2024 (7) TMI 120 - AT - Customs

Police seizure handed to Customs doesn't trigger Section 123 burden shift, Revenue failed proving smuggling

The CESTAT Kolkata allowed the appeal and set aside penalties imposed on appellants for alleged smuggling activity. The court held that Section 123 of the ... Application of Section 123 regarding onus of proof where goods seized by police and handed over to Customs - burden of proof on the Revenue to establish smuggled nature of goods - confiscation of seized goods and currency - imposition of penalty under Section 112 of the Customs Act, 1962 - seizure by police and subsequent delivery to CustomsApplication of Section 123 regarding onus of proof where goods seized by police and handed over to Customs - seizure by police and subsequent delivery to Customs - burden of proof on the Revenue to establish smuggled nature of goods - Whether Section 123 of the Customs Act, 1962 applies and casts the onus on the appellants where the goods were seized by police and later handed over to Customs - HELD THAT: - The Tribunal held that where goods are seized by police under other laws and possession vests in the police and thereafter transferred to Customs on judicial direction, there is no fresh seizure by Customs within the meaning of the Customs provisions which would attract Section 123. Relying on the Apex Court's decision in Gian Chand & Others and subsequent tribunal authorities, the onus to prove that the goods are smuggled lies on the Revenue and not on the appellants because Customs did not effect the original seizure from the appellants. The Tribunal therefore concluded that Section 123 is not applicable in the facts of the present case. [Paras 8, 9]Section 123 does not apply where the police seized the goods and later handed them over to Customs; the burden to prove smuggling is on the Revenue.Confiscation of seized goods and currency - imposition of penalty under Section 112 of the Customs Act, 1962 - burden of proof on the Revenue to establish smuggled nature of goods - Whether penalties and confiscation ordered by the Adjudicating Authority can be sustained where the Revenue failed to prove that the seized gold was smuggled and that the seized currency represented sale proceeds - HELD THAT: - The Tribunal found that the Revenue failed to discharge the burden of proving that the seized gold was smuggled and that the recovered currency constituted sale proceeds of smuggled gold. Because the foundational onus lay on the Revenue (in view of the police seizure and subsequent handing over), the Tribunal concluded that the Adjudicating Authority could not validly impose penalties under Section 112 on the appellants. The order therefore set aside the penalties imposed on the appellants. The judgment also records the consequence on confiscation in the terms used by the Tribunal. [Paras 10, 11, 12]Penalties imposed on the appellants are set aside as the Revenue failed to prove smuggling; the Tribunal accordingly allowed the appeals seeking immunity from penalties.Final Conclusion: Appeals allowed in part: Section 123 held inapplicable because the goods were seized by police and handed to Customs; burden to prove smuggling lay on the Revenue, which failed to discharge it; penalties imposed under Section 112 are set aside and the appeals disposing the challenge to penalty are allowed. Issues:Challenging penalties imposed on appellants for alleged offenses under IPC and Customs Act, violation of principles of natural justice, burden of proof regarding seized goods, confiscation of cash and private vehicle.Analysis:The judgment by the Appellate Tribunal CESTAT KOLKATA involved the challenge of penalties imposed on the appellants for offenses under IPC and the Customs Act. The appellants were apprehended by the Police Personnel and subsequently arrested for alleged offenses. The seized goods, including gold bars and Indian currency, were handed over to Customs Authorities for further proceedings. The appellants were issued a Show Cause Notice proposing confiscation of goods, penalties, and prosecution. However, the appellants claimed that the impugned order was passed in violation of principles of natural justice as they were not provided with relied upon documents or a notice of personal hearing.The appellants argued that the burden of proof regarding the seized goods did not lie with them as the goods were initially seized by the Police and later handed over to Customs. They contended that the Revenue had to substantiate the alleged smuggled nature of the goods to impose penalties. The appellants also challenged the confiscation of Indian currency and the private vehicle, claiming that they should not be penalized.The Revenue argued that the penalties were rightly imposed as the appellants failed to show a licit manner for procuring the goods. However, the Tribunal examined the circumstances of the case and referred to legal precedents, including the decision in Gian Chand and Others v. State of Punjab, to determine the applicability of Section 123 of the Customs Act, 1962. The Tribunal held that since the goods were not seized directly from the appellants by Customs, the burden of proof lay with the Revenue to establish the goods were smuggled.Consequently, the Tribunal ruled in favor of the appellants, setting aside the penalties imposed on them. The judgment highlighted that as the burden of proof was not discharged by the Revenue, no penalties could be imposed. The appeals filed by the appellants seeking immunity from penalties were allowed, and the penalties imposed were overturned, leading to the disposal of the appeals.In conclusion, the judgment emphasized the importance of following principles of natural justice, the burden of proof in cases of seized goods, and the necessity for Revenue to establish the illicit nature of goods for penalties to be imposed. The ruling provided relief to the appellants by overturning the penalties and allowing their appeals.