2024 (12) TMI 1415 - AT - Customs

Smuggling - seizure of gold by customs officials - absence of reasonable belief of the goods being smuggled - discharge of burdento prove - Confiscation - penalties - HELD THAT - As per the circular no. 1/2017 stipuates that there should be reasonable belief by/seizing officer both in seizure list as well as Panchnama separately - But in the instant case, it is seen that seizing officer has certainly failed to comply with such circular thereby rendering the seizure and subsequent, the proceedings thereto bad in the eyes of law. The key element under Section 123 of the Customs Act, 1962 is reasonable belief. The officer exercising its reason of belief must be acquainted to the reason of belief that same is illegally imported into a country whereof mere possession cannot be a factor to determine the same and even the same must be a factor to exercise over and above the reason of suspect if proper officer exercising jurisdiction under Section 110 of the Customs Act, 1962 - the appellant has produced certain documents in support of his claim to discharge its onus in Section 123 of the Customs Act, 1962 which made the goods subject to release. Confiscation of gold - HELD THAT - In this case the gold being importable subject to conditions as imposed and appellant has already produced the mode of procurement of the said goods. Therefore, the goods are not liable for confiscation under Section 111(d) of the Act. Further, the statements made by the appellant during the course of investigation has not been examined. In terms of Section 138 (B) of the Customs Act, 1962, no evidence have been adduced to effect to prove that goods in question recovered from the appellant is the alleged act of smuggling. Conclusion - The absence of reasonable belief clearly makes the instant seizure proceedings vitiated in nature which in turn makes the entire SCN proceedings and its consequent adjudication thereto bad in the eyes of law. The impugned order qua absolute confiscation of gold in question is not sustainable in the eyes of law - Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the seizure of gold by customs officials was conducted with a reasonable belief that the goods were smuggled, as required under Section 110 of the Customs Act, 1962.
Whether the confiscation of the gold under Sections 111(b) and 111(d) of the Customs Act, 1962, was justified.
Whether the appellants successfully discharged their burden of proof under Section 123 of the Customs Act, 1962, to demonstrate the lawful importation and possession of the gold.
Whether the imposition of penalties under Section 114AA of the Customs Act, 1962, was warranted based on the evidence and circumstances of the case.
Whether the procedural requirements and guidelines, including those outlined in Circular No. 01/2017, were adhered to during the seizure and subsequent proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Reasonable Belief for Seizure

Relevant Legal Framework and Precedents: Section 110 of the Customs Act, 1962, requires that for a seizure to be valid, there must be a reasonable belief that the goods are smuggled. The case law cited by the appellant, such as Ajit Bhosle, emphasizes the necessity of reasonable belief beyond mere suspicion.
Court's Interpretation and Reasoning: The court found that the seizure memo did not demonstrate a reasonable belief that the goods were smuggled, as required by law. The absence of such belief rendered the seizure proceedings invalid.
Key Evidence and Findings: The court noted the lack of evidence in the seizure memo to support a reasonable belief of smuggling.
Application of Law to Facts: Without evidence of reasonable belief, the court held that the seizure was not justified under Section 110.
Treatment of Competing Arguments: The appellant argued that the absence of reasonable belief invalidated the seizure, while the respondent claimed the goods were notified under Section 123, shifting the burden of proof. The court sided with the appellant.
Conclusions: The court concluded that the seizure was invalid due to the absence of reasonable belief.

Issue 2: Confiscation under Sections 111(b) and 111(d)

Relevant Legal Framework and Precedents: Sections 111(b) and 111(d) of the Customs Act, 1962, pertain to the confiscation of goods improperly imported.
Court's Interpretation and Reasoning: The court held that the provisions were not applicable as the evidence did not support the conclusion that the goods were illegally imported.
Key Evidence and Findings: The appellant provided documentation supporting the lawful possession of the gold, which was not sufficiently countered by the respondent.
Application of Law to Facts: The court found no evidence of violation of import rules justifying confiscation under Sections 111(b) and 111(d).
Treatment of Competing Arguments: The respondent's reliance on case law supporting confiscation was deemed irrelevant as they did not address the core issue of reasonable belief.
Conclusions: The confiscation of gold was not upheld due to the lack of evidence of illegal importation.

Issue 3: Burden of Proof under Section 123

Relevant Legal Framework and Precedents: Section 123 of the Customs Act, 1962, shifts the burden of proof to the possessor of notified goods to prove lawful importation.
Court's Interpretation and Reasoning: The court found that the appellant had discharged their burden by providing documentation and explanations for the gold's origin.
Key Evidence and Findings: The appellant's documentation was not effectively challenged by the respondent.
Application of Law to Facts: The court determined that the appellant met the burden of proof under Section 123.
Treatment of Competing Arguments: The respondent failed to provide contrary evidence to challenge the appellant's documentation.
Conclusions: The appellant successfully proved the lawful possession of the gold.

Issue 4: Penalties under Section 114AA

Relevant Legal Framework and Precedents: Section 114AA of the Customs Act, 1962, penalizes the use of false documents in customs transactions.
Court's Interpretation and Reasoning: The court found no evidence that the appellant used false documents or engaged in paper transactions without actual importation.
Key Evidence and Findings: The appellant's documents were found to be legitimate, and no evidence of false documentation was presented.
Application of Law to Facts: The lack of evidence of false documentation led the court to conclude that penalties under Section 114AA were not justified.
Treatment of Competing Arguments: The appellant argued against the imposition of penalties, and the court agreed, finding no basis for such penalties.
Conclusions: The penalties under Section 114AA were not upheld.

Issue 5: Procedural Compliance

Relevant Legal Framework and Precedents: Circular No. 01/2017 outlines procedures for recording reasonable belief during seizures.
Court's Interpretation and Reasoning: The court found non-compliance with procedural requirements, further invalidating the seizure.
Key Evidence and Findings: The seizure memo lacked the necessary documentation of reasonable belief as per the circular.
Application of Law to Facts: The procedural failures contributed to the court's decision to set aside the seizure and subsequent proceedings.
Treatment of Competing Arguments: The appellant's argument regarding procedural non-compliance was upheld.
Conclusions: The procedural lapses rendered the seizure and proceedings invalid.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The absence of reasonable belief clearly makes the instant seizure proceedings vitiated in nature which in turn makes the entire SCN proceedings and its consequent adjudication thereto bad in the eyes of law."
Core principles established: Reasonable belief is a fundamental requirement for seizure under the Customs Act, and procedural compliance is essential for the validity of customs actions.
Final determinations on each issue: The court set aside the confiscation and penalties, allowing the appeal and ordering the release of the seized goods with consequential relief.

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