goods valued at Rs. 92,73,350/- and Indian currency of Rs. 14,10,990/- under Section 110 of the Customs Act. The appellant argued that the documents supporting the goods were already taken by DRI officers, preventing him from producing them during the Customs search.

2. Compliance with the Standard of Weights and Measures (SWM) Act and Packaged Commodity Rules:
The Revenue alleged non-compliance with the SWM Act and Packaged Commodity Rules, claiming that the seized goods lacked proper declarations such as the name and address of the importer, quantity, and Maximum Retail Price (MRP). The appellant argued that the Customs officers lacked jurisdiction to enforce these rules outside the Customs area, which should be handled by the Director appointed under the SWM Act.

3. Onus of proving the smuggled nature of goods:
The appellant contended that the goods were purchased from the open market and provided names of suppliers, some of whom corroborated the appellant's claims. The Tribunal found that the Revenue failed to provide evidence proving the smuggled nature of the goods, which were not notified goods under Section 123 of the Customs Act.

4. Jurisdiction of Customs officers under the SWM Act:
The Tribunal agreed with the appellant's argument that the Customs officers had no jurisdiction to enforce the SWM Act and Packaged Commodity Rules outside the Customs area. The proper authority for such enforcement in the open market is the Director under the SWM Act.

5. Principles of natural justice and bias in adjudication:
The appellant argued that the adjudication by the Commissioner of Customs (Preventive), who was also involved in the investigation, violated the principle that no one should be a judge in their own cause. The Tribunal found merit in this argument, noting the violation of natural justice principles.

6. Confiscation of Indian currency and penalty imposition:
The Revenue confiscated Rs. 14,10,990/- found in the appellant's shop, alleging it was sale proceeds of smuggled goods. The appellant claimed part of the amount belonged to his mother-in-law, supported by evidence. The Tribunal found the confiscation unjustified due to the lack of evidence proving the smuggled nature of the goods.

7. Demand for duty on seized goods under Section 125(2) of the Customs Act:
The Revenue's cross-appeal argued that the Commissioner erred in not demanding duty on the seized goods. Section 125(2) mandates that any fine in lieu of confiscation should include duty and charges payable. The Tribunal dismissed the Revenue's appeal, finding no basis for the duty demand given the lack of evidence supporting the smuggling allegations.

Conclusion:
The Tribunal set aside the impugned order, allowing the appellant's appeal and dismissing the Revenue's appeal. The appellant was entitled to consequential benefits, including the refund of the seized/confiscated amount. The Tribunal emphasized the Revenue's failure to prove the smuggled nature of the goods and highlighted jurisdictional overreach and natural justice violations.