1987 (6) TMI 236 - AT - Customs

Summary

Issues Involved:
1. Applicability of Section 123 of the Customs Act.
2. Evidence supporting the claim that the diamonds were smuggled.
3. Legitimacy of the seizure and subsequent actions by the Customs officers.
4. Justification for the confiscation of diamonds and imposition of penalties.

Detailed Analysis:

1. Applicability of Section 123 of the Customs Act:
The main contention was whether Section 123 of the Customs Act, which shifts the burden of proof to the accused in cases of smuggled goods, was applicable. The advocate for the appellants argued that the diamonds were initially described as semi-precious stones in the panchanama dated 27-2-1984, and thus, they were not covered under Section 123. The Tribunal found merit in this argument, noting that the Customs officers had described the goods as semi-precious stones, and there was no reasonable belief at the time of seizure that the goods were smuggled diamonds. Consequently, the burden of proof could not be shifted to the appellants under Section 123 of the Customs Act.

2. Evidence Supporting the Claim that the Diamonds Were Smuggled:
The Additional Collector did not provide sufficient evidence to prove that the diamonds were smuggled. The Tribunal noted that the appellants had established a chain of custody for the diamonds, tracing them from M/s Gemstar Company to the brokers and finally to Shri Md. Farooq. The statements of the brokers and representatives of M/s Gemstar Company corroborated the claim that the diamonds were given on approval basis. The Tribunal concluded that the appellants had satisfactorily discharged any burden of proof regarding the legitimate acquisition of the diamonds.

3. Legitimacy of the Seizure and Subsequent Actions by the Customs Officers:
The Tribunal scrutinized the actions of the Customs officers, particularly the distinction made by the Additional Collector between the recovery and seizure dates. The Tribunal found that the diamonds were effectively seized on 27-2-1984 when they were physically taken and sealed by the Customs officers, contrary to the Additional Collector's claim that the seizure occurred on 3-3-1984. The Tribunal held that the seizure on 27-2-1984 was not made in reasonable belief that the diamonds were smuggled, as required under Section 110 of the Customs Act.

4. Justification for the Confiscation of Diamonds and Imposition of Penalties:
The Tribunal found that the confiscation of the diamonds and the imposition of a Rs. 1,00,000 penalty on Shri Md. Farooq were not justified. The Tribunal observed that the Additional Collector's findings were flawed and biased, influenced by unrelated incidents such as the seizure of gold from another individual and the initial resistance by Smt. Khatoon. Given the lack of evidence proving the diamonds were smuggled and the satisfactory explanation provided by the appellants regarding the acquisition of the diamonds, the Tribunal set aside the Additional Collector's order. The Tribunal directed the return of the diamonds to Shri Md. Farooq and the refund of the penalty amount.

Separate Judgments:
The Tribunal also addressed the appeals of Shri Rajesh K. Bhansali, M/s Gemstar Company, and Shri Ravindra Laxmidas Solanki. These parties were not aggrieved by the Additional Collector's order as no penalties were levied on them. The Tribunal dismissed their appeals, noting that such confirmatory appeals were unnecessary and would burden the appellate system.

Conclusion:
The Tribunal concluded that the seizure of diamonds was not justified under the reasonable belief of smuggling, and the burden of proof could not be shifted to the appellants. The confiscation order and penalty against Shri Md. Farooq were set aside, and directions were issued for the return of the diamonds and refund of the penalty. Appeals by other parties were dismissed as they were not aggrieved by the original order.