Section 123 customs presumption unavailable where police first seized goods; possession, smuggling and knowledge were not proved.

Possession of seized wrist watches and watch straps was not proved where the independent panch witnesses were accepted over the police version and the panchanama did not support the alleged chase and interception. Section 123 of the Customs Act, 1962 was held inapplicable because the articles were first seized by the police as suspected stolen goods and only later handed to customs, so the statutory presumption of smuggling did not arise. Smuggling was also not proved on the evidence, as foreign markings, quantity, import restrictions, and trade statistics did not conclusively establish illicit import. Knowledge that the goods were smuggled was not proved against any accused, and the acquittal was upheld.

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Issues: (i) whether the accused were in possession of the wrist watches and watch straps seized from the car; (ii) whether the goods were proved to be smuggled and the statutory presumption under Section 123 of the Customs Act, 1962 was available; and (iii) whether the accused had knowledge that the goods were smuggled.

Issue (i): whether the accused were in possession of the wrist watches and watch straps seized from the car.

Analysis: The prosecution and the defence offered two rival versions of the occurrence. The police officers supported the case that the accused were found travelling in the car with the goods, while the independent panch witnesses gave a different version that the goods were lying on the footpath and were placed in the car by the police before the accused were taken to the police station. The panchanama did not contain the prosecution version of the chase and interception. The trial court found the panch witnesses trustworthy, and the appellate court, applying the settled restraint in appeals against acquittal, saw no reason to displace that appreciation of evidence.

Conclusion: Possession by the accused was not proved.

Issue (ii): whether the goods were proved to be smuggled and the statutory presumption under Section 123 of the Customs Act, 1962 was available.

Analysis: Section 123 applies only where goods are seized under the Customs Act in the reasonable belief that they are smuggled goods. Here the articles were first seized by the police, who proceeded on the footing that they were stolen goods, and only later handed over to customs officers. The presumption therefore was not attracted. On the merits, foreign markings, large quantity, restricted import conditions, and the unexplained absence of the consignment from the statistics produced were held insufficient. The extract from the trade statistics was not treated as admissible public evidence, and in any event it did not conclusively establish illicit import. Suspicion, even if strong, could not replace proof.

Conclusion: Smuggled nature of the goods was not proved and the presumption under Section 123 was unavailable.

Issue (iii): whether the accused had knowledge that the goods were smuggled.

Analysis: The prosecution relied on the statement of accused No. 1 that he was told the packages contained wrist watches and on the presence of accused Nos. 2 and 3 in the car. The statement, read as a whole, did not establish knowledge that the goods were smuggled, and it could not be split to use only the inculpatory part. As to accused Nos. 2 and 3, there was no evidence that they knew the contents of the packages or their alleged smuggled character.

Conclusion: Knowledge that the goods were smuggled was not proved against any accused.

Final Conclusion: The prosecution failed on possession, on proof of smuggling, and on mens rea, so the acquittal was upheld and the State's appeal did not succeed.

Ratio Decidendi: The presumption under Section 123 of the Customs Act, 1962 is unavailable where the seizure is first made by the police and not under the Customs Act, and conviction for customs offences cannot rest on suspicion or an incomplete use of an accused's statement without proof of possession, smuggling, and knowledge.

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