TaxTMI 
TaxTMI 
2022 (11) TMI 636
X X X X Extracts X X X X
X X X X Extracts X X X X
.... phone for deciphering by sleuths intent on destruction of economic saboteurs. A follow up raid at the establishments run by her uncle, uncovers 41 nos. of precious stones and jewellery valued at Rs. 2,05,21,000 that, for the present, were unaccounted in the stock of M/s Vihari Jewels at the Grand Hyatt, Mumbai. The uncle also manufactures and trades in loose diamonds and jewellery under the name and style of Rajesh Brothers and Tisya Jewels. 2. After these revelations, and not surprisingly, the lady passenger is arrested with release on bail taking a while. The uncle, in the meanwhile, retracts the initial admission of lack of explanation for the unaccounted stock and furnished four invoices, for total amount of Rs. 1,75,00,000, purporting to record supply of these precious articles. Under questioning by officials of the investigating agency, the suppliers deny all commercial relationship and admit that they had, out of their personal and professional equation, provided the said invoices against four post-dated cheques that would, instead of being presented for collection on due dates, be returned to issuer. Everything seems to be tightly sewn up for the denouement and for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Service that Ms Vihari Sheth had visited India more than thirty times in the previous twenty seven months. 5. According to the investigation, names of five purchasers, viz., Ms Bhakti Modi, Ms Rina Jain, Ms Aditi Kothari, Ms Vinita and Ms Devki Jaipuria and Dr Sujata Jetley, came to light during the painstaking assembly of useful material in the red diary and mobile phone seized from the person of Ms Vihari Sheth and from some of the distinctly labelled files recovered during the search at M/s Vihari Jewels on 7th August 2013 and 8th August 2013. Four invoices of January 2013 (3 nos) and of May 2013 (1 nos) for sale of jewellery to Ms Bhakti Modi, one invoice of May 2012 for sale of 'diamond studded jewellery' to Mr Manoj Modi and one of December 2012 for sale of 'diamond studded jewellery' to Ms Smita Modi were furnished on their behalf to investigators along with the said articles and these were seized on 15th July 2014 as they appeared to match the details and descriptions in the diary of Ms Sheth. Likewise, the details in the same diary were opined by the investigators as matching articles covered in five invoices of June - July 2013 evidencing sale to Ms Rina Jain leading ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sers from whom the goods had been seized was accepted and the option of redemption was shifted to them along with the obligation to discharge duties of customs, if any, arising from operation of empowerment under Customs Act, 1962. The outcome in the adjudication order was left undisturbed in the matter of penalties imposed under section 112 of Customs Act, 1962 which is now under challenge in these proceedings. 8. Consequently, the value determined by the 'approved valuer' is no longer of consequence as far as the show cause notice is concerned with only the value in the tax invoice of relevance for any purpose whatsoever under Customs Act, 1962. The other aspect of the opinion of the 'approved valuer', i.e., of the goods being of 'foreign origin' is not, if we may permit ourselves to say so, deserving of oracular sanctity, usually accorded to professional expertise, as gold and diamonds are most likely to have originated at same stage or the other from abroad. Under the customs law of the country, geographical provenance of any good is obliterated after legal import into the country and it is moot if even the most experienced 'approved valuer' is able to determine such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of work purportedly executed for Mr Jiten Sheth was not acceptable as evidence. 11. The goods impugned in the show cause notice were covered by twenty invoices issued to nine customers and it was recorded by their spouses/authorized person that it was Ms Vihari Sheth who discussed the design of goods and other aspects of their requirements while the money transactions were with Mr Jiten Sheth from whom the goods were collected or who arranged for delivery to them. While Ms Sheth denied having smuggled any jewellery in the past, she did depose that she had discussed designs and requirements with persons known to her through her kin and that she had no further role in the transactions after introducing them to her uncle. Furthermore, she agreed that the designs in the red diary were of her making but did not elaborate on their significance. Mr Jiten Sheth had, in his very statement, claimed that his niece had, on three occasions since May 2013, brought in 'diamond studded jewellery' for sale at the outlet in Grand Hyatt but did not furnish any explanation on the contents of the files seized there. 