2024 (9) TMI 1617 - HC - Customs

Seeking quashing of seizure order - Dried Areca Nuts contained in 352 bags - inter state transportation - Section 110 of the Customs Act - reasons to believe - HELD THAT - Reason to believe is the most significant safeguard available to the authorising officer to conduct search. The phrase is made up of two words reason means cause and believe means to accept as true or have faith in it. The reason to believe word has been interpreted by the Hon ble Supreme Court in the case of N. Nagendar Rao and Company 1994 (9) TMI 316 - SUPREME COURT that even though formation of opinion may be subjective but It must be based on material on the record. It cannot be arbitrary, capricious or whimsical. Reason to believe cannot be a rubber stamping of the opinion already formed by a competent officer. The Officer who is supposed to write down his minimum reasons to believe has to be independently apply his mind. It should not be a mechanical reproduction of the words in the statute. When an officer exercising quasi judicial function, such a decision peruses such reasons to believe. It must be apparent to the reviewing authority that the officer penning the reasons has applied his mind to the material information available on record and has, on that material, arrived at his reasons to believe. Application of mind to the officer must be discernible. In the case of Sabh Infrastructure vs. Assistant Commissioner of Income Tax 2017 (9) TMI 1589 - DELHI HIGH COURT , the Delhi High Court specifically held that it is also now well settled that the reasons to believe have to be self explanatory. The reasons cannot be, thereafter, supported by any extraneous material. Suspected opinion of the local traders that seized dried Areca Nuts is a foreign origin is not reliable and acceptable, in other words, with a naked eye one cannot draw inference that whether it is Indian origin or foreign origin. In the present case, admittedly, the goods were seized at Forbishganj and not seized from any port or any customs area to form a believe that the goods were being imported into India. The Ministry of Agriculture and Farmer Welfare as well as ICAR were of the view that there is no mechanism available to trace the country of origin of Areca Nuts and there is no laboratory test available for the same and further on the basis of examination by naked eye, it cannot be conclusive determined with regard to origin of the Areca Nuts - The opinion of the local traders that seized Areca Nuts suspected to be foreign origin failed the test Wednesbury Principles as no reasonable person can reach the conclusion of country of origin of Areca Nuts by mere perusal from naked eye as well as the opinion of the local traders. Some ways to assess the quality of Areca Nuts like glossy appearance, Kernel colour, fiber characteristics, texture, grading, moisture contents, weight etc., are needed. Recording of reasons in support of the conclusions arrived at in a judgment or order by the Courts in our judicial system has been recognized since the very inception of the system. Right to know the reasons for the decisions made by the Judges is an indispensable right of a litigant. Even a brief recording of reasoned opinion justifying the decision made would suffice to withstand the test of a reasoned order or judgment. A non-speaking, unreasoned or cryptic order passed or judgment delivered without taking into account the relevant facts, evidence available and the law attracted thereto has always been looked at negatively and judicially de-recognized by the courts. The petitioner has made out a case so as to interfere with the impugned seizure memo dated 02.04.2024 and the same is set aside. Consequently, bank guarantee is discharged and the bond furnished by the petitioner to secure provisional release of the seized goods within a period of three months from the date of receipt of copy of this order. Petition allowed.

Issues Involved:
1. Compliance with Section 110 of the Customs Act, 1962.
2. Reliability of local traders' opinion on the origin of seized dried Areca Nuts.
3. Validity of the opinion formed by the Areca Nuts Research and Development Foundation, Mangalore, Karnataka.
4. Genuineness and sufficiency of documents related to the transit of seized goods.

Issue-wise Detailed Analysis:

1. Compliance with Section 110 of the Customs Act, 1962:
The petitioner argued that the seizure memo dated 02.04.2024 lacked compliance with Section 110 of the Customs Act, 1962, particularly the 'reason to believe' requirement. The court emphasized that 'reason to believe' is a critical safeguard and must be supported by material evidence. The judgment referenced various legal precedents, including the Supreme Court's interpretation of 'reason to believe' in cases like N. Nagendar Rao and Company and Income Tax Officer vs. Lakhmani Mewal Das, which underscored that such belief must be based on material facts and not be arbitrary. The court found that the seizure memo merely cited statutory violations without providing specific material information or reasons, thus failing to meet the 'reason to believe' standard.

2. Reliability of Local Traders' Opinion:
The petitioner contended that the local traders' opinion, which suggested the seized Areca Nuts were of foreign origin, was unreliable. The court agreed, noting that the opinion was based on a visual examination, which is insufficient to determine the origin of the goods. The court cited the Ministry of Agriculture and Farmer Welfare and ICAR, which stated that there is no mechanism to trace the country of origin of Areca Nuts through visual inspection. The court concluded that the local traders' opinion failed to meet the necessary standards and could not be relied upon.

3. Validity of the Opinion by Areca Nuts Research and Development Foundation:
The court considered the test report from the Areca Nuts Research and Development Foundation, which stated that the seized nuts resembled Indian Areca Nuts and were of good quality. This opinion supported the petitioner's claim that the goods were of Indian origin. The court found this opinion more reliable than the local traders' visual inspection, thereby strengthening the petitioner's case.

4. Genuineness and Sufficiency of Transit Documents:
The petitioner provided various documents, including invoices and transportation documents, to prove the legitimacy of the goods' transit. The court noted that these documents were not adequately considered in the seizure memo. The court found no evidence of fraud or any substantial issues with the documents, further undermining the validity of the seizure. The court emphasized that the seizure memo did not reflect any examination of these documents, rendering the seizure unjustified.

Conclusion:
The court concluded that the seizure memo dated 02.04.2024 did not comply with the legal requirements under Section 110 of the Customs Act, 1962, as it lacked specific reasons and material evidence to support the 'reason to believe'. The reliance on local traders' opinion was deemed unreliable, and the opinion from the Areca Nuts Research and Development Foundation supported the petitioner's claim. The transit documents were found to be genuine and sufficient. Consequently, the court set aside the seizure memo, discharged the bank guarantee, and allowed the petition.

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