2022 (12) TMI 19 - AT - Customs

Tribunal overturns order, grants trader's appeal, dismisses Revenue's appeal, orders refund. Revenue failed to prove smuggling.

The Tribunal set aside the impugned order, allowing the trader's appeal and dismissing the Revenue's appeal. The trader was entitled to consequential ... Onus of proof for smuggling - confiscation under Section 111(d) of the Customs Act - jurisdiction under Standard Weights and Measures Act for goods in the domestic market - Customs jurisdiction limited to Customs area - violation of principles of natural justice / nemo judex in causa sua - liability to duty in lieu of confiscation under Section 125(2)Onus of proof for smuggling - confiscation under Section 111(d) of the Customs Act - Confiscation of the seized goods was set aside for want of proof of smuggling. - HELD THAT: - The Tribunal found this to be a town seizure and accepted the appellant's evidence that the goods were purchased in the open domestic market from named suppliers, some of whom corroborated supply to the appellant. Documents in support of the appellant's case had been resumed by DRI prior to the Customs search, and the Revenue did not produce independent evidence establishing that the goods were smuggled or not duty-paid. On this basis the Tribunal held that the statutory onus to prove smuggling was not discharged and that confiscation under the impugned order could not be sustained. [Paras 20, 21]Impugned confiscation of goods set aside for lack of evidence proving smuggling.Jurisdiction under Standard Weights and Measures Act for goods in the domestic market - Customs jurisdiction limited to Customs area - Customs officers had no jurisdiction under the SWM Act to inspect, search or seize packaged goods in the open domestic market outside the Customs area. - HELD THAT: - The Tribunal held that the powers and functions under the Standard Weights and Measures Act (and the Packaged Commodity Rules) form a separate code for goods in the domestic market and that jurisdiction to inspect and enforce those provisions outside the Customs area vests in the Director appointed under the SWM Act. Consequently, the Revenue's assertion of violation of SWM Act provisions by exercising Customs powers in the town seizure was held to be without jurisdiction. [Paras 15, 22]Allegation of SWM Act/Rules violation by Customs in respect of goods in the domestic market rejected for lack of jurisdiction.Violation of principles of natural justice / nemo judex in causa sua - The adjudication was vitiated by breach of the principles of natural justice because the investigating authority performed adjudicatory functions. - HELD THAT: - The Tribunal found that the investigation, seizure and show-cause proceedings were conducted by the Customs (Preventive) office which also adjudicated the matter, giving rise to the vice that no one should be judge in his own cause. This procedural defect contributed to invalidating the impugned order. [Paras 16, 22]Impugned order held vitiated by breach of natural justice.Liability to duty in lieu of confiscation under Section 125(2) - Revenue's cross-appeal for demand of duty under Section 125(2) was dismissed. - HELD THAT: - Revenue contended that duty should have been demanded in addition to confiscation. The Tribunal, having set aside confiscation on merits and found jurisdictional and procedural infirmities, dismissed the Revenue's appeal seeking such a demand. [Paras 19, 23]Revenue's appeal for demand of duty in lieu of confiscation dismissed.Final Conclusion: The appeal of the appellant is allowed and the impugned order of confiscation and penalty is set aside; the Revenue's cross-appeal is dismissed and the appellant is entitled to consequential reliefs, including refund of amounts seized/confiscated. Issues Involved:1. Legality of the search and seizure conducted by Customs officers.2. Compliance with the Standard of Weights and Measures (SWM) Act and Packaged Commodity Rules.3. Onus of proving the smuggled nature of goods.4. Jurisdiction of Customs officers under the SWM Act.5. Principles of natural justice and bias in adjudication.6. Confiscation of Indian currency and penalty imposition.7. Demand for duty on seized goods under Section 125(2) of the Customs Act.Detailed Analysis:1. Legality of the search and seizure conducted by Customs officers:The appellant, a trader of musical goods, faced two searches: one by DRI officers on 19.12.2007 and another by Customs (Preventive) officers on 5.1.2008. The second search led to the seizure of goods valued at Rs. 92,73,350/- and Indian currency of Rs. 14,10,990/- under Section 110 of the Customs Act. The appellant argued that the documents supporting the goods were already taken by DRI officers, preventing him from producing them during the Customs search.2. Compliance with the Standard of Weights and Measures (SWM) Act and Packaged Commodity Rules:The Revenue alleged non-compliance with the SWM Act and Packaged Commodity Rules, claiming that the seized goods lacked proper declarations such as the name and address of the importer, quantity, and Maximum Retail Price (MRP). The appellant argued that the Customs officers lacked jurisdiction to enforce these rules outside the Customs area, which should be handled by the Director appointed under the SWM Act.3. Onus of proving the smuggled nature of goods:The appellant contended that the goods were purchased from the open market and provided names of suppliers, some of whom corroborated the appellant's claims. The Tribunal found that the Revenue failed to provide evidence proving the smuggled nature of the goods, which were not notified goods under Section 123 of the Customs Act.4. Jurisdiction of Customs officers under the SWM Act:The Tribunal agreed with the appellant's argument that the Customs officers had no jurisdiction to enforce the SWM Act and Packaged Commodity Rules outside the Customs area. The proper authority for such enforcement in the open market is the Director under the SWM Act.5. Principles of natural justice and bias in adjudication:The appellant argued that the adjudication by the Commissioner of Customs (Preventive), who was also involved in the investigation, violated the principle that no one should be a judge in their own cause. The Tribunal found merit in this argument, noting the violation of natural justice principles.6. Confiscation of Indian currency and penalty imposition:The Revenue confiscated Rs. 14,10,990/- found in the appellant's shop, alleging it was sale proceeds of smuggled goods. The appellant claimed part of the amount belonged to his mother-in-law, supported by evidence. The Tribunal found the confiscation unjustified due to the lack of evidence proving the smuggled nature of the goods.7. Demand for duty on seized goods under Section 125(2) of the Customs Act:The Revenue's cross-appeal argued that the Commissioner erred in not demanding duty on the seized goods. Section 125(2) mandates that any fine in lieu of confiscation should include duty and charges payable. The Tribunal dismissed the Revenue's appeal, finding no basis for the duty demand given the lack of evidence supporting the smuggling allegations.Conclusion:The Tribunal set aside the impugned order, allowing the appellant's appeal and dismissing the Revenue's appeal. The appellant was entitled to consequential benefits, including the refund of the seized/confiscated amount. The Tribunal emphasized the Revenue's failure to prove the smuggled nature of the goods and highlighted jurisdictional overreach and natural justice violations.