12. The link of the furnished invoices with the recovered documents was sought ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of this appeal before the Tribunal. An application for early hearing was allowed on 13th January 2022 to direct listing of the appeal on 30th March 2022. Following request of Learned Authorized Representative for adjournment, the hearing was re-scheduled for 6^th April 2022 when maintainability of appeal before the Tribunal was raised for the first time and, to enable further submissions, hearing was adjourned to 23rd May 2022 and, thereafter, to 16th August 2022. As none had entered appearance for respondent-Commissioner and Tribunal had not been made aware of any re-deployment of representation on behalf of Revenue, the bench was, and justifiably, prompted to make critical observations on the inability of Revenue to participate in proceedings that had been considered fit to be heard 'out of turn' and in which maintainability was insinuated almost as an afterthought. Learned Special Counsel, and after appearance on 17thAugust 2022 to argue the case of Revenue to its conclusion, filed a submission explaining his absence; while we may have sympathy with the circumstances, it is necessary for him to take note that it is for him, along with others for whom courts are their workplace, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sues canvassed is the inappropriateness of confiscation for not being 'baggage', the claim of unavoidable recourse to jurisdiction of Government of India in the appellate hierarchy is not legally sustainable. 15. Furthermore, the impugned order has rectified a perceived flaw in the order of adjudicating authority which adopted the appraisal by the 'approved valuer' as not being in conformity with provisions for valuation in section 14 of Customs Act, 1962. For assessment and clearance, the essence of 'baggage' is classification against the omnibus description corresponding to heading 98 03 of First Schedule to Customs Tariff Act, 1975 despite being set of products of differing descriptions, that may, otherwise, individually find conformity with varying descriptions corresponding to other tariff items in the First Schedule to Customs Tariff Act, 1975, owing to common attribute of the same ownership before and after import. Though first proviso to section 14 of Customs Act, 1962 does envisage inclusion of manner of determination of value in the event of 'no sale' under the empowerment to make rules, recourse has not been had to it; it is questionable if rule 12 of Customs (Determi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ged in the said Rules. This, for the moment, is parked for appropriate evaluation should the need arise at a later stage. 17. Considering that goods had not been seized upon entry into India, the manner in which the evidence has been marshalled and confiscation ordered by recourse to section 111 (d), (j), (l) and (m) of Customs Act, 1962 by noting that '65......I find that M/s Vihari Jewellers didn't have any documents to prove licit import and possession of the said goods before sale. Further, the present owners of these jewellery also do not have any evidence/proof of licit import of these articles of jewellery...' before adverting to decisions such as Collector of Customs, Madras and others v. D Bhoormull [1983 (13) ELT 1546 (SC)] and Sailesh Amulakh Jogani v. Union of India [2009 (241) ELT 348 (Bom)] and the turn adopted by appellate authority on redemption of the goods, it is abundantly clear that adverse presumption sanctified by section 123 of Customs Act, 1962 is the bedrock of the proceedings. We are, therefore, obliged to recall the scheme of Customs Act, 1962 and, more so, in the light of the submissions made by Learned Special Counsel designed to pers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unnel. Owing to the frailty of systems and ingenuity of human behavior, provision however, must be had for 'presumptive smuggling' that shifts the onus for establishing otherwise - not as a general rule but in specified contexts. Two of the three such relate to goods that are visibly offending: goods brought near land frontier, coast and bay, gulf, creek or tidal river which is rendered liable for confiscation under section 113(c) of Customs Act, 1962 as presumed to be intended for smuggling out and that enumerated in section 123 of Customs Act, 1962 with the presumption of having been smuggled in unless proved otherwise. A third, with inbuilt detriment, presumes, under section 116 of Customs Act, 1962, that goods not landed after despatch from place of loading are in breach of the procedure prescribed in Customs Act, 1962. It is the second of the former that we are concerned with here for that has been cited in the show cause notice though the adjudicating authority tried to distance himself from it and as Learned Special Counsel has placed emphasis thereon in his submissions. 21. The particular presumption that this dispute is concerned with, viz., section 123 of Customs Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order to safeguard the revenues of the State.' in the Notes appended thereto. 22. By section 4 of Act 36 of 1973, with effect from 1st September 1973, any person who claimed to be the owner of seized goods was also bought within the operational scope and by section 2 of Act 40 of 1989, with effect from 26th October 1989, 'diamonds, manufactures of gold or diamonds' were substituted for in the special provision to now read as '123. Burden of proof in certain cases. (1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be - (a)in a case where such seizure is made from the possession of any person, - (i) on the person from whose possession the goods were seized; and (ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person; (b) in any other case, on the person, if any, who claims to be the owner of the goods so seized. (2) This section shall apply to gold, and manufactures thereof, watches, and any other....