Full Judgment
2. Briefly the facts of the case are that the Preventive Staff of the Central Excise & Customs Department conducted raid on the show room and godown of the appellant and the residential premises of the Proprietor Shri M. Mohindroo. The Preventive Staff prepared a panchnama dated 20-11-198* detaining the seized goods worth Rs. 59,300/- as shown in Annexures A, B & C of panchnama. The officers also detained 1080 video cassettes valued at Rs. 1,89,000/- vide Annexure E of the said panchnama. A show cause notice was issued requiring the appellant to show cause why the goods under seizure valued at Rs. 1,35,435,'- be not confiscated under Section 111 of the Customs Act, 1962 for contravention of Section 3(1) of Imports/Exports (Control) Act, 1947 read with Section 11 of the Customs Act, 1962 and Section 11C, I ID, HE and 11F ibid and why penalty should not be imposed upon him under Section 112 ibid being the person concerned in carrying, keeping, selling or purchasing as in other manner dealing with the goods which he knew and has reasons to believe are liable to confiscate under the said Customs Act, 1962.
In reply to the said show cause notice the appellant sent a reply.
Extracts from the same is reproduced below :- "(i) That they have not committed any offence as alleged in the S.C.N. not have contravened the, provisions of the Customs Act, 1962 or other allied laws as involved therein, the question, therefore, of confiscation of the seized goods or imposing any penalty on them Under Section 112 of the Customs Act, 1962 does not arise.
(ii) That the seizure is bad in law and against the provisions of Section 110 of the Customs Act, 1962 inasmuch as it was made by the officers of Customs without entertaining a belief far less a reasonable as required by this section. Section 110 of the C.A. 62 reads as under : "If the proper officer has reason to belief that the goods are liable to confiscation under this act, he may seize such goods".
A plain reading of Section 110 ibid indicates that the power of seizure can be exercised only if the proper officer has reason to believe that the goods are liable to confiscation under the Customs Act, 1962. The fact that the officer laid their hands on the goods of Indian origin and also put under detention some goods suspecting them to be contravened clearly negates the existence of such a belief. The seizure having been made in breach of the mandatory provisions of the Section 110 is liable to be vacated.
(iii) That without prejudice to the above, it may be submitted that as already submitted all the goods under them seizure were lawfully acquired and possessed by them in the normal course of our business.
They also produced the original bills of purchase which on departmental verification, have been proved to be genuine. Most of the seized video cassettes are of Indian original and were bearing stickers "Made in India" some of which are removed by the staff at the time of verification. Full details of the source of acquisition of seized goods is explained in the enclosed chart showing therein the particulars of the goods and the source of purchase. You will kindly observe from the enclosed chart that all the goods are lawfully acquired and possessed by them in the normal course of business and the bills of purchases were produced by them before the officers at the first available opportunity which on departmental verification have been proved to be genuine. Most of the goods are of Indian original/assembled in India. It is requested that your honour may kindly examine the goods at the time of personal hearing and to see whether the goods are of foreign origin. The position may be summed up as under :- Most of the goods appearing in Annexure 'A' except item at S. No. 6 are of Indian origin. They had also produced the purchase invoices vide which the goods were purchased by them. Departmental enquiry conducted have revealed that the sellers have confirmed having sold the goods to them. The report that bill No. 2108, dated 16-11-1984 could not be verified as M/s. Prakash Electronics 1415, 3rd Floor, Bhagirath Palace, Delhi could not be contacted at the given address is misleading inasmuch as the party is functioning at the same address. Moreover the goods covered by this bill are of Indian origin and no offence of any kind has been committed. One Sanyo ultra compact cassette-cum-stereo appearing at Serial No. 6 is the property of Shri Ashwani Kumar Mahajan s/o Shri Hans Raj Mahajan resident of Adda Bastian Jalandhar which had come to them for installation purposes. Shri Mahajan had imported the same from abroad. He had also filed an affidavit before the local Central Excise Officers claiming the ownership of this item, a copy of which is enclosed.
One video cassette recorder National NV-370 made in Japan belonged to Shri Jagjit Singh, H.L.A. which had come to them for repair. He lodged a claim with the officers and on verification of the same it has since been released to him by the Asstt. Collector, Jalandhar.
