2013 (1) TMI 727 - AT - Customs

Mumbai Customs jurisdiction upheld, burden of proof on appellants, penalties overturned

The Tribunal affirmed the jurisdiction of Mumbai Customs authorities to adjudicate the case, rejected the appellants' challenge. The burden of proof for ... Confiscation of goods - Imposition of redemption fine and penalty - Held that:- The source of procurement given by the appellants were found to be false. Therefore, the Department has discharged the burden cast on it and it is for the appellants to prove the licit nature of procurement of the goods which they have failed to do. The Hon’ble High Court of Karnataka also took a similar stand in the Vikram Jain case cited supra by holding that “the contention of the respondent that the burden of proving that the goods have been smuggled or brought into the territory of India without payment of duty, lies on the authorities would facilitate the mischief since all human affairs require absolute certainty, is a myth and ‘all exactness if a fake’ and absolute proof being unattainable the law would accept as a working substitute in this work-a-day world”. If the department is able to establish that they have satisfied the principles laid down by the Supreme Court, they are deemed to have discharged the burden of proof cast on them and established their case. Therefore, we do not find any reason to find fault with the findings that the goods in question are smuggled into the country and consequently they are liable to confiscation under Section 111(d) of the Customs Act. It is not necessary that the goods should be prohibited from import under FTDR Act for them to be confiscated under Section 111(d). In this case the allegation is that the goods have been removed without payment of customs duty and therefore, they are liable to confiscation under Section 111(d) of the said Customs Act. Commissioner has imposed various penalties on the persons from whose possession the goods had been seized under Section 112(b) of the Customs Act. It is now well established that mens rea is an important ingredient for imposing a penalty on the persons enumerated in Section 112(b) of the Customs Act. The goods may be liable to confiscation for contravention of the provisions of the Customs Act but the person who is in possession of the goods need not necessarily have anything to do with either smuggling or dealing with them knowingly. The evidence brought out by the department nowhere suggests that the appellants were aware that the goods in question were smuggled into the country. Their dealing in such goods, whose tainted nature they are unaware of, is not covered under Section 112(b) of the Customs Act. The penalties imposed on these persons, therefore, cannot be sustained while upholding confiscation of the goods. We, therefore, set aside the penalties imposed in each of these appeals. - duty demands is confirmed and the confiscation of the goods and imposition of redemption fine is upheld in lieu thereof. However, we set aside the penalties imposed. - decided partly in favour of assessee. Issues Involved:1. Jurisdiction of Customs Authorities2. Burden of Proof for Non-Notified Goods3. Sufficiency of Evidence for Establishing Smuggling4. Imposition of Penalties Under Section 112(b) of the Customs ActIssue-Wise Detailed Analysis:1. Jurisdiction of Customs Authorities:The appellants contested the jurisdiction of the Mumbai Customs authorities to adjudicate the case. The Tribunal held that the customs authorities have the power to investigate and adjudicate cases irrespective of whether the goods are notified or non-notified. The cause of action arose in Mumbai where the goods were seized. Citing the case of K.P. Abdul Majeed v. Collector of Customs & Central Excise, Cochin, and other relevant decisions, it was established that the jurisdictional Commissioner can investigate and adjudicate matters if the cause of action arises within their territorial jurisdiction. The Tribunal rejected the appellants' contention, affirming that the Mumbai Customs authorities had the jurisdiction to adjudicate the case.2. Burden of Proof for Non-Notified Goods:The appellants argued that since the goods were not notified under Section 123 of the Customs Act, the burden of proof to show that the goods were smuggled lay on the department. The Tribunal noted that the foreign origin of the goods was evident from the markings and the appellants' own admissions. The appellants failed to provide satisfactory explanations or evidence of the licit procurement of the goods. Thus, the onus of proof shifted from the Revenue to the appellants, which they did not discharge. The Tribunal referenced the case of Phoenix Mills Ltd. v. Union of India to explain the distinction between burden of proof and onus of proof, concluding that the department had discharged its burden.3. Sufficiency of Evidence for Establishing Smuggling:The Tribunal considered whether the evidence provided by the department was sufficient to establish that the goods were smuggled. The department had conducted investigations, verified the appellants' claims, and found them to be false. The Tribunal cited the case of D. Bhoormull, where the Supreme Court held that the department is deemed to have discharged its burden if it provides enough evidence to raise a presumption in its favor. The Tribunal concluded that the department had provided sufficient circumstantial evidence to establish that the goods were smuggled, thereby discharging its burden of proof.4. Imposition of Penalties Under Section 112(b) of the Customs Act:The Commissioner had imposed penalties on the persons from whose possession the goods were seized under Section 112(b) of the Customs Act. The Tribunal noted that mens rea (guilty mind) is an important ingredient for imposing penalties under this section. The evidence did not suggest that the appellants were aware that the goods were smuggled. Consequently, the Tribunal set aside the penalties imposed on the appellants while upholding the confiscation of the goods and the imposition of redemption fines.Conclusion:The Tribunal confirmed the duty demands, upheld the confiscation of the goods, and imposed redemption fines in lieu thereof. However, it set aside the penalties imposed on the appellants due to the lack of evidence of mens rea. The operative part of the order was pronounced in court.