2014 (9) TMI 376 - HC - Customs

Smuggling of goods - onus to prove - notified goods u/s 123 - confiscation and imposition of penalty - 99 sets of Intel Pentium four processors and cooling fan of foreign origin valued at ₹ 7,92,000/- were found in the Mitsubishi Lancer Car which was parked in Hotel - Tribunal observed that, these goods were freely available in the open market. The Revenue has not discharged their burden to prove that the goods were smuggled ones. - Held that - the cases to which Section 123 is not attracted, the adjudicating authorities and the Courts have to bear in mind whether they are proceeding against the goods or against the person. If they are proceeding against the goods, the standard of proof that is required is far less when compared to a proceedings in which they are proceeding against that person. Similarly, in all cases to which Section 123 is not attracted, the initial burden of proving that the goods are smuggled goods is on the Department. Under no circumstances, it changes, but in discharge of that burden, once the department adduces evidence, the question is whether that burden of proof shifts to the opposite party, if so, at what stage. It is in this context, Section 106 is attracted as the smuggling being a clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. It is here the underlying principle of Section 106 is attracted and once prima facie evidence is adduced to show that the goods seized are smuggled goods, the burden of showing that it is not the smuggled goods shifts to the person from whose possession these goods are seized. There is a presumption of innocence, but it may be successfully encountered by the presumption of guilt arising from the unexplained lawful possession of the property. It is unfortunate that a Tribunal which is a specialised body, instead of applying its mind to the facts of this case, to the statutory provisions and the principles evolved for more than four decades, and decide the case has followed judgment which cannot be approved and cannot be treated as a judgment which is rendered after referring to those judgments to which a reference is made. It is the case of the respondents that the goods were purchased by them in Burma Bazaar, Chennai. Admittedly, they were not in possession of any documents to show that they purchased those goods from Burma Bazaar, Chennai. It is admitted that they are in the business of selling these electronic items which is for the purpose of selling them. These items were brought from Chennai to Bangalore through Mallapuram. If their statement is to be ignored, there is nothing on record to show that these goods were readily available in plenty in the open market. The initial presumption of innocence cannot be extended to the respondents. As the said goods are all having foreign markings, in the absence of any material to show that it is purchased from a registered dealer dealing with those goods and in the light of what they have stated in the statement under Section 108, burden of proving that they were acquired lawfully shifts on the respondents. They have miserably failed to substantiate their case. - The respondents are in the business of sale of smuggled goods and as no duty is paid on these goods, they are liable for confiscation under the Act. - Decided in favor of revenue.

Issues Involved:
1. Burden of proof regarding smuggled goods under the Customs Act, 1962.
2. Applicability of Section 123 of the Customs Act.
3. Evaluation of evidence and statements under Section 108 of the Customs Act.
4. Tribunal's reliance on previous judgments.

Issue-wise Detailed Analysis:

1. Burden of Proof Regarding Smuggled Goods Under the Customs Act, 1962:
The primary issue revolves around whether the Revenue has successfully discharged its burden of proving that the seized goods were smuggled. The Customs Act, 1962, particularly Section 123, outlines the burden of proof in cases involving smuggled goods. The judgment emphasizes that the initial burden lies with the Department to prove that the goods are smuggled. This burden is considered discharged if the Department provides prima facie evidence indicating the foreign origin of the goods and their illicit importation.

2. Applicability of Section 123 of the Customs Act:
Section 123 of the Customs Act places the burden of proof on the person from whose possession the goods were seized if the goods are notified under this section. However, in this case, the goods were non-notified, hence the general law of evidence applies. The judgment clarifies that for non-notified goods, the burden of proof remains with the Department to establish that the goods are smuggled. The Department can shift this burden to the respondent by providing circumstantial evidence indicating the illicit nature of the goods.

3. Evaluation of Evidence and Statements Under Section 108 of the Customs Act:
The Customs Officers seized 99 sets of Intel Pentium 4 Processors and cooling fans of foreign origin from a Mitsubishi Lancer car. The respondents failed to produce any documents proving lawful possession or purchase of these goods. Their statements under Section 108 indicated that the goods were purchased from Burma Bazaar, Chennai, but no receipts were provided. The judgment highlights that the respondents' inability to provide documentation or a convincing explanation shifts the burden back to them to prove lawful acquisition, which they failed to do.

4. Tribunal's Reliance on Previous Judgments:
The Tribunal relied on the judgment in N.A. Khan's case, which was deemed inappropriate by the High Court. The High Court criticized the Tribunal for not applying its mind to the specific facts of the case and for relying on a judgment that did not adequately address the issues at hand. The High Court emphasized the need for the Tribunal to consider the principles laid down by the Apex Court regarding the burden of proof and the evaluation of evidence in smuggling cases.

Conclusion:
The High Court concluded that the Department had sufficiently discharged its burden of proving that the goods were smuggled based on the circumstantial evidence and the respondents' failure to provide lawful documentation. The Tribunal's order was set aside, and the orders of the original authority and the appellate authority were restored. The substantial question of law was answered in favor of the Revenue, and the respondents were held liable for the confiscation of the goods and penalties imposed. The High Court's judgment underscores the importance of adhering to legal principles and proper evaluation of evidence in cases involving smuggled goods.

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