All the goods mentioned in Annexures 'C&D' were properly accounted for in the statement recorded by the seizing officer and the bills of purchase in respect of items appearing at S.No. 1 to 8 of Annexure 'C' and those appearing in Annexure 'D1 were produced before the officers. All the parties have confirmed having sold the goods to them. Bill No. 2108 of M/s. Prakash Elect, could not be verified as the party is reported to have not been functioning at the address given in the bill. It may be submitted that the report of enquiry is misleading inasmuch as the party is functioning at the same address. Moreover the goods covered by this bill are of Indian origin and no offence of any kind has been committed in respect of these goods. Bill No. 252 of M/s. Aiko Elect, has also reportedly not been verified as the party has shifted to their office. They have therefore, satisfactorily dischared the burden. It may be submitted that this item was seized by the officers earlier also on 18-11-1981 and they produced this bill which was verified and the goods released to them vide A.O. No. 7/Cus/82, dated 2-8-1982. Item as S.No. 9 and 10 of Annexure 'C1 were received as gifts from Shri Sehgal who is their closed relation and had come from abroad. A photostat copy of his letter dated 6-6-1985 is enclosed which proves their stand. Item No. 11 is defective and is more than 10 years old. Most of the video cassettes were bearing stickers made in India and in Indian brand names like Televista, Weston etc. which were seized without any authority of law as the goods of Indian origin are outside the purview of the Customs Act, 1962. All the video cassettes had, thus been lawfully acquired and possessed by them in the normal course of their business. All are assembled in India.
Physical verification of these cassettes would establish their contention. Since the goods under seizure are indigenously manufactured, these, could not be seized. The seizure having been made without authority or in excess of authority, these may kindly be released at your earliest to save us from further hardship and inconvenience.
(iv) That the burden of proof under Section 123 has wrongly been cast on us. Section 123 of the Customs Act, 1962 being a departure from the general provisions of criminal jurisprudence has to be construed in accordance with the canons of constitution if a statute and natural meaning given to the words employed. It applies to cases where the goods are seized in the reasonable belief of the Customs Officers that the goods are smuggled. Reasonable belief of the officers with regard to the smuggled nature of the goods is a condition precedent for the applications of this section.
The fact that most of the goods are of Indian origin and further the fact that goods have been seized on suspicion goes to show that there was no belief far less a reasonable as required by the section. The burden of proof is, therefore, as the department to first prove foreign origin of the goods. Once this is established, they have to prove further that these have been illicitly imported into India. You will appreciate that the department has failed to advance even an iota of evidence to prove the smuggled nature of these goods. It may be submitted that in the absence of any evidence, corroborative or otherwise, the goods under seizure are outside the purview of confiscation.
Further, video cassettes have not been specified under Section 1-.23 of the Customs Act, 1962. As such, the burden of proof that these had been illicitly imported into India lies with the department.
There is no evidence, direct, cogent or otherwise, to prove that the video cassettes were illicitly imported into India. These are therefore, liable to be released.
(v) That as regards filing of declaration under Section 11C of the Customs Act, 1962 it may be submitted that the goods being of Indian origin, no declaration v/as required to be filed. Moreover, any technical violations in the initial period may not be seriously viewed as video cassettes were declared "notified goods" only on 20-7-198* vide Notification No. 205/84 whereas the seizure was effected by the officers on 20-11-1984.
(vi) That we denied our liability to penalty under 112 of the Customs Act, 1962, as no offence of any kind has been committed in respect of the seized video cassettes. It may be submitted that before a person can be penalised in terms of Section 112 of the Customs Act, 1962, two things must be established, namely that the goods have been unlawfully imported into India and the persons concerned has dealt with the goods !n one or more of the manners laid down in the said section with the knowledge that the goods are liable to confiscation. In the instant case, even the first requirement is not satisfied inasmuch as it has not been proved that the seized goods are imported much less in contravention of the provisions of law. On the contrary there is ample evidence to prove that the goods are of Indian origin or had been lawfully acquired and possessed by them. On the question of mens rea, it may be submitted that it is the exclusive responsibility of the Department to prove it against them. In the absence of an allegation of mens rea and a clear proof, no penalty under Section 1.12 of the Customs Act, 1962 can be imposed on them. Reliance is placed on the following judicial decisions reported at :- (vii) That in view of the submissions made above, it is respectfully prayed that the contemplated proceedings be dropped and the goods released. It is further prayed that before decision, your honour may examine the goods in our presence to enable us to' demonstrate that most of the seized goods are of Indian origin. A hearing therefore may be fixed at Jullundhar. The goods were examined at Jullundhar on 19-9-1985 by the Asstt. Collector, Central Excise Jalandhar, Supdt.
