2025 (1) TMI 998 - AT - Customs

Absolute confiscation - penalty - Seizure of Gold of foreign origin - existence of reasonable belief of smuggled nature of goods or not - iota of evidence brought in by the investigation to prove that the seized gold is of foreign origin or not principles of natural justice. Demand based on assumptions and presumptions - HELD THAT - It is observed that 7 pieces of fine gold weighing in total of 449.300 gms was seized from Appellant-1 viz. Shri Souvik Mondal on the ground that the said gold pieces were smuggled in nature and illegally transported by the Appellants without any valid documents for its licit purchase. However the department has failed to produce any evidence to corroborate that the gold seized was smuggled in nature. No evidence has been adduced to the effect to prove the mens rea of the appellant in the alleged act of smuggling/illegal importation. The impugned order has been passed by the lower authorities on the basis of presumptions and assumptions. No evidence has been brought on record to substantiate the allegation that the said gold is of foreign origin and illegally imported into India. Existence of reasonable belief or not - HELD THAT - Section 123 of the Customs Act clearly stipulates that a reasonable belief that the gold is of smuggled in nature is mandatory for invocation of the said provision. However in the present case no reasonable belief has been formed by the officers that the gold is of smuggled in nature and hence I hold that provisions of Section 123 are not applicable in this case and the burden lies on the department to prove that seized gold is of smuggled in nature - no evidence has been brought on record by the Revenue to substantiate the allegation that the gold is of foreign origin and smuggled in nature. Principles of natural justice - HELD THAT - It is observed that there was no Panchanama drawn at the time of seizure of the gold. The appellants have written to the Authorities on multiple times for release of the gold seized and supplying of Relied Upon Documents (RUDs) but there was no response from the authorities. Thus the principles of natural justice have not been followed during the process of adjudication. Confiscation - penalty - HELD THAT - Accordingly the confiscation of the gold in the impugned order is not sustainable on account of non-following of the principles of natural justice also - As the confiscation of the gold is not sustained the penalties imposed on the appellants are also not sustainable. Conclusion - i) No evidence has been brought on record to substantiate the allegation that the said gold is of foreign origin and illegally imported into India. ii) No evidence has been brought on record by the Revenue to substantiate the allegation that the gold is of foreign origin and smuggled in nature. iii) The principles of natural justice have not been followed during the process of adjudication. iv) The confiscation of the gold in the impugned order is not sustainable on account of non-following of the principles of natural justice also. v) As the confiscation of the gold is not sustained the penalties imposed on the appellants are also not sustainable. Appeal allowed.

2020 (1) TMI 315 - AT

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in the judgment are:

Whether the seizure of gold from the appellants was justified under the Customs Act, 1962, particularly under Section 123, which pertains to the burden of proof regarding the smuggled nature of goods.
Whether the principles of natural justice were adhered to during the adjudication process, including the opportunity to present evidence.
Whether the penalties imposed on the appellants were justified and sustainable under the law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Gold Seizure under the Customs Act, 1962

Relevant legal framework and precedents: Section 123 of the Customs Act, 1962, places the burden of proof on the person from whom goods are seized to show that they are not smuggled. The appellants cited precedents like Rara Brothers v. M.L. Dey and Raj Kumar Jaiswal to argue that the initial burden is on the Revenue to establish a reasonable belief that goods are smuggled.
Court's interpretation and reasoning: The Tribunal found that the Revenue did not provide sufficient evidence to establish that the gold was of foreign origin or smuggled. It emphasized the necessity of a 'reasonable belief' for invoking Section 123, which was absent in this case.
Key evidence and findings: The Tribunal noted the lack of foreign markings on the gold and the absence of evidence proving the gold's foreign origin or smuggling. The appellants provided invoices from M/S DCM & Co. as evidence of legitimate purchase.
Application of law to facts: The Tribunal applied the principles from the cited cases, emphasizing that the Revenue failed to meet its burden of proof. It concluded that the seizure was based on assumptions without reasonable belief.
Treatment of competing arguments: The Tribunal dismissed the Revenue's argument that the appellants failed to prove the licit nature of the gold, highlighting that the initial burden of proof was on the Revenue.
Conclusions: The Tribunal concluded that the seizure of gold was not legally sustainable due to the lack of reasonable belief and supporting evidence.

Issue 2: Adherence to Principles of Natural Justice

Relevant legal framework and precedents: The principles of natural justice require fair hearing and opportunity to present evidence. The appellants argued that these principles were not followed, as they were not given a chance to present their documents.
Court's interpretation and reasoning: The Tribunal observed that the appellants were not provided with the Relied Upon Documents (RUDs) and were not given a fair opportunity to present their case.
Key evidence and findings: The lack of a Panchanama and the authorities' failure to respond to the appellants' requests for documents were highlighted as violations of natural justice.
Application of law to facts: The Tribunal applied the principles of natural justice and found that the adjudication process was flawed due to the lack of fair hearing.
Treatment of competing arguments: The Tribunal dismissed the Revenue's defense of the adjudication process, emphasizing the procedural lapses.
Conclusions: The Tribunal concluded that the confiscation was unsustainable due to the violation of natural justice principles.

Issue 3: Justification of Penalties Imposed

Relevant legal framework and precedents: Penalties under the Customs Act require proof of smuggling or illegal importation. The appellants argued that the penalties were unjustified due to lack of evidence.
Court's interpretation and reasoning: The Tribunal reasoned that since the confiscation was not justified, the penalties based on such confiscation were also unsustainable.
Key evidence and findings: The Tribunal found no evidence to support the imposition of penalties, as the foundational allegation of smuggling was unproven.
Application of law to facts: The Tribunal applied the legal standards for imposing penalties and found them unmet due to the lack of evidence.
Treatment of competing arguments: The Tribunal did not find merit in the Revenue's justification for penalties, given the absence of proof of smuggling.
Conclusions: The Tribunal set aside the penalties, finding them legally unsustainable.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal held, "The seizure of the gold without following the 'reasonable belief' that the gold is of smuggled in nature, is not sustainable."
Core principles established: The judgment reinforced the principle that the burden of proof initially lies with the Revenue to establish a reasonable belief of smuggling under Section 123 of the Customs Act. It also emphasized adherence to natural justice principles in adjudication.
Final determinations on each issue: The Tribunal set aside the confiscation and penalties, allowing the appeals with consequential relief. It concluded that the seizure was not supported by evidence or reasonable belief, and the adjudication process violated natural justice.

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