Collector of Customs and Central Vs. Shri Balkrishan - Court Judgment

Excerpt:
1. not satisfied with the impugned order passed by the collector of customs (appeals), setting aside the order of confiscation and penalty passed by the assistant collector, the revenue has filed the present appeal.2. factual backdrops: preventive staff on 20.6.82, apprehended the respondent after he had taken delivery of three bales from the railway station and on examination of the contents of these bales 333 pieces of garments of different textures, sizes, designs, and colours valued at rs. 10,0467- were recovered. since according to the revenue the respondent failed to produce any evidence in support of the lawful acquisition/ possession etc., of the said goods, said to be of foreign origin, the same were seized. after the usual adjudication proceedings, the assistant collector ordered for the confiscation of the seized goods under section 111 of the customs act, 1962 with an option to redeem the same on a payment of a redemption fine of rs. 5,000/- in lieu of confiscation besides a personal penalty of rs. 1,000/- under section 112, ibid. against this order, the respondent went in appeal before the collector of customs (appeals) new delhi, who allowed the appeal and set aside the order of confiscation and the penalty imposed inter-alia, holding that, according to the assistant collector himself, on examination of the garments in question no labels of foreign origin were found, but he concluded the seized garments to be of foreign origin by observing that the 'structure of the fabrics used' shows to be of foreign origin. this visual examination by the assistant collector did not find favour with the lower appellate authority in the absence of any technical data, more particularly, as the very manufacturing processes are used in india as are used in abroad. lower appellate authority also held that the burden was on the department to prove that the goods were of smuggled nature since the provisions of section 123 of customs act, 1962 or that of chapter iv-a of that act were neither relied upon in the order of adjudication nor were cited in the show cause notice.4. at the time of hearing, the respondent instead of entering into personal appearance, requested the case to be decided on the grounds taken in the cross objections. accordingly, i perused the record and heard smt. nisha chaturvedi, learned sdr for the respondent.5. smt. nisha chaturvedi, learned sdr for the appellant observed that since the garments in question were seized in pursuance of information and on a reasonable belief that the same had been imported into india in contravention of the provisions of different laws, it was for the respondent to prove that the garments in question were leglly imported.she also cited "the decisions rendered in the case of state of maharashtra v. natwar lal damodar pass, air 1980 sc shah chuman mai v.state of andhra pradesh, 1983 elt 1931 (sc) and kanungo & co., v.collector. customs, 1983 elt 1486 (sc) by the hon'ble supreme court to show that even in cases where section 123(1) of the customs act is not attracted, the prosecution discharges its burden by establishing circumstances from which a prudent person acting prudently, may infer that in all probabilities the goods in question were smuggled goods and the accused had the requisite knowledge, and that the department is not required to prove its case with mathematical precision to a demonstrable degree and further that the burden of proof on the department gets discharged by falsifying many particulars of the story put forward by the accused and the false denial could be relied upon for concluding that goods have been illegally imported. while elaborating her arguments, she submitted that the respondent initially took the defence that the garments were purchased from hawkers in kali market, calcutta, but later on stated that he had purchased the same from m/s. abdul rashid and saheb khan, both having same address as 107, kali bazaar, calcutta.. she further submitted that on varification both the cash memos produced by the respondent were found to be false.6. before i proceed to appreciate the evidence on record, it may be stated at the outset that so far as the principles of law enunciated in the aforesaid cases are concerned, there cannot be any quarrel. . in the instant case provisions of section 123 of the customs act or that of chapter iv-a of that act were never relied upon in the show cause notice nor in the order of adjudication as rightly held by the lower appellate authority. it appears from the record that challenged the very nature of the garments in question regarding their foreign origin and requested for the examination of the goods, which was allowed. on examination by the assistant collector, the assistant collector has recorded his observations to the effect that the garments in question were not containing any label of foreign origin. however, on his visual examination he observed that 'structure of the fabrics used' shows to be of foreign origin. this visual observation in the absence of any technical data did not find favour with the appellate authority below on the ground that as the same manufacturing processes are used in india as are used in abroad the visual examination showing the structure of the fabrics used as of foreign origin is not sufficient test to determine whether the goods are of foreign origin or not. even during the course of the examination when the bench asked the learned sdr as to whether she is disputing that the manufacturing processes which are used abroad are also used in india, she frankly, as her usual fairness, conceded that with the advancement of the science and technology, manufacturing processes which are ;used abroad are also largely used in india. under these circumstances, i am of the view that no interference with the impugned order is called for. the contention of the appellant that the respondent initially stated that the garments in question were purchased in calcuttta and subsequently stated that they were purchased from the said shops and the cash mernos produced were found to be false also does not improve the case of the appellant in the facts and circumstances of the instant case, in the absence of any other evidence on record to show that the garments in question were of foreign origin. in this view of the matter, i am 'supported by the decision of the madras high court rendered in the case of shah rikhab das chagan raj v. collector of central excise, air 1963 madras 337 wherein it was held that merely to act on suspicion or upon grounds that the accused failed to substantiate the defence cannot be sufficient to dishcarge the onus which rested upon the customs authorities and it-is necessary that evidence must be forthcoming to show that the goods were in fact or must have been imported from a foreign territory in a clandestine manner. in the case of arvinder singh kocher v. collector of customs, - 1986(26) - elt 792 this tribunal held that the initial burden lies on the department when the goods are neither notified under chapter iv-a nor under section 123 of the customs act and even if it is assumed that the goods (in that case t-shirts and half shirts) were of foreign origin that by itself would not be sufficient to order confiscation in the absence of clear evidence that they were smuggled goods. on this point, the following observations may be extracted with advantages: "i have carefully considered the submissions made on both sides. admittedly, the t-shirts and the half shirts were not the notified goods at the relevant time. therefore, the provisions of chapter iv-a are pot attracted. they were also not notified under section 123 of the customs act. therefore, there was no burden on the appellant to establish that the t-shirts and half shirts were licitly imported into india. the initial burden that t-shirts and half shirts were smuggled goods lies on the department. the department had not led any evidence to discharge that burden. the department however relied upon the admission of the appellant and two other circumstances, namely, recovery of goods of foreign origin from a purchaser from the appellant and the conduct of the appellant in not opening the door and wetting the t-shirts and half shirts which he got done before the police were called. the admission of the appellant was that the seized goods were purchased by him from the passengers coming from abroad. this admission by itself does not establish that the goods were smuggled into india. the goods can be said to be smuggled into india when they are imported without payment of duty or in violation of restrictions or prohibition regarding the entry of those goods into india. there was no evidence that the passengers who had sold the goods to the appellant had not paid the duty. the burden was on the department and the department may not discharge of this burden. even if we assume that the goods are of foreign origin that by itself would not be sufficient to order confiscation in the absence of clear evidence that they were smuggled goods. the circumstances and the other evidence relied on by the department could only give rise to suspicion. suspicion however strong is not a substitute for proof." 7. in the result, the appeal fails being devoid of any merit. cross objections also stand disposed of accordingly.

