1988 (7) TMI 78 - SC - Customs

Whether there was material for forming an opinion as to reasonable belief under Section 110 read with Section 123 of the Act. Section 110(1) of the Act which deals with seizure of goods, documents and things? whether the appellants had discharged this burden by tendering affidavits of persons claiming ownership of the seized diamonds? Held that - There was good ground accompanied by rational nexus leading to formation of the belief that the goods were smuggled. Furthermore, the petitioners stated that they had purchased the goods locally through the brokers and had already made 50 per cent cash payment but the cash book showed no such payment. They also refused to disclose brokers names saying that the brokers would not come forward to confirm the deal. Besides, various incriminating documents were also found. The existence of the material is justiciable but not the sufficiency of the material. In this case there is ample material, their existence cannot be disputed. There is certainly a nexus between these materials and the formation of the belief that the goods are liable to confiscation. In the light of the above Section 110 read with Section 123 has been fully complied with. The High Court correctly found that by filing the affidavits in this case, the burden had not been discharged. The facts that the affidavits had been filed long afterwards and the names of the parties were not disclosed at the time of search, warrant rejection of the affidavits. These were filed after a gap of 15 months and the same were examined minutely. The facts and figures given were checked up and the credibility of the deponents as well as the credence of their version examined. Furthermore, the affidavits must be looked at in the background that those persons who claim that they had given these diamonds on approval basis, made no claim for all these diamonds. Appeal dismissed.

Issues Involved:
1. Reasonable belief for seizure under Section 110 read with Section 123 of the Customs Act.
2. Burden of proof under Section 123 of the Customs Act.
3. Adequacy of material to form reasonable belief.
4. Discharge of burden of proof by the petitioners.
5. Opportunity of fair hearing.

Detailed Analysis:

1. Reasonable Belief for Seizure under Section 110 read with Section 123 of the Customs Act:
The Customs Officers, acting on secret information, conducted a search and found a significant quantity of diamonds in the petitioners' premises, which were not accounted for in their books. The officers formed a prima facie belief that the diamonds were smuggled based on the lack of documentation and the petitioners' inability to provide evidence of legal acquisition. The High Court found that there was material to form a reasonable belief under Section 110 read with Section 123 of the Act, as the large quantity of diamonds found and the lack of trustworthy evidence supported the presumption of smuggling.

2. Burden of Proof under Section 123 of the Customs Act:
Section 123 of the Customs Act places the burden of proof on the person from whose possession the goods are seized or who claims ownership. The petitioners argued that they had discharged this burden by tendering affidavits from various persons claiming ownership of the seized diamonds. However, the High Court held that the affidavits were insufficient as they were filed long after the seizure and did not provide credible evidence of legal acquisition.

3. Adequacy of Material to Form Reasonable Belief:
The High Court found that the Customs Officers had adequate material to form a reasonable belief that the goods were smuggled. The documents found indicated transactions in foreign currencies, and the stock in the books did not match the quantity of diamonds found. The Court concluded that there was a rational nexus between the material found and the formation of the belief that the goods were liable to confiscation.

4. Discharge of Burden of Proof by the Petitioners:
The petitioners contended that they had discharged the burden of proof by filing affidavits. The High Court, however, found that the affidavits did not discharge the burden as they were filed 15 months after the seizure, and the deponents did not claim ownership of the diamonds at the time of the search. The Court held that the affidavits lacked credibility and did not provide a preponderance of probabilities in favor of the petitioners.

5. Opportunity of Fair Hearing:
The petitioners argued that they were not given a fair hearing. The High Court found that the proceedings followed the principles of natural justice and provided a reasonable opportunity for the petitioners to present their case. The Court concluded that there was no denial of opportunity and that the proceedings were in order.

Conclusion:
The High Court upheld the Tribunal's decision, finding that the Customs Officers had adequate material to form a reasonable belief that the diamonds were smuggled and that the petitioners had failed to discharge the burden of proof. The Court also found that the petitioners were given a fair hearing. The application for leave to appeal was rejected.

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