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... '(1) ...that s. 178A was constitutionally valid, (2) that the rule as to burden of proof enacted by that section applies to a contravention of a notification under s. 8(1) of the Foreign Exchange Regulation Act, 1947, by way of a notification under s. 19 of the Sea Customs Act, (3) that the preliminary requirement of s. 178 A that the seizing officer should entertain "a reasonable belief that the goods were smuggled" was satisfied in the present case....' and, thereby in the second and third supra, enunciating the test of legal sanction for invoking this contrarian principle emplaced in the customs law of the land. With the constitutional vires of the provision having been upheld, it is but natural that most of the disputes thereafter have almost entirely been about the pre-requisite of 'reasonable belief' of the goods being smuggled having been apparent at the time of seizure. This is a critical aspect of exercise of this extraordinary power vested in officers of customs by the statute: the onus devolves on the person from whom it was seized along with coordinate onus on person, if any, claiming ownership of the said goods and it merely requires inability to establish pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n on whom the onus devolves having foregone sufficient opportunity of evidencing otherwise, be subjected to that detriment without interference from higher appellate authority. That is the culmination of the decision in re Indru Ramchand Bharvani which held that '................This court.... held that the Evidence Act does not contemplate that the accused should prove the case with same strictness and rigour. But in this case the nature of the evidence on which the reliance could not be placed was rightly rejected by the Customs and the High Court held it properly that the petitioners had not discharged the onus to prove that the goods were not smuggled. In this case there was no denial of opportunity, the proceedings followed excluded the possibility of denial of opportunity. The proceedings taken were in order and in consonance with natural justice. The High Court was right in answering the first question by saying that the Tribunal was justified in holding that the seizing Customs had adequate material to form a reasonable belief as contemplated under Section 110 read with Section 123 of the Act and it rightly held that the appellants had failed to discharge ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law and whose suggested facilitation of unaccounted stock of such goods at the premises of another is intended to be penalized by recourse to this special provision in relation to another set of such goods alleged to have been smuggled even earlier. 28. The 'studded jewellery' impugned in the appeal before us were not intercepted in a customs area; it is also not in doubt that it was not an interruption of a transaction of the appellants that commenced these proceedings. Under the normal procedure of confiscation under the statute, it would be necessary to present evidence, even if not necessarily direct, of the impugned goods having been in the baggage of Mrs Vihari Sheth during one or more of her inbound travels to invoke the penal provisions against the three appellants; section 123 of Customs Act, 1962 obviates that in relation to goods considered by the State as warranting such recourse. The scope for invoking of section 123 of Customs Act, 1962 must now be turned to. 29. Section 123 of Customs Act, 1962 is all about responsibility for discharging onus of licit possession and, in terms of the law as it stands today, it is cast on the person from whom the suspectedly smug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fastening the presumption to 'diamonds' of themselves but to 'diamonds set in gold' and leaves us puzzled about the policy imperative that may have prompted this very fine line of distinction that Learned Special Counsel urges us to accept as unquestionable. Law is intended to serve a working purpose and is not for mere display in a vacuum or to exemplify sterile existence. The amendment brought about in 1989 has had the effect of alienating the presumption in section 123 of Customs Act, 1962 from the goods impugned here. For these reasons, the imposition of penalties on the appellant must find justification in the evidence that were set out in the show cause notice to be sustained. 31. Admittedly, there are no markings on the impugned goods that would attribute provenance outside India. The sole link of the goods with foreign sourcing is frequency of travel of Ms Vihari Sheth, an admission of shared imputation in unidentifiable jewellery dealt with in the past through Vihari Jewels by Mr Jiten Sheth, that was construed upon by the customs authorities as relating to all, and any, jewellery available and dealt with in the past, complementary statements of two job-workers - one as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fiscation is a penalty in rem which is enforced against the goods and the second kind of penalty is one in personem which is enforced against the person concerned in the smuggling of the goods. In the case of the former, therefore, it is not necessary for the Customs authorities to prove that any particular person is concerned with their licit importation or exportation. It is enough if the Department furnishes prima facie proof of the goods being smuggled stocks. In the case of the latter penalty, the Department has to prove further that the person was proceeded against was concerned in the smuggling. .... "........This also disposes of the first point. As we have said, the burden was on the Customs Authorities which they discharged by falsifying in many particulars the story put forward by the appellant.... It cannot be disputed that a false denial could be relied upon by the Customs Authorities for the purpose of coming to the conclusion that the goods had been illegally imported." In the case before us, the circumstantial evidence suggesting the inference that the goods were illicitly imported into India, was similar and reasonably pointed towards the....