(AA&R) Chandigarh in the presence of the party and the seizing officer and personal hearing fixed for 17-10-1985. The counsel of the party and the Prop. Shri Rajinder Kumar reiterated the submissions already made in their reply dated 3-9-1985 and further submitted that the examination for the goods conducted revealed that the goods claimed by them to be of Indian origin were found with the stickers made in India or there was sign of removal of the stickers.
For the goods of foreign origin they had already adduced satisfactory evidence showing illicit (licit?) import of these goods. In the interest of justice they requested that the goods be examined by the Addl. Collector himself which would satisfy his owner about the origin of the goods.
It was further stated that the video cassettes mentioned in Annexure 'E1 to the. show cause notice are of Indian brand names; and during the course of examination some of the cassettes were found to bear stickers 'Made in India' and others were found to have impression of the stickers having been removed. All these goods are of Indian origin and no offence of any kind has been committed by them. They requested that the seized goods be restored to them at the earliest." The learned Addl. Collector after considering the reply of the appellant, had passed the order and operative part of the order is reproduced below :- "(1) I order unconditional release of items at S.No. 9 and 10 of Annexure 'A' and items at S-No. 2, 9, 10 and 11 of Annexure 'C', all valuing Rs. 4,050/- (Being un-notified goods).
(2) Items at S.No. 4, 5, 6 and 8 of Annexure 'A', 3 cassettes out of cassettes mentioned at S.No. 1 of Annexure 'C' and items at S.No. 6 and 8 of Annexure 'C' and one cassettee out of S.No. 1 of Annexure 'D' all valuing Rs. 5,750/- "are ordered to be confiscated under Section 111 of C.A. 1962 for non-observance of provision of Chapter IV A. However, I give the party an option to redeem the same on payment of R.F. of Rs. 2,000/- (Rupees two thousand only).
(3) I order absolute confiscation of items at S.No. 1, 2, 3 and 7 of Annexure 'A' 108 cassettes at S.No. 1 (out of 111 cassettes) items at S.No. 3, 4, 5 and 7 of Annexure 'C', 16 cassettes (out of 17 video cassettes) at S.No. 1 and S.No. 2 of Annexure 'D' and 515 video cassettes of Annexure 'E1 (seized out of 1080 detained cassettes) all valuing 1,25,625/- under Section 111 of Customs- Act, 1962 for contravention of 3(1) of Import Export (Control) Act, 1947 read with Section 11, 11C, 11D, 11E and 11F of the Customs Act, 1962.
(4) I also impose P.P. of Rs. 30,000/- (Rupees thirty thousand only) upon Shri Rajinder Kumar, Prop, of M/s. Hindustan Electronics (Gem House), Jalandhar under Section 112 of the Customs Act, 1962." Being aggrieved from the aforesaid order the appellant has come in appeal before the Tribunal.
3. Shri M. Chandrasekharan, the learned Advocate, has appeared on behalf of the appellants. He has reiterated the facts and also the arguments made before the lower authorities. He has stated that the date of seizure is 20-11-1984 whereas Notification Nos. 204 and 205 which were issued under Section 11C of Chapter IVA of the Customs Act, 1962. He has argued that the goods are not notified goods in terms of Section 123 of the Customs Act, 1962 and as such the onus is on the Revenue to prove that the goods were smuggled and the Revenue has not been able to discharge the same. Shri Chandrasekharan has referred to page 15 of the Addl. Collector's order where the learned Addl.
Collector has dealt at length as to the item Nos. 1 viz. Stereo Radio Cassettes Recorder Sanyo Model M 9935K, S.No. 2 - National Compact Stereo Radio cassette recorder 14 W-RXF-3F-Made in Japan, S.No. 3 National 2 way 4 speaker system If W - Stereo RXF-6F and S.No. 4 : Unisef Stereo and S.No. 7 Sanyo 2X1 Model 1760+A1 (Mini and Slim) and as to item at S.Nos. 4, 5, 6, 8, %9 & 10 of Annexure 'A' to the panchnama. He agrees that the same were lawfully acquired by the appellant but in the operative part of the order he only released item at S.Nos. 9 and 10 of Annexure 'A' and items at S.Nos. 4, 5, 6, 8 of Annexure 'A1 confiscates but gives an option to redeem the same and ordered absolute confiscation of items at S.Nos. 1, T, 3 and 7 of Annexure 'A'. 108 cassettes at S.No. 1 out of 111 cassettes of Annexure 'C' of the panchnama were released. Shri Chandrasekharan has referred to other items confiscated by the Addl. Collector which have been mentioned at page 15 and the operative part of the order states that there are discrepancies. Shri Chandrasekharan states that the whole case has been based on wrong notion. The emphasis has been wrongly placed on onus. The onus is on the Revenue and not on the appellant because notifications were issued under Section 11C of the Customs Act, 1962 (Chapter IV) and there are no corresponding notifications or amendment of law under Section 123 of the Customs Act, 1962. He states that 1080 cassettes were retained out of which 565 were released. In support of his argument he has referred to the following judgments of Allahabad High Court and the Tribunal :-Ashok Kumar and Anr. v. Collector of Central Excise and Customs, Kanpur and Anr.
