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2025 (3) TMI 1147 - AT - CustomsConfiscation of 34, 400 kgs of areca nuts - smuggling of foreign origin goods - notified item or not - confiscation was done solely on the basis of suspicions without any substantive proof to indicate that the goods were of foreign origin - HELD THAT - The Department has not brought in any evidence to substantiate their allegation that the impugned goods are smuggled in nature. In this regard the appellant has stated that the goods were lawfully purchased from local markets in Nagaland and Assam and the confiscation was done solely on the basis of suspicion without any substantive proof to establish foreign origin of the goods in question. It is observed that the appellant s claim of purchase of the Betel Nuts/Areca Nuts from local market/mandi on payment of Cess has not been negated by the department. The goods were seized from the godowns in Indian territory far away from an international border. Since the goods were not seized within the Customs area we observe that as per the provisions of Section 123 of Customs Act 1962 the burden to prove that the seized goods were of foreign origin or smuggled in nature lies on Department. The confiscation of the impugned goods is not sustainable and accordingly the same is set aside. Since the order of confiscation is not sustained the demand of redemption fine in lieu of confiscation is not sustainable and accordingly the same is set aside. As the confiscation itself is not sustained there is no question of imposing penalty on the appellant and hence the same is set aside. The appellant needs to be compensated for the destruction of the impugned goods. Further from the decision cited above we observe that when goods valued Rs.88 lakhs was seized and destroyed at the pre-trial stage the Hon ble High Court has allowed the refund of Rs.60 lakhs. By adopting the same ratio we are of the view that the appellant is liable to be refunded Rs.20 lakhs in lieu of the seizure value of Rs.32.68 lakhs. The refund is to be paid within a period of three months from the date of communication of this order and if the Department fails to comply interest on the expiry of the said three months shall be payable on the refund amount at the rate of 12% per annum. Confiscation - i) The appellant is eligible for refund of Rs.20 lakhs in lieu of the seizure value of Rs.32.68 lakhs. The refund is to be paid within a period of three months from the date of communication of this order and if the Department fails to comply interest shall be payable on the refund amount at the rate of 12% per annum on the expiry of the said three months. ii) The impugned goods are not liable for confiscation. Accordingly the order of confiscation is set aside. iii) The penalty imposed on the appellant is set aside. Appeal disposed off.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were: 1. Whether the confiscation of 34,400 kgs of areca nuts by Customs was legally sustainable given the Department's failure to substantiate the allegation that the goods were of foreign origin and smuggled. 2. Whether the destruction of the seized goods at the pre-trial stage violated principles of natural justice, and if the appellant is entitled to a refund of the seizure value along with interest. ISSUE-WISE DETAILED ANALYSIS 1. Confiscation of Areca Nuts Relevant legal framework and precedents: The Customs Act, 1962, particularly Section 123, places the burden of proof on the Department to establish that goods are smuggled if they are not notified items. The appellant argued that areca nuts are not a notified item under Section 123, thus the burden to prove smuggling lies with the Department. The appellant cited precedents such as Commissioner of Cus., C. Ex. & S.T., Siliguri v. Subodh Das and Laltanpuii v. Commissioner of Cus. (Preventive), NER, Shillong to support their case. Court's interpretation and reasoning: The Tribunal found that the Department failed to provide substantive evidence proving the foreign origin and smuggled nature of the goods. The appellant's claim of lawful purchase from local markets was not negated by the Department. The Tribunal emphasized that mere suspicion without substantive proof is insufficient for confiscation. Key evidence and findings: The Tribunal noted the absence of evidence from the Department to substantiate their allegations. The goods were seized from a location far from any international border, and the appellant's purchase claims were not disproved. Application of law to facts: The Tribunal applied the legal principle that the burden of proof lies with the Department, as the goods were not seized within a Customs area and areca nuts are not a notified item under Section 123. Treatment of competing arguments: The appellant's reliance on precedents was upheld, with the Tribunal agreeing that the Department failed to discharge its burden of proof. Conclusions: The Tribunal concluded that the confiscation was not sustainable and set aside the order of confiscation, as well as the demand for redemption fine and penalty. 2. Destruction of Seized Goods and Refund Claim Relevant legal framework and precedents: The appellant argued that the destruction of goods without a fair opportunity to present their case violated principles of natural justice. They relied on decisions such as Northern Plastics Ltd. v. Collector Of Customs and the High Court of Meghalaya's ruling on compensation for destroyed goods. Court's interpretation and reasoning: The Tribunal found that the destruction of goods was conducted without providing the appellant a fair opportunity to contest the findings of the goods being unfit for consumption. The Tribunal referred to the High Court of Meghalaya's decision, which allowed a refund when goods were destroyed without proving smuggling. Key evidence and findings: The Tribunal noted the timeline of events, including the destruction notice and the appellant's claim that the goods decayed while in the Department's custody. The Tribunal found that the appellant was not given a fair opportunity to contest the destruction. Application of law to facts: The Tribunal applied the principle of natural justice, concluding that the appellant was entitled to compensation for the destroyed goods. Treatment of competing arguments: The Tribunal considered the Department's actions and the appellant's claims, ultimately siding with the appellant based on the lack of fair process. Conclusions: The Tribunal ordered a refund of Rs.20 lakhs to the appellant, to be paid within three months, with interest applicable if delayed. SIGNIFICANT HOLDINGS The Tribunal established the following core principles: - The burden of proof lies on the Department to establish that goods are smuggled if they are not notified items under Section 123 of the Customs Act, 1962. - Confiscation based on mere suspicion without substantive evidence is unsustainable. - Destruction of seized goods without a fair opportunity for the appellant to contest the findings violates principles of natural justice. - The appellant is entitled to compensation for destroyed goods when the Department fails to prove smuggling. Final determinations on each issue: - The confiscation of the impugned goods was set aside, and the appellant was not liable for any penalty. - The appellant was awarded a refund of Rs.20 lakhs, with interest applicable if the refund is delayed beyond three months.
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