1991 (3) TMI 252 - AT - Customs

Summary

Issues Involved:
1. Applicability of Section 123 of the Customs Act, 1962.
2. Evidence of diamonds being foreign.
3. Denial of cross-examination of the expert witness.
4. Burden of proof regarding the smuggled nature of the diamonds.
5. Non-consideration of documents provided by appellants.
6. Adverse inference due to non-production of enquiry reports.
7. Inconsistent treatment of similar diamonds in other cases.

Issue-wise Detailed Analysis:

1. Applicability of Section 123 of the Customs Act, 1962:
The primary issue was whether Section 123 of the Customs Act, 1962, which shifts the burden of proof to the person from whom goods are seized to prove that they are not smuggled, was applicable. The Tribunal concluded that Section 123 could only be applied if there was prima facie material to suggest that the goods were smuggled. The diamonds in question did not have foreign markings, and Indian diamonds were also available. Thus, there was no prima facie material to conclude that the diamonds were smuggled.

2. Evidence of diamonds being foreign:
The evidence presented included a report from Smt. Sudha Phuken, a geologist, who opined that the diamonds did not appear to be cut in India. However, this report was not provided to the appellants, and her expertise in diamond identification was not established. The Tribunal found that the opinion of Smt. Phuken could not be relied upon as it was hearsay and not backed by primary evidence. Moreover, there was no practical or scientific method to determine the origin of diamonds, as supported by expert opinions from various gemological institutes.

3. Denial of cross-examination of the expert witness:
The appellants were not allowed to cross-examine Smt. Sudha Phuken, and no reasons were provided for this denial. The Tribunal held that this violated the principles of natural justice and further weakened the Department's case, as the appellants were deprived of an opportunity to challenge the expert's opinion.

4. Burden of proof regarding the smuggled nature of the diamonds:
The Tribunal determined that the burden of proof had not shifted to the appellants because there was no reasonable belief or prima facie material to suggest that the diamonds were smuggled. The Department failed to establish that the diamonds were of foreign origin, and thus, the burden remained with the Department to prove the smuggled nature of the diamonds.

5. Non-consideration of documents provided by appellants:
The appellants had produced several documents to show that they had legally obtained the diamonds. However, the authorities below did not discuss these documents or the results of the enquiries made regarding them. The Tribunal found that the failure to consider these documents violated the principles of natural justice and that the authorities should have discussed and provided a finding on these documents.

6. Adverse inference due to non-production of enquiry reports:
The Tribunal noted that the Department did not provide the enquiry reports to the appellants, which were obtained to verify the documents produced by the appellants. Citing legal precedents, the Tribunal held that an adverse inference must be drawn against the Department for not producing these reports, suggesting that if produced, they would have supported the appellants' case.

7. Inconsistent treatment of similar diamonds in other cases:
The Tribunal observed that similar diamonds found in other jewels were returned to the respective parties as there was no clear proof of their foreign origin. The Tribunal found that there was no reason to treat the diamonds in question differently from those in other cases, highlighting a manifest error in applying different standards of proof.

Conclusion:
The Tribunal allowed the appeals, directing that the seized diamonds be returned to the respective appellants. The judgment emphasized the lack of prima facie material to classify the diamonds as smuggled, the improper denial of cross-examination, the failure to consider relevant documents, and the inconsistent treatment of similar cases.