Burden of proving smuggling for non-notified diamonds rests on Revenue, and mere unexplained possession is not enough.

For non-notified diamonds, Section 123 of the Customs Act does not create a presumption against the possessor, so the Revenue must prove smuggling with positive evidence. Mere inability to explain lawful possession or source is insufficient to shift the burden or establish illegal import. The record here was found inadequate because the main statements were retracted, no independent corroborative evidence proved import across the customs frontier, the seized quantity did not match the alleged smuggled quantity, and the video material was not relied on as evidence. In the absence of corroboration, the confiscation and penalties could not be sustained.

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Issues: (i) Whether, in respect of non-notified diamonds, the burden to prove smuggling lay on the Revenue and could be discharged merely from the appellants' inability to explain licit acquisition; (ii) Whether the record contained positive and corroborative evidence sufficient to sustain the finding that the diamonds were smuggled.

Issue (i): Whether, in respect of non-notified diamonds, the burden to prove smuggling lay on the Revenue and could be discharged merely from the appellants' inability to explain licit acquisition.

Analysis: Diamonds are not notified goods under Section 123 of the Customs Act, 1962. For such goods, the statutory presumption does not arise against the possessor, and the Revenue must establish the smuggled character of the goods by evidence. Mere failure to explain lawful possession or source does not, by itself, prove smuggling or shift the burden in the absence of the statutory conditions.

Conclusion: The burden remained on the Revenue, and it was not discharged merely by the appellants' inability to explain possession.

Issue (ii): Whether the record contained positive and corroborative evidence sufficient to sustain the finding that the diamonds were smuggled.

Analysis: The finding of smuggling rested mainly on statements that were later retracted, while no independent or reliable evidence established illegal import across the customs frontier. The quantity seized did not tally with the alleged quantity smuggled, the proposed video material was not relied upon as evidence, and the surrounding circumstances did not amount to positive proof. In the absence of corroboration, the statements were insufficient to sustain the charge.

Conclusion: The evidence was insufficient to prove that the diamonds were smuggled.

Final Conclusion: The confiscation and penalties could not be sustained, and the appellants were entitled to relief.

Ratio Decidendi: For non-notified goods, smuggling must be proved by positive evidence; failure to explain lawful possession or source does not by itself establish smuggling or displace the Revenue's burden.

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