2023 (3) TMI 251 - SCH - Customs

Search and Seizure - Smuggling - reasons to believe - Quashing of search and seizure proceedings and all consequential proceedings, launched against the respondent/assessee - assessee had impugned the action contending that there were no reasons to believe in terms of Section 110 of the Central Excise Act, 1944 read with Section 123 of the Customs Act, 1962 - HELD THAT - The power of search which in this case was resorted to, can be gathered from Section 105 of the Customs Act. Section 105 confers power to search premises if the Assistant Commissioner of Customs or Deputy Commissioner of Customs has reasons to believe that goods liable to confiscation or documents relevant for such proceedings are secreted in any place. In such event, the search proceedings can be authorized by the Assistant Commissioner or other official. Section 123 on the other hand enacts a burden of proof which is that where any goods to which that provision applies are seized under the Act on the reasonable relief that they are smuggled goods, the burden of proof would then shift to the person in possession of such goods to prove that they were not smuggled goods. The basic premise of Section 105, and indeed search proceedings is the reasonable belief that some objective material exists on the official record to trigger searches. The person authorizing the search must express his satisfaction that the material is sufficient for him to conclude that search is necessary; further there should exist something to show what is such material. The mere recording that the person concerned is satisfied, without the supportive materials, therefore, is insufficient to trigger a lawful search - In the present case the concerned official who authorized the search did not refer to any information nor indeed any report on the record which was produced before the High Court. Appeal dismissed.

Summary

Issues:
1. Validity of search and seizure proceedings under Central Excise Act and Customs Act.
2. Requirement of "reasons to believe" for conducting a search.
3. Burden of proof under Section 123 of the Customs Act.
4. Sufficiency of material to authorize a search.
5. Compliance with legal requirements for conducting a lawful search.

Analysis:

The Supreme Court addressed the validity of search and seizure proceedings under the Central Excise Act and the Customs Act in the present case. The impugned judgment of the Madhya Pradesh High Court, which had quashed the initiation of search and seizure proceedings against the respondent/assessee, was challenged by the revenue. The search conducted on the respondent's premises in 2009 led to the seizure of materials and documents, prompting the assessee to challenge the action on the grounds of "no reasons to believe" as required by law.

The High Court, in its judgment, relied on precedents such as "State of Rajasthan vs. Rehman" and "Durga Prasad Etc. vs. H.R. Gomes," emphasizing the necessity for the officer authorizing the search to have valid reasons to believe that tax evasion was occurring. The Court highlighted that the power to search is wide but must be exercised in compliance with legal requirements, including the need for the officer to satisfy himself of the existence of reasons to believe before authorizing a search.

The Supreme Court examined the original record and found that while the warrant of seizure mentioned some information leading to the conclusion that goods were liable to confiscation, there was a lack of material linking the decision to search with the nature of the materials seized. The absence of supporting materials on record to justify the search proceedings raised concerns about the lawfulness of the search conducted.

The Court considered the provisions of Section 105 of the Customs Act, which empower officials to search premises based on "reasons to believe" that goods liable to confiscation are hidden. Additionally, Section 123 imposes a burden of proof on the possessor of seized goods to prove they are not smuggled. The Court emphasized that the foundation of search proceedings lies in the reasonable belief supported by objective material, and the mere satisfaction of the authorizing official without accompanying material is insufficient to validate a search.

Ultimately, the Court concluded that the concerned official did not refer to any information or report on record to justify the search, leading to the dismissal of the appeals. The judgment underscores the importance of complying with legal requirements and ensuring the presence of adequate material to support the decision to conduct a search, thereby upholding the integrity and lawfulness of search and seizure proceedings under the relevant statutes.