1987 (6) TMI 237 - AT - Customs

Tribunal Overturns Confiscation of Diamonds and Penalties, Orders Return and Refund

RAJESH K. BHANSALI Versus COLLECTOR OF CUSTOMS

The Tribunal set aside the Collector's order of confiscation of diamonds and the penalty imposed on Shri Md. Farooq U. Memon. The diamonds were directed ... Search and seizure Issues Involved:1. Applicability of Section 123 of the Customs Act.2. Evidence to prove that the diamonds were smuggled.3. Legitimacy of the seizure on 27-2-1984.4. Reasonable belief for seizure.5. Burden of proof under Section 123 of the Customs Act.6. Validity of the penalty imposed on Shri Md. Farooq U. Memon.7. Competence of appeals by Shri Rajesh K. Bhansali, M/s. Gemstar Company, and Shri Ravindra Laxmidas Solanki.Issue-wise Analysis:1. Applicability of Section 123 of the Customs Act:The Tribunal examined whether Section 123 of the Customs Act applied to the seizure of diamonds. The diamonds were initially described as semi-precious stones in the panchanama dated 27-2-1984. The Collector argued that the diamonds were not seized on 27-2-1984 but detained and later seized on 3-3-1984 upon valuation by the Customs Appraiser. The Tribunal found this distinction between recovery and seizure to be incorrect. The Tribunal held that the seizure took place on 27-2-1984, and thus, the burden of proof under Section 123 could not be shifted to the appellants.2. Evidence to Prove that the Diamonds were Smuggled:The Tribunal scrutinized the evidence presented by the Collector and found it insufficient to prove that the diamonds were smuggled. The Collector's reliance on the resistance by Smt. Khatoon and the appellant's connection with unsocial elements was deemed insufficient. The Tribunal noted that the Collector failed to provide concrete evidence that the diamonds were of foreign origin or smuggled.3. Legitimacy of the Seizure on 27-2-1984:The Tribunal analyzed the panchanama dated 27-2-1984, which indicated that the diamonds were seized and sealed by the Customs officers. The Tribunal rejected the Collector's claim that the diamonds were only detained on 27-2-1984 and seized on 3-3-1984. The Tribunal concluded that the seizure occurred on 27-2-1984, and the subsequent panchanama on 3-3-1984 was for valuation purposes only.4. Reasonable Belief for Seizure:The Tribunal found that the Collector's assertion of reasonable belief for the seizure on 3-3-1984 was flawed. The Tribunal emphasized that the reasonable belief must exist at the time of seizure, which was on 27-2-1984. The Tribunal held that the Collector's findings did not support a reasonable belief that the diamonds were smuggled at the time of the seizure.5. Burden of Proof under Section 123 of the Customs Act:The Tribunal determined that since the seizure was not made in the reasonable belief that the diamonds were smuggled, the burden of proof under Section 123 could not be shifted to the appellants. Even if the burden was shifted, the Tribunal found that the appellant, Shri Md. Farooq, had satisfactorily discharged it by providing a complete chain of evidence from the brokers to the import of rough diamonds by M/s. Gemstar Company.6. Validity of the Penalty Imposed on Shri Md. Farooq U. Memon:The Tribunal scrutinized the penalty of Rs. 1,00,000/- imposed on Shri Md. Farooq under Section 112 of the Customs Act. The Tribunal found that the Collector's order lacked clarity on whether the penalty was under sub-section (1) or (2) of Section 112. The Tribunal deemed the penalty unjust and excessive, given the lack of evidence of smuggling and the satisfactory discharge of the burden of proof by the appellant.7. Competence of Appeals by Shri Rajesh K. Bhansali, M/s. Gemstar Company, and Shri Ravindra Laxmidas Solanki:The Tribunal examined the appeals filed by Shri Rajesh K. Bhansali, M/s. Gemstar Company, and Shri Ravindra Laxmidas Solanki. The Tribunal found that these appellants were not aggrieved parties as no penalties were levied on them. The Tribunal rejected their appeals, stating that such confirmatory appeals are unnecessary and would burden the appellate authority.Conclusion:The Tribunal set aside the Collector's order of confiscation of diamonds and the penalty imposed on Shri Md. Farooq U. Memon. The Tribunal directed that the diamonds be returned to Shri Md. Farooq and the penalty amount be refunded. The appeals by Shri Rajesh K. Bhansali, M/s. Gemstar Company, and Shri Ravindra Laxmidas Solanki were dismissed as they were not aggrieved parties.