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TMI Blog2018 (7) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... ds imported earlier totally false by relying on aforesaid evidence - It is seen that the entire investigation is in the nature where the appellants have been asked to explain the legal possession or source of the diamonds. The appellants have primarily failed to produce the necessary evidence. Similarly the Revenue has also failed to establish it’s case. While Revenue has created a doubt regarding the Licit acquisition of diamonds seized, no evidence of the same being smuggled has been produced. Section 123 of the Customs Acts puts the onus of establishing smuggled nature of goods on the Revenue, except for the notified goods. Diamonds are not notified under Section 123. In these circumstances by mere failure to explain Licit acquisition of diamonds the burden of proof under Section 123 is not discharged - It is also a fact that diamonds are freely traded in the open market. A person may acquire legally or illegally from the market. Failure to explain legal acquisition does not automatically imply that the goods are smuggled. There are no sufficient evidence has been placed to conclude that the diamonds were smuggled. The case of revenue has not been substantiated by positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time the rough diamonds in question were seized on 07/08/2011 by DRI. It was alleged that Shri Bharatbhai Savaliya was also present in Room No. 517 of Hotel Gateway, Surat on 06/08/2011 at around 7pm to 8pm when the packet containing rough diamonds was handed over by Mr. Jean to Shri Pravin Ajudiya. Shri Bharatbhai Savaliya was one of the associates of Shri Pravinbhai Ajudiya who had helped Shri Pravin Ajudiya in concealing, keeping, selling or in any other manner dealing with the seized smuggled rough diamonds of Congo origin. 5. The matter was first decided wherein the diamonds were absolutely confiscated and penalty of ₹ 50 Lakhs was imposed under Section 111(d) of Customs Act. Penalty of ₹ 5 Lakhs was also imposed on the appellant Sh. Bharatbhai G. Savalia. The matter was agitated before Tribunal which remanded the matter to Commissioner. In remand proceeding the Commissioner again ordered absolute confiscation of the seized diamonds. He further, imposed penalty of ₹ 45 Lakhs on Shri Pravinbhai Ajudita and 2 Lakhs on Shri Bharatbhai Savaliya to Order in Original. Aggrieved by this order they filed appeals before this Tribunal. 6. Ld. Counsel Shri B.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid period were produced. He further pointed out that from the said data it can be said that the said locker was not operated by them from 04/08/2011 to 07/08/2011. He argued that in these circumstances it cannot be said that the diamonds found in the locker were part of the diamonds allegedly smuggled by Mr. Jean from Congo to India. 9. He further argued that Mr. Jean had retracted his statement while he was in jail on 12/08/2011. He clearly stated that he did not meet Mr. Bharatbhai Savaliya in room 517 on 06/08/2011. He pointed out that after the said retraction no further statement was recorded by DRI of Mr. Jean. He further, pointed out that no evidence of any payment made to Mr. Jean has been recovered by Revenue. He pointed out that both Mr. Jean and Mr. Loen in their first statement recorded on 07/08/2011 denied smuggling of rough diamonds. 10. Further, he argued that there is no VAT tax/ Service tax, no custom duty and no restriction of import of diamonds. In these circumstances there was no incentive for smuggling diamonds. He argued that Shri Pravinbhai Ajudiya is an established importer and trader of the diamonds for more than 2 decades. He pointed out that assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... locker and that Mr. Pravinbhai Ajudiya had also confirmed that the rough diamonds recovered from Shri Bharatbhai Savaliya s room were handed over by Mr. Jean in Mr. Bharatbhai Savaliya s presence. The impugned order also relies on the fact that in the statement dated 08/08/2011 and 09/08/2011 Shri Pravinbhai Ajudiya claimed ownership of rough diamonds. However in his letter dated 12/08/2011 he denied that he had not given any rough diamonds to Shri Bharatbhai Savaliya and also denied that rough diamonds were recovered from room number 102 of Hotel Jivan Dhara. 14. The impugned order discusses the appellant s defense that the rough diamonds found in the locker and in the Hotel room were from the Licit Import made by appellant in earlier. Revenue s argument is that the value of diamonds seized is much higher than the value of diamonds which were imported by the appellant earlier. The impugned order also discussed the claim as the income tax returns of Shri Kanchanben Ajudiya wife of the appellant for the Assessment Year 2011-12 i.e. for Financial Year 2010-11 reveal that there was nil stock and raw material/ stock in process and finished goods/ trading goods. As per their income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellants were produced before magistrate 09/08/2011, and no such assertion was made before magistrate. The impugned order also notices that the appellant s assertion that the transaction with M/s Aakash Diamonds has only a paper transaction. The impugned order notices that director of Aakash Diamonds categorically admitted to have received the diamonds and making payments against the said invoices. 