2017 (5) TMI 1323 - AT - Customs

Town seizure for non-notified goods - burden of proving - whether in the case of Town seizure for non-notified goods (readymade garments) under Section 123 of the Customs Act, 1962, whether it is the onus of Revenue to prove that the goods are smuggled and whether the order of confiscation with redemption fine and further penalty of ₹ 5 lakhs under Section 112(a) of the Customs Act, 1962, is sustainable? Held that - the readymade garments in question, being not notified goods under Section 123 of the Customs Act, 1962, were freely importable. It is well settled that initial burden to prove smuggling of non-notified goods lies on the Department. The appellants have given cogent explanation along with evidence of import of the goods, through licit route and the same have not been found to be untrue. Further, revenue have rejected the evidences produced, on flimsy ground which is not tenable. I find that the whole case of revenue is based on presumptions and no evidence have been led as to the allegation of smuggling. Mere failure on the part of the appellant to produce some document to the satisfaction of the Customs Authority does not ipso-facto lead to inevitable conclusion that the goods are smuggled. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the onus of proving that seized goods are smuggled lies on the Revenue.
2. Whether the order of confiscation with redemption fine and penalty under Section 112(a) of the Customs Act, 1962, is sustainable.

Analysis:

Issue 1:
The appeal questioned whether the Revenue had the burden to prove that seized readymade garments were smuggled. The consignment was intercepted based on intelligence, and the goods were found to be of foreign origin. The appellant claimed legal import under specific Bill of Entry dates and provided supporting documents. However, discrepancies arose regarding the consignor and consignee information, leading to suspicions of illicit import. The Show Cause Notice alleged smuggling based on the quality of goods and lack of proper documentation. The appellant argued that the Revenue failed to discharge the burden of proving smuggling, as the goods were freely importable non-notified items. The Tribunal held that the Department bears the initial burden to prove smuggling of non-notified goods and found the Revenue's case to be based on presumptions without substantial evidence. The Tribunal concluded that the Show Cause Notice was unsustainable, allowing the appeal and setting aside the order of confiscation.

Issue 2:
The second issue revolved around the sustainability of the order of confiscation with redemption fine and penalty imposed under Section 112(a) of the Customs Act, 1962. The appellant contended that the goods, initially declared as inferior quality, were inspected, separated, and repacked before being sent to Delhi. The appellant argued that the Revenue's allegations of smuggling lacked concrete evidence and that the Show Cause Notice was time-barred. The Tribunal found the Revenue's rejection of the appellant's evidence on flimsy grounds to be untenable. Additionally, the Tribunal noted the lack of sampling of seized goods and the absence of substantial proof supporting the smuggling allegations. Ultimately, the Tribunal set aside the impugned order, granting the appellants consequential benefits, including the immediate release of confiscated goods if not auctioned.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the Revenue's failure to provide substantial evidence of smuggling and the unsustainable nature of the Show Cause Notice. The judgment highlighted the importance of the Revenue bearing the burden of proof in cases involving non-notified goods and the necessity of concrete evidence to support allegations of smuggling.