Judgment:
1. Not satisfied with the impugned Order passed by the Collector of Customs (Appeals), setting aside the order of confiscation and penalty passed by the Assistant Collector, the Revenue has filed the present appeal.

2. Factual backdrops: Preventive Staff on 20.6.82, apprehended the respondent after he had taken delivery of three bales from the Railway Station and on examination of the contents of these bales 333 pieces of garments of different textures, sizes, designs, and colours valued at Rs. 10,0467- were recovered. Since according to the Revenue the respondent failed to produce any evidence in support of the lawful acquisition/ possession etc., of the said goods, said to be of foreign origin, the same were seized. After the usual adjudication proceedings, the Assistant Collector ordered for the confiscation of the seized goods under Section 111 of the Customs Act, 1962 with an option to redeem the same on a payment of a redemption fine of Rs. 5,000/- in lieu of confiscation besides a personal penalty of Rs. 1,000/- under Section 112, ibid. Against this Order, the respondent went in appeal before the Collector of Customs (Appeals) New Delhi, who allowed the appeal and set aside the Order of confiscation and the penalty imposed inter-alia, holding that, according to the Assistant Collector himself, on examination of the garments in question no labels of foreign origin were found, but he concluded the seized garments to be of foreign origin by observing that the 'structure of the fabrics used' shows to be of foreign origin. This visual examination by the Assistant Collector did not find favour with the Lower Appellate Authority in the absence of any technical data, more particularly, as the very manufacturing processes are used in India as are used in abroad. Lower Appellate Authority also held that the burden was on the Department to prove that the goods were of smuggled nature since the provisions of Section 123 of Customs Act, 1962 or that of Chapter IV-A of that Act were neither relied upon in the Order of adjudication nor were cited in the Show Cause Notice.

4. At the time of hearing, the respondent instead of entering into personal appearance, requested the case to be decided on the grounds taken in the Cross Objections. Accordingly, I perused the record and heard Smt. Nisha Chaturvedi, Learned SDR for the respondent.

5. Smt. Nisha Chaturvedi, Learned SDR for the appellant observed that since the garments in question were seized in pursuance of information and on a reasonable belief that the same had been imported into India in contravention of the provisions of different laws, it was for the respondent to prove that the garments in question were leglly imported.