(2) Tarlochane Singh Surie v. Collector of Customs and Central Excise, Shillong reported in 1985 (21) ELT 521 (Tribunal)State (Collector of Central Excise) v. Tapan Kumar Shome reported in 1986 (23) ELT 42 (Orissa) (4) Assistant Collector of Customs, Dhubri v. Umed Kumar Jain reported in 1986 (23) ELT 152.
Shri Chandrasekharan states that the Revenue has not been able to establish the character of the goods confiscated i.e. goods as smuggled goods and the same need be released. At the worst it can be treated as technical offence. For the confiscation of 2 in 1-s, he states that the appellant has not been able to place any material evidence. He pleads that a lenient view may be taken in respect of those items. He has pleaded for the acceptance of the appeal.
4. Shri T.H.K. Ghauri, learned SDR and Shri Inder Singh, JDR, have appeared on behalf of the respondent. Shri Ghauri, the learned SDR, has stated that respondent's case is fully covered by Notification No.205/84-Cus., dated 20-7-1984 issued under Section 11B of the Customs Act, 1962 (Chapter IVA). He has relied on the findings of the learned Addl. Collector and has pleaded for the dismissal of the appeal.
5. Shri M. Chandrasekharan, learned Advocate, states that the appellant only committed a technical offence and has further pleaded that if the appellant's plea is not fully accepted, the quantum of fine in lieu of confiscation and penalty may be reduced, which is highly excessive.
6. We have heard both the sides and have gone through the facts and circumstances of the case. For the proper appreciation of legal position, Section 123 of the Customs Act, 1962 as well as Notification Nos. 204/84-Cus. and 205/84-Cus., dated 20-7-1984 are reproduced below :- "123. (1) Burden of proof in certain cases :- Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall beta) in a case where such seizure is made from the possession of any person - (ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person; (b) in any other case, on the person if any, who claims to be the owner of the goods so seized.
(2) This section shall apply to gold, diamonds, manufactures of gold or diamonds, watches and any other class of goods which the Central Government may by notification in the official Gazette specify." "In exercise of the powers conferred by Sub-section (2) of Section 123 of the Customs Act, 1962 (52 of 1962) and in supersession of the notifications of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 88-Customs, dated the 26th August, 1967 and No. 52-Customs, dated the 27th March, 1968, the Central Government hereby specifies the following other classes of goods, for the purpose of the said section, namely :- "Whereas the Central Government, having regard to the magnitude of the illegal import of the goods mentioned in the Schedule hereto annexed, is satisfied that it is expedient in the public interest to take special measures for the purposes of checking the illegal import, circulation and disposal, and facilitating the detection of the said goods; Now, therefore, in exercise of the powers conferred by Section 11B of the Customs Act, 1962 (52 of 1962), and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue and Insurance) No. 12-Customs, dated the 3rd January, 1969, the Central Government hereby specifies the goods mentioned in the said Schedule as the goods with respect to which special measures for the purpose of checking the illegal import, circulation and disposal, and facilitating the detection, thereof shall be taken.
3. Fabrics, sarees and knitted wear made wholly or mainly of synthetic yarn 9. Transistor radios, transistors and diodes; tape recorders and tapes and cartridges therefore any combination of these instruments.
13. Video Cassette Recorders, Video Cassette Players and Video Cassette Tapes.
A simple perusal of Section 123 and Notification Nos. 20* and 205/84-Cus., dated 20th July, 1984 shows that Notification No.205/84-Cus., dated 20-7-1984 has been issued under Section 11B of the Customs Act, 1962 and video cassette tapes fall at S.No. 13 of the schedule to Notification No. 205/84-Cus., dated 20-7-1984. Notification No. 2Q4/84-Cus. has been issued by virtue of the powers conferred by Section 12X2) of the Customs Act, 1962 and video cassettes do not appear in Notification No. 204/84-Cus., dated 20-7-1984. So, the initial onus is on the Revenue to prove that the goods are smuggled one. The appellant, in reply to the show cause notice, had placed necessary evidence as to the acquisition of the Cassettes and the Revenue has not placed any evidence which shows that the video cassettes were smuggled. Para 12 of the Hon'ble Allahabad High Court judgment in the case of Ashok Kumar and Anr. v. Collector of Central Excise and Customs, Kanpur and Anr. reported in 1984 (15) ELT 400 (All.) is reproduced below :- "Accordingly the presumption of the nature mentioned above can be raised only in respect of the goods to which Section 123 applies.
