2024 (3) TMI 140 - HC - Customs

Release of seized goods - Arecanuts - prohibited goods - test to ascertain the origin of goods - reason to believe - pre-existed objective/scientific test - HELD THAT - Prima facie, the Tax Invoices issued by M/s Sri Karni Traders were evidence of valid purchase made by the petitioner within the country. In absence of a legal requirement, the absence of the purchase documents of Sri Karni Traders (during transportation by the petitioner), may never have led to formation of a reason to believe that goods were of foreign origin. At most, a suspicion may have arisen to the revenue authorities, at that stage. However, once the purchase documents of Sri Karni Traders were made available by the petitioner along with his reply dated 2.12.2023 and other reply (which the revenue does not dispute), the suspicion that may have existed stood resolved - to the benefit of the assessee. Before any reason to believe may have arisen, the revenue authorities were obligated to conduct an enquiry and/or verification if the goods had originated from outside the country. Here, no material existed to doubt the origin of Aeranuts from within the country. Thus, revenue has failed to discharge its burden. Thus, we find that the revenue authorities have hopelessly failed to bring out to record the objective material and have further failed to establish formation of any reason for the belief entertained by them that goods were of foreign region. In similar circumstances, the co-ordinate bench of this Court had allowed the writ petition for similar reasons in Jaymatajee Enterprise (Seller) and Another (Supra). Accordingly, the writ petition is allowed. The order (passed during pendency of the writ petition) and the detention-memo are quashed. Let goods be released forthwith. No order as to costs.

Summary

Issues Involved:
1. Legality of the seizure order dated 04.01.2024.
2. Validity of the detention-memo dated 25.10.2023.
3. Requirement of "reason to believe" for seizure under the Customs Act, 1962.
4. Credibility of the ARDF report and other materials relied upon by the revenue authorities.
5. Burden of proof regarding the origin of goods.

Summary:

1. Legality of the Seizure Order and Detention-Memo:
The petitioner challenged the seizure order dated 04.01.2024 and the detention-memo dated 25.10.2023, arguing that the Customs Authority lacked the "reason to believe" that the goods (Arecanuts) were liable for confiscation under the Customs Act, 1962.

2. Requirement of "Reason to Believe":
The court emphasized that for goods to be seized under Section 110 of the Act, the Proper Officer must have a "reason to believe" that the goods are liable to be confiscated under Section 111 of the Act. This belief must be based on objective material, not mere suspicion.

3. Credibility of the ARDF Report and Other Materials:
The Customs Authority relied on trade opinions and a report from the Arecanuts Research and Development Foundation (ARDF) to form their belief. However, the court found that the ARDF report was not definitive and only suggestive, using terms like "resembles" and "seems," which admit the possibility of the facts being otherwise. The report did not employ any scientific or recognized tests to determine the origin of the Arecanuts, making it unreliable as objective material.

4. Burden of Proof Regarding the Origin of Goods:
The court noted that Arecanuts are grown within the country, particularly in the northeastern regions and some southern states. The petitioner provided Tax Invoices from their supplier, Sri Karni Traders, which indicated that the Arecanuts were of Indian origin. The revenue authorities failed to provide any credible material to contradict this or to prove that the goods were of foreign origin.

5. Court's Conclusion:
The court concluded that the revenue authorities failed to establish a "reason to believe" that the goods were of foreign origin. The reliance on subjective opinions and an inconclusive ARDF report did not meet the legal standard required for seizure. The court quashed the seizure order and detention-memo and ordered the release of the goods.

Final Order:
The writ petition was allowed, and the seizure order dated 04.01.2024 and the detention-memo dated 25.10.2023 were quashed. The court ordered the immediate release of the goods. No costs were imposed.