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TMI Blog2024 (3) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... en, the revenue authorities were obligated to conduct an enquiry and/or verification if the goods had originated from outside the country. Here, no material existed to doubt the origin of Aeranuts from within the country. Thus, revenue has failed to discharge its burden. Thus, we find that the revenue authorities have hopelessly failed to bring out to record the objective material and have further failed to establish formation of any reason for the belief entertained by them that goods were of foreign region. In similar circumstances, the co-ordinate bench of this Court had allowed the writ petition for similar reasons in Jaymatajee Enterprise (Seller) and Another (Supra). Accordingly, the writ petition is allowed. The order (passed during pendency of the writ petition) and the detention-memo are quashed. Let goods be released forthwith. No order as to costs. - Hon'ble Saumitra Dayal Singh And Hon'ble Manjive Shukla JJ. For the Petitioner : Shubham Agrawal For the Respondent : Gaurav Mahajan,Dhananjay Awasthi ORDER 1. Heard Sri Shubham Agrawal, learned counsel for the petitioner and Sri Dhananjay Awasthi Sri Gaurav Mahajan, learned counsel for the revenue. 2. Present writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... galore (hereinafter referred to as ARDF ) dated 17.11.2023; alleged discrepancy of the total quantity and weight of Arecanuts purchased by the petitioner from its supplier, Sri Karni Traders, Guwahati and, doubts expressed as to valuation of goods disclosed by the petitioner. 10. Reliance has been placed on the decision of the Hon'ble Supreme Court in State of Uttar Pradesh Others Vs. M/s Aryaverth Chawl Udyoug and Others 2017 U.P.T.C.-262 to submit, no material exists to form any reason to believe and no reason exists to support the belief that the goods were of foreign origin. Reliance has also been placed on the decision of a coordinate bench of this Court passed in Jaymatajee Enterprise (Seller) and Another Vs. The Commissioner of Customs (Preventive) And 2 Others in Writ Tax No. 573 of 2020 (Neutral Citation No. - 2020:AHC:91647-DB). 11. Then relying upon the decision of the Meghalaya High Court in C.C. (Preventive), NER Region, Shillong Vs. Laltanpuii 2022 (382) E.L.T. 592 (Meghalaya), as affirmed by Hon'ble Supreme Court in Commissioner of Customs (Preventive) Vs. Laltanpuii 2022 (382) E.L.T. 588 (S.C.), it has been urged that the ARDF is not an accredited laboratory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms (Preventive) Commissionerate, Kendriya Bhavan, Sector- H, Aliganj, Lucknow Letter No C.No.GEN/INV/SMLG/OTH/538/2023/1712 Dated 27.10.2023 Sample details Sample No 1; Detention Case Dated 25.10.2023 Quantity received About 150gms Physical Characteristics: Appearance Red sliced Arecanuts Quality good IDENTIFICATION OF ORIGIN Based on Cut test, Appearance, Size etc. Texture: From the sliced Arecanuts supplied it was found that the nuts are of medium in size with round to oval in shape with brownish colour. The nuts were harvested at different stages of maturity. Some of the nuts were harvested at immature stages, dehusked, sliced, boiled, dipped in areca tannin and dried. Such nuts when observed exhibited a marbled interior with uniform dark brown and white colour inside. This resembles to the Arecanuts of India. Some others were harvested at mature stages. Such nuts were first dehusked, sliced, dipped in areca tannin and dried without boiling. Such nuts when cut open exhibited a marbled interior, more of dark brown portion with mostly compact white pith. This resembles to the arecanuts of Indonesian origin. Both types are almost equal in numbers. Final Conclusion: The sample of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfiscation proceedings against the petitioner, by seizing the goods. 20. Having learned counsel for the parties and having perused the record, in the first place, it is a sine qua non that goods may not be confiscated under the Act unless they belong to a prohibited category. For goods to be of prohibited category, either a general prohibition on their import may exist or they may be goods as may not have been validly imported. Also, it is a matter of common knowledge that Arecanuts are grown within the country. Mainly, these are grown in the north-eastern part that has land border with other countries with similar geography, climate, flora and fauna and also in some southern States. Therefore, there must have existed some credible material with the revenue authorities to establish that the goods had been brought from outside the country. It not being a case of detention at the customs frontiers, the revenue was burdened to bring some objective material as may have led to formation of a reason , in that regard. While sufficiency of reasons is not an aspect to be examined or decided in these proceedings, the relevancy of material remains an essential test to be satisfied by the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the goods were of foreign origin. Unless such definitive opinion existed, the report itself may never form objective material to form a reason to believe . Suspicions, howsoever strong may never replace/substitute reasons that may be tested against material on which it may arise. 25. Similar conclusion has been reached by this Court with respect to similar report of the ARDF with respect to Betel nuts in Commissioner Customs, (Preventive) Vs. M/S Maa Gauri Traders (Supra), wherein it was observed as below:- The report of the ARDF has also been held to be not reliable in as much as it could not be shown with any degree of certainty that the origin of the betel nuts could be established by testing in a laboratory, as is clear by the answer to the RTI query given by Directorate of Arecanut And Spice Development, Ministry of Agriculture and Farmers Welfare, Government of Kerala. 26. Third, no material has been shown to us to reach conclusion different from that reached by the Meghalaya High Court in C.C. (Preventive), NER Region, Shillong wherein it was observed as below:- 4. The Division Bench of the Tribunal recorded the finding that the confiscated betel nut is non-notified go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax for Assessment Year 1957-58. Question in the circumstances arises as to what is the import of the words reason to believe , as used in the section. In our opinion, these words convey that there must be some rational basis for the assessing Authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing Authority can proceed in the manner laid down in the section. To put it differently, if there are, in fact, some reasonable grounds for the assessing Authority to believe that the whole or any part of the turnover of a dealer has escaped assessment, it can take action under the section. Reasonable grounds necessarily postulate that they must be germane to the formation of the belief regarding escaped assessment. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under the above section. If, however, the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the Assessing Authority would be clothed with jurisdiction to take action under the section. Whether the grounds are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. (Emphasis supplied) 30. Also, in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2008) 14 SCC 208, the expression reason to believe used under Section 247 of the Income Tax Act was dealt with. The Supreme Court observed as below:- 9. Section 147 authorises and permits the assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of opinion . If an assessing Authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for re-assessment. Thus, reason to believe cannot be said to be the subjective satisfaction of the assessing Authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment. (Emphasis supplied) 32. Thus, a consistent view exists - where exercise of executive power and assumption of jurisdiction hinges on prior recording of reason to believe that true objective test in law must be satisfied by the authority wielding the power. Curtailment of free trade has serious consequences. While the revenue authorities would be within their jurisdiction to exercise their power to seize and confiscate goods that may have been smuggled inside the customs frontiers, yet with respect to natural products, that are also grown inside the country, no presumption is available to presume or assume that such goods are smuggled unless the assessee or the citizen otherwise satisfies that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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