1987 (5) TMI 208 - AT - Customs

Tribunal overturns order confiscating diamonds, penalties citing Customs Act legality, burden of proof.

The Tribunal allowed all four appeals, setting aside the Collector's order of confiscation of diamonds and penalties. The judgment emphasized that the ... Seizure of diamonds by Income Tax Officers Issues Involved:1. Whether the seizure of diamonds by the Customs Officers was lawful under Section 110 of the Customs Act.2. Whether Section 123 of the Customs Act applies, thus shifting the burden of proof to the appellants.3. Whether the appellants satisfactorily discharged the burden of proof regarding the legality of the diamonds.4. Whether the penalties imposed under Section 112(b) of the Customs Act were justified.Detailed Analysis:Issue 1: Lawfulness of Seizure by Customs OfficersThe Tribunal examined whether the diamonds were seized by the Customs Officers under Section 110 of the Customs Act. The facts revealed that the diamonds were initially found and sealed by the Income-Tax Officers under a warrant issued under Section 132(3) of the Income-Tax Act on 9-11-1983. The Customs Officers took charge of the diamonds from the Income-Tax Officers on the following day, 10-11-1983. The Tribunal concluded that the diamonds were effectively seized by the Income-Tax Officers, who had taken physical possession by sealing the cupboard and taking the key, thus making the subsequent seizure by the Customs Officers a formality.Issue 2: Applicability of Section 123 of the Customs ActSection 123 of the Customs Act shifts the burden of proof to the person from whom the goods are seized if the goods are seized under the reasonable belief that they are smuggled. The Tribunal found that the seizure by the Customs Officers was not from the possession of the appellant, Shri Radhakrishan Kejriwal, but from the Income-Tax Officers. Therefore, the provisions of Section 123 were not applicable. The Tribunal supported this conclusion by referring to the Supreme Court's decision in Gianchand - A.I.R. 1962 S.C. 496, which held that the burden of proof under Section 123 cannot be applied if the goods were not seized from the possession of the accused.Issue 3: Discharge of Burden of Proof by AppellantsEven if Section 123 were applicable, the Tribunal examined whether the appellants had satisfactorily discharged the burden of proof. The appellants provided detailed explanations and documentary evidence regarding the origin of the diamonds. Statements and documents from M/s. P.C. Jain & Co. and M/s. Premier Gems confirmed that the diamonds were given to Shri Radhakrishan Kejriwal on approval. The Tribunal noted that the explanations and evidence provided by the appellants were consistent and credible. The discrepancies noted by the Collector were minor and did not undermine the overall credibility of the appellants' claims.Issue 4: Justification of Penalties under Section 112(b)The penalties were imposed under Section 112(b) of the Customs Act, which pertains to improper importation of goods. Given that the Tribunal found that the diamonds were not smuggled and that the appellants had satisfactorily explained their lawful acquisition, the penalties were deemed unjustified. The Tribunal set aside the Collector's order of confiscation and penalties, directing the release of the diamonds and refund of the penalties paid by the appellants.Conclusion:The Tribunal allowed all four appeals, setting aside the Collector's order of confiscation of diamonds and penalties. The judgment emphasized that the seizure by the Customs Officers was not lawful under Section 110 of the Customs Act, Section 123 did not apply, and the appellants had satisfactorily discharged any burden of proof regarding the legality of the diamonds. Consequently, the penalties imposed under Section 112(b) were also unjustified.