1989 (11) TMI 178 - AT - Customs

Summary

Issues Involved:
1. Legality of the search and seizure of the goods.
2. Evidence of foreign origin of the goods.
3. Trade restrictions and the nature of the goods.
4. Burden of proof and suspicion as evidence.
5. Procedural fairness and cross-examination.
6. Specificity of the penalty provision under Section 112 of the Customs Act, 1962.

Detailed Analysis:

1. Legality of the Search and Seizure:
The appellants contended that there was no reasonable cause for the search and seizure of the goods, arguing that the grounds mentioned in the Show Cause Notice were unfounded. The goods were seized under Section 110 of the Customs Act, 1962, based on the belief that they were illegally imported, violating Section 3(2) of the Import/Export (Control) Act, 1947, read with Section 11 of the Customs Act, 1962. The Collector of Customs (Preventive) West Bengal, Calcutta, had confiscated the goods and imposed penalties, leading to the appeals.

2. Evidence of Foreign Origin:
The appellants argued that there was no evidence in the seizure list indicating that the goods bore any foreign marks. They claimed that the goods were purchased locally and denied any violation of customs laws. The Collector, however, relied on post-hearing inquiries that revealed some garments had marks of foreign origin (Japan, Taiwan, Korea), concluding that the goods were smuggled from Bangladesh. The Tribunal found that the department failed to establish even a prima facie case of smuggling, as the only evidence was the foreign marks on some garments, which did not conclusively prove smuggling.

3. Trade Restrictions and Nature of the Goods:
The appellants argued that there were no trade restrictions on dealing with the subject goods in border areas and that selling old garments was a legitimate trade for the poor. They also contended that such goods were abundantly available in the state. The Collector did not accept these arguments, but the Tribunal noted that the appellants' explanation of acquiring the goods locally was not specifically refuted.

4. Burden of Proof and Suspicion as Evidence:
The appellants cited several decisions, including S.N. Sarkar v. Collector of Central Excise, emphasizing that the burden of proof lies with the department to establish that the goods were smuggled. They argued that suspicion could not amount to evidence. The Tribunal agreed, noting that the department had not provided sufficient evidence to shift the burden of proof to the appellants. The Supreme Court's decision in Collector of Customs v. D. Bhormull was referenced, highlighting that the department must establish a degree of probability that a prudent person would believe the goods were smuggled.

5. Procedural Fairness and Cross-Examination:
The appellants argued that they were not provided copies of documents relied upon in framing the charges and were denied the opportunity to cross-examine witnesses. The Tribunal found that the department's procedure was deficient, as the evidence regarding foreign marks was not part of the Show Cause Notice and was furnished post-hearing. The Tribunal emphasized the importance of procedural fairness and the right to cross-examine witnesses in quasi-judicial proceedings.

6. Specificity of the Penalty Provision:
The appellants contended that the Show Cause Notice did not specify which sub-section of Section 112 of the Customs Act, 1962, was attracted, citing the Madras High Court decision in B. Lakshmichand v. Government of India. The Tribunal found that the Collector's order lacked clarity regarding the specific provision under Section 112, which was crucial for imposing penalties. The Tribunal held that the absence of specific reference to the relevant sub-section did not vitiate the order, but the overall failure to establish the smuggled nature of the goods warranted setting aside the penalties.

Conclusion:
The Tribunal allowed the appeals, setting aside the Collector's order of confiscation and penalties. The appellants were entitled to consequential reliefs, as the department failed to establish the smuggled nature of the goods and did not adhere to procedural fairness.