2023 (7) TMI 114 - AT - Customs

Smuggling of foreign origin betel nuts - conspiracy, with insinuations of international collusion - burden to prove under section 123 of Customs Act, 1962 - absolute confiscation - penalty - denial of benefit of exemption in notification 26/2000- Cus dated 1st March 2000 - HELD THAT - The goods, packed in loose form in gunny bags made of jute, marked with BUDIMAN-90 , were found to tally with declared weight but substantially fewer than the declared number of bags. It was Shri Gulam Farooq Noorani who apparently confessed to the investigators that the marking on the bags were that of an Indonesian entity, M/s Swee Choon Co Pte Ltd, that Shri Deepak Sadhwani was the financier of the consignment and that he had sourced and arranged documentation for enabling M/s Silver Export to file bills of entry. The two partners admitted that they were in receipt of payments for each such container. The denial of exemption was based on the finding that the goods, being of Indonesian origin, were not entitled to the concessional rate of duty, intended for betel nuts harvested in Sri Lanka and conforming to Customs Tariff (Determination of Origin of Goods under Free Trade Agreement between the Democratic Socialistic Republic of Sri Lanka and the Republic of India) Rules, 2000. The impugned goods were confiscated under the authority of section 111(h) and 111(o) of Customs Act, 1962 and Shri Gulam Farooq Noorani was proceeded with under the authority of section 2(26) and section 2(39) as well as section11 of Customs Act, 1962, along with the two partners of M/s Silver Exports as also liable for the duty, fine and penalty recoverable from M/s Silver Exports. The authenticity of declaration of Sri Lankan origin is to be established by submission of certificate of origin as provided for in rule 11 of Customs Tariff (Determination of Origin of Goods under Free Trade Agreement between the Democratic Socialistic Republic of Sri Lanka and the Republic of India) Rules, 2000. That the declaration in the four bills of entry, covering the goods under seizure at Nhava Sheva, as well as that of goods already cleared was so supported is not in dispute - Here is an institution of the State of a contracting party that places such premium on lack of trust in institutional mechanism established by the Agreement, and with overriding effect, as to superimpose conventional ascertainment relied upon in domestic investigations under the garb of implied national interest. To approve of such travesty, merely on the ground of noble intentions, is to put the stamp of approval on whittling of the authority of the State from within. Seizure of the consignment at Nagpur is a brazen act of intrusion. As pointed out by Learned Counsel, betel nuts are not included in section 123 of Customs Act, 1962. Implied resort to this particular exception to the principle of smuggling having to be established by customs authorities, by seizure of goods that were not in a customs area and requiring the owners to produce evidence of provenance, is contrary to Customs Act, 1962 - The scope of section 123 of Customs Act, 1962 has been implicitly expanded by executive overreach inasmuch as the enactment, presupposing illegal entry into the country has been invoked in relation to an agricultural product, predominantly originating in India, and, thereby, upturning the logic for existence of section 123 of Customs Act, 1962 on its head. The confiscation of 148.230 MT of betel nuts at Nhava Sheva under section 111 of Customs Act, 1962 is invalid for being consequent upon determination of origin in the absence of compliance with procedure laid down in Customs Tariff (Determination of Origin of Goods under Free Trade Agreement between the Democratic Socialistic Republic of Sri Lanka and the Republic of India) Rules, 2000. In the absence of that validating ascertainment, the liability to duty other than in accordance with exemption in notification no. 26/2002-Cus dated 1st March 2002 is contrary to law - Fines imposed under section 125 of Customs Act, 1962 are, therefore, set aside as also penalties under section 112 and 114AA of Customs Act, 1962. Confiscation of 106.11 MT of betel nuts at Nagpur under section 111 of Customs Act, 1962 is set aside. Penalties under section 112 and 114AA of Customs Act, 1962 are also set aside. Appeal allowed.

Summary

Issues Involved:

1. Entitlement to concessional rate of duty under Indo-Sri Lanka Free Trade Agreement.
2. Allegations of fraudulent importation and smuggling of betel nuts.
3. Validity of evidence and procedural compliance.
4. Determination of origin of goods.
5. Confiscation and penalties imposed.

Summary:

1. Entitlement to Concessional Rate of Duty:
The primary issue was whether the betel nuts imported by M/s Silver Export were entitled to the concessional rate of duty under the Indo-Sri Lanka Free Trade Agreement. The goods were claimed to be of Sri Lankan origin to avail the benefits of notification no. 26/2000-Cus dated 1st March 2000. However, investigations revealed that the goods were allegedly of Indonesian origin, leading to the denial of the concessional rate and application of the standard rate of duty.

2. Allegations of Fraudulent Importation and Smuggling:
The case involved allegations that the betel nuts were fraudulently declared as Sri Lankan origin to avail duty exemptions. Investigations indicated that the goods were packed in gunny bags marked "BUDIMAN-90," a brand of M/s Swee Choon Co Pte Ltd, Indonesia. The Central Intelligence Directorate of Sri Lankan Customs confirmed that the bills of lading did not match the physical shipment records, suggesting a conspiracy to defraud the exchequer.

3. Validity of Evidence and Procedural Compliance:
The appellants contended that the enforcement actions were marked by disregard for the law and prejudice against the trade in foreign-origin betel nuts. They argued that the adjudication process was vitiated by the refusal to allow cross-examination of witnesses and reliance on statements recorded under coercion. The adjudicating authority's reliance on the Arecanut Research & Development Foundation (ARDF) to determine the country of origin was also challenged.

4. Determination of Origin of Goods:
The determination of the origin of the betel nuts was a significant issue. The ARDF's report, which claimed the goods were of Indonesian and Myanmar origin, was heavily relied upon by the authorities. However, the appellants argued that the ARDF lacked the accreditation to determine the country of origin and that the evidence presented was insufficient to conclusively prove the origin of the goods.

5. Confiscation and Penalties Imposed:
The goods were confiscated, and penalties were imposed on the appellants under various sections of the Customs Act, 1962. The adjudicating authority found that the goods were not entitled to the concessional rate of duty and imposed fines and penalties accordingly. However, the Tribunal found that the procedural requirements for determining the origin of the goods were not followed, and the evidence was insufficient to support the allegations.

Conclusion:
The Tribunal set aside the confiscation of the betel nuts and the penalties imposed, finding that the procedural requirements for determining the origin of the goods were not followed, and the evidence presented was insufficient to support the allegations of fraudulent importation and smuggling. The appeals were allowed, and the impugned orders were set aside.