2025 (11) TMI 1285 - AT - Customs

Confiscation of black pepper and peas set aside; Revenue failed burden under S.123 Customs Act, no penalties

CESTAT Kolkata allowed the appeal against confiscation of black pepper and peas allegedly smuggled from Nepal. The Tribunal held that since the goods had ... Smuggling of goods from Nepal - seizure of black pepper and peas - notified goods or not - onus to prove - HELD THAT:- As the goods in question have suffered GST at the end of supplier of the goods in question therefore, the onus lies on Revenue to prove that goods in question is of foreign origin. Admittedly, it is not a case of seizure at the International Border, Port or Airport. It is a case of town seizure. Moreover, the goods in question are neither notified goods under Section 123 of Customs Act 1962. In that circumstances, the onus lies on the Revenue to prove that the goods are the smuggled one which Revenue has failed to do so. In that circumstances, the goods in question are not liable for confiscation. Consequently, the confiscation of the impugned goods and impositions of redemption filed is not sustainable and no penalty can be imposed on the appellants. There are no merit in the impugned order. Accordingly, the same is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Revenue discharged the onus of proving that the seized consignment of black pepper and green peas was smuggled (of third-country origin) so as to justify confiscation under Section 111(b) & (h) and vehicle confiscation under Section 115(2) of the Customs Act, 1962. 2. Whether the production of a bill of supply showing GST payment and the fact of a town interception (as opposed to seizure at an International Border/Port/Airport) alters the onus of proof and suffices to establish legality of importation or domestic origin of the goods. 3. Whether confiscation, redemption fine and penalties under Sections 112, 114AA and 117 of the Customs Act, 1962 could be sustained where the Revenue has not affirmatively proved smuggling or illegality of the goods. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Onus of proof that goods were smuggled / of third-country origin Legal framework: Confiscation under Sections 111(b) & (h) and vehicle confiscation under Section 115(2) require reasonable belief, based on evidence, that goods are smuggled or otherwise liable to confiscation under the Customs Act. When goods are alleged to be of foreign or smuggled origin, the Revenue bears the onus to establish that fact. Precedent Treatment: The Court did not rely upon or discuss any binding precedents in the impugned order; the reasoning follows statutory onus principles rather than specific case law. Interpretation and reasoning: The Tribunal noted that the consignments had GST invoices showing GST payment by the supplier (as per the bill of supply produced). The interception occurred in a town (Hajipur) rather than at an international border, port or airport. The Court held that in such circumstances, merely showing the movement and statements of investigating officers and attendant circumstantial material (toll receipts, statements) was insufficient for Revenue to discharge the burden of proving that goods were smuggled from Nepal and therefore of foreign origin. Ratio vs. Obiter: Ratio - where goods intercepted in a town and not at a port/border/airport, and those goods are accompanied by a supplier's GST document showing payment of GST, the Revenue must affirmatively prove foreign/smuggled origin to justify confiscation; mere suspicion and circumstantial indicators are insufficient. Conclusions: The Revenue failed to discharge the onus of proving that the seized black pepper and green peas were smuggled third-country goods; therefore the goods were not liable to confiscation under the cited provisions. Issue 2 - Effect of production of bill of supply with GST and town-seizure on evidential burden Legal framework: Documentary evidence of tax compliance (GST invoice) tends to support claim of lawful acquisition/transaction; locus of seizure (town vs. international border/port/airport) affects the probative weight and the evidential burden on Revenue to show smuggling. Precedent Treatment: No prior judicial decisions were applied or distinguished; the Tribunal applied statutory and evidentiary principles to the facts. Interpretation and reasoning: The Tribunal treated the bill of supply indicating GST payment as material evidence placing an evidential burden on Revenue to rebut the legitimacy of the transaction and prove foreign origin. Because the seizure occurred inland (town seizure) rather than at an international frontier or customs port, the presumption of illegality is weaker; consequently, the existence of GST documentation means Revenue must lead positive evidence that the goods were smuggled despite the invoice. Ratio vs. Obiter: Ratio - presence of an invoice showing GST payment in an inland seizure shifts the onus to Revenue to prove smuggling; failure to do so precludes confiscation. Conclusions: The bill of supply showing GST payment, together with the town interception, required Revenue to provide affirmative proof of smuggling; absence of such proof led the Tribunal to hold that the documentary evidence was sufficient to defeat confiscation claims. Issue 3 - Validity of confiscation, redemption fine and penalties when smuggling not established Legal framework: Confiscation, imposition of redemption fines (Section 125) and penalties under Sections 112, 114AA and 117 are contingent on establishment of liability for confiscation and/or culpable conduct such as making or using forged documents or evading investigation. Precedent Treatment: The adjudicator imposed confiscation, redemption fines and penalties on findings of conscious involvement and forging/using documents; the Tribunal re-examined whether the essential predicate (goods being smuggled) was established. Interpretation and reasoning: Since the Tribunal concluded that Revenue did not prove that the goods were smuggled (and therefore not liable to confiscation), the foundational basis for redemption fines and the statutory penalties could not stand. Penalties predicated upon confiscation or established use of forged documents with malafide intent require proof of the underlying illegal import or deception; absent proof of smuggling, imposition of these monetary sanctions is unsustainable. Ratio vs. Obiter: Ratio - penalties and redemption fines which flow from a finding of smuggling/confiscation cannot be sustained where the Revenue fails to prove smuggling; such ancillary sanctions fall with the principal adjudication. Conclusions: Confiscation, redemption fines and penalties imposed in the impugned order were set aside because the essential legal finding (that the goods were smuggled/of third-country origin) was not proved by the Revenue. Cross-references and Interrelated Reasoning The conclusions on Issues 1-3 are interlinked: (a) the presence of GST documentation and town interception (Issue 2) informed the Tribunal's assessment of the evidential burden (Issue 1); (b) failure to discharge that burden negated the statutory basis for confiscation and consequently nullified the imposition of redemption fines and penalties (Issue 3). The Tribunal's decision is therefore grounded in evidentiary sufficiency rather than credibility findings alone. Disposition On the facts and evidence before it, the Tribunal allowed the appeals, set aside the confiscation, redemption fines and penalties, and granted consequential relief as appropriate because Revenue failed to prove that the seized goods were smuggled and thus liable to confiscation. (Operative finding is ratio of the decision.)