17. The impugned order holds that the diamonds recovered form Mr. bharatbhai Sawliya s locker were not those smuggled by Mr. Jean but still hold that the same were smuggled. In this regard reliance was placed on evidence of the income tax returns and appellant is failure to produce KPC certificate. For their assertion he relied on the decision of Tribunal in the case of Yogey Diamonds Vs.2004 (176) ELT 717 when it has been held that if the explanation offered for legal acquisition of impugned goods is found to be false then, by application of Section 106 of the Evidence Act, 1872, it was sufficient circumstance to avail the decision in favor of department that the goods were not legally acquired. 18. In the aforesaid circumstance the Revenue is seeking to discharge the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under Section 167(8) of the Act. The broad effect of the application of the basic principle underlying Section 106, Evidence Act to cases under Section 167(8) of the Act, is that the Department would be deemed to have discharged its burden if it adduces only so much evidence, circumstantial or direct, as is sufficient, to raise a presumption in its favour with regard to the existence of the fact sought to be proved. Amba Lal s case, (1961) 1 SCR 933 = 1983 (13) E.L.T. 1321, was a case of no evidence. The only circumstantial evidence viz. the conduct of Amba Lal in making conflicting statements, could not be taken into account because he was never given an opportunity to explain the alleged discrepancies. The status of Ambalal viz. that he was an immigrant from Pakistan and had come to India in 1947 - before the customs barrier was raised - bringing along with him the goods in question, had greatly strengthened the initial presumption of innocence in his favour. Amba Lal s case thus stands on its own facts. 19. It is seen that the entire investigation is in the nature where the appellants have been asked to explain the legal possession or source of the diamonds. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section. These conditions are : (1) seizure of goods to which the section applies. (2) seizure under the Act, and (3) seizure in the reasonable belief that they are smuggled goods. When all the three elements are proved, the burden would shift to the accused to show that they are not smuggled goods . The correct legal position is that in the absence of special notification under Sec. 123 of the Customs Act specifying goods to which the section applies, the onus of proof under that section cannot be placed on persons whose goods are seized. Where no presumption under Sec. 123 of the Act could be used against the accused it is for the prosecution to prove that the accused knew that the goods in possession was smuggled and imported into the country without a permit. 14. The Digest of the Law of Evidence by Stephen, Article 104 wherein it is stated that - the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the burden of proving the fact shall lie on any particular person; but the burden may in the course of a case be shifted from one side to the othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o same principle has been applied. Thus it is seen in respect of both categories of cases same principles applied. 16. In case of MaganlalGulabchand Shah v. Union of India, the Hon ble Supreme Court has upheld the decision of the Hon ble Gujarat High Court holding that the burden of proof of smuggling of specified goods is sufficiently discharged if the Department furnishes prima facie proof of the goods having been smuggled and burden then shifts to the person concerned to discharge on the principle underlying Section 106 of the Evidence Act. In that case gold bars have been seized and the Department has produced prima facie evidence of smuggling of the gold wherein the burden shifted to the person from whose possession the gold was seized. Though this judgment distinguished the principle laid down in D. Bhoormull case, yet it does not speak that the burden entirely lie on the person from whose possession the smuggled goods are seized. Therefore, the principle laid down in D. Bhoormull case as observed by the Hon ble Bombay High Court in the case of Ganesh Trading have to be applied in the instant case of non-notified goods under Section 123 of Customs Act. The principle laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 503 (Tri. Mad.) upheld the order of Tribunal affirming that in case of non-notified goods, burden of proof of smuggled goods is upon department. Similar view taken by this Tribunal in the case of Muniyandi Vs. CC,Chennai 2004 (167) ELT 215 (Tri. Chennai) and also in the case of Sadbhavna Vs. CC, Indore 2003 (158) ELT 652 (Tri.-Del). There needs to be positive evidence to support such assertion. It is seen that except for certain statements of Mr. Jean, which was retracted later, there is no evidence of the act of smuggling these diamonds across the customs frontiers. The retraction took place when Mr. Jean was in jail. No further statement of Mr. Jean was recorded thereafter. Moreover in the first statement recorded by Revenue Mr. Jean had denied any smuggling and no diamonds were recovered from his custody or from his room. In these circumstances we do not find sufficient evidence has been placed before us to conclude that the diamonds were smuggled. The case of revenue has not been substantiated by positive evidence and hence cannot be sustained. 21. The appeals are allowed with consequent relief. ( Pronounced in the open court on 02.07.2018 ) - - TaxTMI - TMITax - C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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