Confiscation of non-notified goods needs positive proof of smuggling; destroyed seized goods may attract monetary compensation

For non-notified goods under Section 123 of the Customs Act, confiscation requires the department to adduce cogent and positive evidence of smuggled or foreign origin; mere suspicion is insufficient, and where local purchase is not rebutted the confiscation cannot be sustained. Where seized goods are later destroyed while in departmental custody and the confiscation fails, monetary relief may be granted in lieu of the seized value, with interest if payment is delayed. The annotated decision also notes that penalty and confiscation were annulled and compensation was directed on an equitable basis.

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Issues: (i) Whether the confiscation of the seized areca nuts was sustainable when the goods were not notified under Section 123 of the Customs Act, 1962 and the department had not adduced positive evidence of smuggled or foreign origin; (ii) Whether the appellant was entitled to refund or compensation for the value of the goods destroyed while in departmental custody.

Issue (i): Whether the confiscation of the seized areca nuts was sustainable when the goods were not notified under Section 123 of the Customs Act, 1962 and the department had not adduced positive evidence of smuggled or foreign origin.

Analysis: The seized goods were areca nuts, which are not notified goods under Section 123 of the Customs Act, 1962. In such a case, the burden lay on the department to establish by cogent and positive evidence that the goods were smuggled or of foreign origin. The record did not contain such evidence, and the appellant's claim of local purchase was not rebutted. The Tribunal applied the settled principle that suspicion, without proof, cannot sustain confiscation of non-notified goods.

Conclusion: The confiscation was not sustainable and was set aside.

Issue (ii): Whether the appellant was entitled to refund or compensation for the value of the goods destroyed while in departmental custody.

Analysis: The goods were destroyed after seizure and before final adjudication. The Tribunal held that, since the confiscation could not stand and the goods had been destroyed, the appellant was entitled to monetary compensation in lieu of the seizure value. Taking guidance from the value-based relief granted in a similar matter, the Tribunal quantified the refund on an equitable basis and directed payment within a specified period, with interest on default.

Conclusion: The appellant was held entitled to a refund of Rs. 20 lakhs in lieu of the seizure value, with interest if payment was delayed.

Final Conclusion: The appeal succeeded in part: confiscation and penalty were annulled, and monetary relief was granted for the destroyed goods.

Ratio Decidendi: For non-notified goods under Section 123 of the Customs Act, 1962, confiscation can be sustained only on positive proof of smuggling by the department; where such proof is absent and the goods are destroyed in custody, monetary compensation may be granted in lieu of the seized value.

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