According to Sub-section (2) of Section 123, the section would apply to gold, diamonds, manufactures of gold or diamonds, watches and any other class of goods which the Central Government may by notification in official gazette specify. Video cassettes do not fall in the category of gold, diamonds, manufactures of gold or diamonds and watches. learned Counsel could not bring to our notice any notification by the Central Government which has made the provisions of Section 123 applicable in respect of video cassettes.
The respondents therefore were clearly in error in thinking that burden of proving that the cassettes seized from petitioners business premises were not smuggled, lay on the petitioners and in entertaining a belief that they were smuggled goods merely because the respondents also could not place any material before us to show that legally it was not possible for any one to obtain licence for importing video cassettes for purposes other than for use by actual users. Reference to Import Policy formulated and published by Government of India, for the years 1983-84, made by the respondents does not appear to be conclusive in this regard. In the result, we find that there neither is any positive material before the respondents nor is the presumption under Section 123 available to them for entertaining the belief that the video cassettes found in possession of the petitioners are smuggled goods, liable to confiscation under the Customs Act. Even if it be that the video cassettes imported under a licence granted by the appropriate authority have, after being properly imported, dealt with in a manner which contravenes the provisions of the licence or any other provision of law, it would not mean that the cassettes have been imported contrary to the prohibition imposed under the Customs Act or any other law for the time being in force. Such cassettes would not the liable to confiscation under Section 111(d) and the respondents will have no jurisdiction to seize them under Section 110 of the Act." The facts of the present cases are similar to the Allahabad High Court judgment and the issue of the notification does not affect the initial onus of proof on the Revenue because there is no mention of Section 123 in the Notification No. 205/84-Cus., dated 20-7-1-984. The judgment of the Allahabad High Court"" was followed by East Regional Bench in the case of Tarlochane Singh Surie v. Collector of Customs and Central Excise, Shillong reported in 1985(21) ELT 521 (Tribunal). For items at S.Nos. 4, 5, 6 & 8 of Annexure 'A' viz. Unisef Stereo, Clarion Auto Reverse Cassette Car Stereo PT-833A, Sanyo Ultra Compact Cassette Car Stereo CX-1010 F-T-200F, and National Panasonic Auto replay cassette Car Stereo CX-1010 ENW, we uphold the findings of the lower authorities. To meet the ends of justice we reduce the fine in lieu of confiscation at Rs. 500/- (Rupees five hundred only) and order that the appellant should be careful in future in, observing the provisions of Chapter IVA. The learned Addl. Collector had ordered absolute confiscation of the following item's of Annexures 'A' & 'C' :-1. Stereo Radio Cassettes recorder 1 2,000/- Sanyo Model M 9935K2. National Compact Stereo Radio Cassettes 1 2,000/- recorder, 14W-RXF-3F - Made in Japan3. National 2 way 4 Speaker System 14W - 1 2,000/- Stereo RXF-6F4. Sanyo 2X1 Model 1760+A1 (Mini and Slim) 1 700/- ANNEXURE 'C'1. Set of two ps each Unisef Packable 3 1,700/- cassettes recorder AF-523. Sanyo cassette recorder with three Band 1 1,200/- Transistor, Model No. 1760H of foreign4. Great-on Speaker, Model M.S.518 SN, 2 sets 500/- Made in Japan, each set of 2 ps.
We feel that keeping in view the facts and circumstances of the case the absolute confiscation was not justified. To meet the ends of justice we order release of the abovementioned items after payment of fine in lieu of confiscation at Rs. 2,000/- (Rupees two thousand only).
The Additional Collector had imposed a personal penalty of Rs. 30.000/-. Since the offence committed by the appellant is in the nature of technical offence, there does not appear to be any element of mens rea. To meet the ends of justice we reduce the same to Rs. 5,000/- (Rupees five thousand only) on account of technical default committed by the appellant. In the result the appeal is partly allowed. Revenue authorities are directed to give consequential effect to this order.