2024 (11) TMI 846 - HC - Customs

Seizure of goods as smuggled into the country from the bordering Myanmar - exercising the jurisdiction by this Court u/s 130 of the Customs Act, 1962 - burden of proof to show that the seized areca nuts are not smuggled goods is on the respondent u/s 123 of the Customs Act, 1962 or it is for the Department to show that the seized betel nuts are of foreign origin and are smuggled goods, before it can be confiscated u/s 111 of the Customs Act, 1962. HELD THAT - An appeal under Section 130 of the Customs Act, 1962 shall lie to the High Court only if the High Court is satisfied that it involves a substantial question of law. It also appears that the provision of Section 130 (1) appears to be in pari materia with Section 100 (1) of the Code of Civil Procedure, 1908. There are a catena of judgments of the Apex Court, which has held that the existence of a substantial question of law is a sine qua non for exercise of jurisdiction of the High Court under Section 100 of the Code of Civil Procedure, 1908. Thus, applying the same logic to an appeal preferred under Section 130 of the Customs Act, 1962 it can be safely concluded that the existence of a substantial question of law is a sine qua non for exercising the jurisdiction by this Court under Section 130 of the Customs Act, 1962. Thus, if the Appellate Tribunal has ignored the material evidence available on record or has acted on no evidence, same shall in light of the above observations made by the Apex Court can be considered while deciding the substantial question of law so formulated by the High Court. Let us now consider the substantial questions of law formulated by this Court by its order dated 19.03.2024. For the sake of convenience, the substantial questions Nos. 1 and 2, formulated by this Court, by order dated 19.03.2024, are taken up for consideration, together. Cogent and positive evidence that the seized betal nuts were smuggled betal nuts or not - It appears that the betel nuts, in this case, were seized at Kawlbem which is within the Indian Territory and there is no material available, including any foreign markings on the bags in which the seized betal nuts were found to show that they are of foreign origin. There is also no credible expert opinion regarding origin of the goods. Merely, on the basis of presumption that as Kawlbem is near the international border and as Kawlbem is situated in a district which is not producing much betal nuts and is far away from the betal nuts producing districts of Mizoram like Kolasib and Mamit, it cannot be concluded that the betal nuts which were seized in this case were smuggled into India. Moreover, in the instant case, though, the learned Appellate Tribunal has not taken into the considerations the documents produced by the respondent to show that the betal nuts were purchased from M/s Emily Store, Bethel Veng by the respondent, in reaching the conclusion arrived at in the impugned order, however, same cannot be ignored in toto unless there is some material on record to show that the said GST documents are fake. In any view of the matter, this is not a case where the learned Appellate Tribunal has arrived at its finding without any evidence on record or without any reasons being mentioned for arriving at the decision in the impugned order. Hence, in our considered opinion the impugned order passed by learned Appellate Tribunal cannot be treated as perverse. Accordingly, substantial question of law framed by this Court as regards perversity is also answered against the appellant.

Summary

Issues Involved:

1. Whether the CESTAT erred in holding that the evidence collected by the Department could not establish the origin of the dry Areca nuts seized.
2. Whether the Department discharged its burden to prove that the seized goods were smuggled, given that Betel/Areca Nut is not a notified item under Section 123 of the Customs Act.
3. Whether the CESTAT erred in law by accepting GST documents submitted belatedly by the appellant.
4. Whether the Order dated 06.07.2022 is perverse in law and requires to be set aside.

Issue-wise Detailed Analysis:

1. Establishment of Origin of Seized Goods:

The core issue was whether the CESTAT erred in concluding that the Department failed to prove the foreign origin of the seized betel nuts. The High Court noted that betel nuts are not notified goods under Section 123 of the Customs Act, 1962, which places the burden of proof on the Department to demonstrate that the goods are smuggled. The CESTAT found that the Department did not produce any cogent and positive evidence to substantiate the allegation of smuggling. The High Court agreed with this finding, emphasizing that mere failure to produce documents by the respondent does not imply that the goods are smuggled.

2. Burden of Proof Regarding Smuggling:

The High Court examined whether the Department had discharged its burden to prove the smuggling of non-notified goods like betel nuts. It was reiterated that the burden lies with the Department to prove smuggling by positive evidence, as betel nuts are not covered under Section 123. The Court observed that the Department's reliance on the respondent's failure to produce documents was insufficient. The Court found no substantial question of law in this issue, as the principle that the burden lies with the Department is well-settled.

3. Acceptance of GST Documents:

The question was whether the CESTAT erred in accepting GST documents submitted belatedly by the appellant. The High Court found this to be a factual issue rather than a substantial question of law. The CESTAT did not base its decision on these documents but rather on the lack of evidence from the Department. Thus, the acceptance of GST documents was not a significant legal error.

4. Perversity of the CESTAT Order:

The appellant argued that the CESTAT order was perverse. The High Court considered whether the decision was based on no evidence or ignored material evidence. It concluded that the CESTAT's decision was not perverse, as it was based on the lack of positive evidence from the Department. The Court noted that the location of the seizure near the border and the absence of foreign markings did not suffice to prove smuggling. The High Court found no substantial question of law regarding the alleged perversity of the order.

Conclusion:

The High Court dismissed the appeal, finding no merit in the appellant's contentions. It upheld the CESTAT's decision, emphasizing that the Department failed to discharge its burden of proof regarding the smuggling of non-notified goods. The Court confirmed that the issues raised did not constitute substantial questions of law, affirming the CESTAT's order as legally sound and not perverse.