She also cited "the decisions rendered in the case of State of Maharashtra v. Natwar Lal Damodar Pass, AIR 1980 SC Shah Chuman Mai v.State of Andhra Pradesh, 1983 ELT 1931 (SC) and Kanungo & Co., v.Collector. Customs, 1983 ELT 1486 (SC) by the hon'ble Supreme Court to show that even in cases where Section 123(1) of the Customs Act is not attracted, the prosecution discharges its burden by establishing circumstances from which a prudent person acting prudently, may infer that in all probabilities the goods in question were smuggled goods and the accused had the requisite knowledge, and that the Department is not required to prove its case with mathematical precision to a demonstrable degree and further that the burden of proof on the Department gets discharged by falsifying many particulars of the story put forward by the accused and the false denial could be relied upon for concluding that goods have been illegally imported. While elaborating her arguments, she submitted that the respondent initially took the defence that the garments were purchased from hawkers in Kali Market, Calcutta, but later on stated that he had purchased the same from M/s. Abdul Rashid and Saheb Khan, both having same address as 107, Kali Bazaar, Calcutta.. She further submitted that on varification both the Cash Memos produced by the respondent were found to be false.

6. Before I proceed to appreciate the evidence on record, it may be stated at the outset that so far as the Principles of Law enunciated in the aforesaid cases are concerned, there cannot be any quarrel. . In the instant case provisions of Section 123 of the Customs Act or that of Chapter IV-A of that Act were never relied upon in the Show Cause Notice nor in the Order of adjudication as rightly held by the Lower Appellate Authority. It appears from the record that challenged the very nature of the garments in question regarding their foreign origin and requested for the examination of the goods, which was allowed. On examination by the Assistant Collector, the Assistant Collector has recorded his observations to the effect that the garments in question were not containing any label of foreign origin. However, on his visual examination he observed that 'structure of the fabrics used' shows to be of foreign origin. This visual observation in the absence of any technical data did not find favour with the Appellate Authority below on the ground that as the same manufacturing processes are used in India as are used in abroad the visual examination showing the structure of the fabrics used as of foreign origin is not sufficient test to determine whether the goods are of foreign origin or not. Even during the course of the examination when the Bench asked the Learned SDR as to whether she is disputing that the manufacturing processes which are used abroad are also used in India, she frankly, as her usual fairness, conceded that with the advancement of the Science and Technology, manufacturing processes which are ;used abroad are also largely used in India. Under these circumstances, I am of the view that no interference with the impugned Order is called for. The contention of the appellant that the respondent initially stated that the garments in question were purchased in Calcuttta and subsequently stated that they were purchased from the said shops and the Cash Mernos produced were found to be false also does not improve the case of the appellant in the facts and circumstances of the instant case, in the absence of any other evidence on record to show that the garments in question were of foreign origin. In this view of the matter, I am 'supported by the decision of the Madras High Court rendered in the case of Shah Rikhab Das Chagan Raj v. Collector of Central Excise, AIR 1963 Madras 337 wherein it was held that merely to act on suspicion or upon grounds that the accused failed to substantiate the defence cannot be sufficient to dishcarge the onus which rested upon the Customs Authorities and it-is necessary that evidence must be forthcoming to show that the goods were in fact or must have been imported from a foreign territory in a clandestine manner. In the case of Arvinder Singh Kocher v. Collector of Customs, - 1986(26) - ELT 792 this Tribunal held that the initial burden lies on the Department when the goods are neither notified under Chapter IV-A nor under Section 123 of the Customs Act and even if it is assumed that the goods (in that case T-Shirts and half shirts) were of foreign origin that by itself would not be sufficient to order confiscation in the absence of clear evidence that they were smuggled goods. On this point, the following observations may be extracted with advantages: "I have carefully considered the submissions made on both sides.

Admittedly, the T-Shirts and the half Shirts were not the notified goods at the relevant time. Therefore, the provisions of Chapter IV-A are pot attracted. They were also not notified under Section 123 of the Customs Act. Therefore, there was no burden on the appellant to establish that the T-Shirts and half shirts were licitly imported into India. The initial burden that T-Shirts and half shirts were smuggled goods lies on the department. The department had not led any evidence to discharge that burden. The department however relied upon the admission of the appellant and two Other circumstances, namely, recovery of goods of foreign origin from a purchaser from the appellant and the conduct of the appellant in not opening the door and wetting the T-Shirts and half shirts which he got done before the police were called. The admission of the appellant was that the seized goods were purchased by him from the passengers coming from abroad. This admission by itself does not establish that the goods were smuggled into India. The goods can be said to be smuggled into India when they are imported without payment of duty or in violation of restrictions or prohibition regarding the entry of those goods into India. There was no evidence that the passengers who had sold the goods to the appellant had not paid the duty. The burden was on the department and the department may not discharge of this burden. Even if we assume that the goods are of foreign origin that by itself would not be sufficient to order confiscation in the absence of clear evidence that they were smuggled goods. The circumstances and the other evidence relied on by the department could only give rise to suspicion. Suspicion however strong is not a substitute for proof." 7. In the result, the appeal fails being devoid of any merit. Cross Objections also stand disposed of accordingly.