AI Drafter 
TaxTMI 
TaxTMI 
2024 (3) TMI 140
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....Supplementary Counter Affidavit & Supplementary Rejoinder Affidavit. Sri Awasthi has filed another Supplementary Counter Affidavit in reply to the Supplementary Rejoinder Affidavit. 5. Primary submission of learned counsel for the petitioner is, under the Customs Act, 1962 (hereinafter referred to as "the Act"), seizure of goods is an action preceding confiscation of prohibited goods. Thus, goods liable to confiscation under Section 111 of the Act may be seized under Section 110 of the Act. However, before seizure of goods may arise, the Proper Officer must have "reason to believe" that such goods are liable to be confiscated under the Act. Unless such "reason to believe" exists, no seizure may arise. 6. For "reason to believe" to be recorded, the goods (here Arecanuts), must be such as may have been imported from outside the country without valid customs clearance. Failing valid import, they would remain prohibited goods liable to be confiscated and therefore exposed to seizure proceedings. 7. On the contrary, if the Arecanuts are of Indian origin, no reason to believe may ever arise to confiscate such goods under the Act. Therefore, they may never be subjected to seizure....
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....rigin. Therefore, no "reason to believe" may have arisen on the strength of such an ambiguous report. 13. Relying on the Tax Invoices issued by the supplier, Sri Karni Traders including Invoice Nos. 10 and 11 dated 19.10.2023 and 20.10.2023 for sale of 9,800 kgs. and 11,200 kgs. of Assam Dried Arecanuts, it has been submitted (in the alternative) tangible, credible and undoubted material existed as was shown to the authorities-specifically by means of reply dated 1.12.2023 filed on 2.12.2023 through email mode that the entire quantity of 49,210 kgs. of dried Arecanuts was of Indian origin. Inquiry made from M/s Karni Traders did not bring out any doubt as to the Indian origin of the goods. 14. Relying on such facts, it has been submitted, the revenue authorities have hopelessly failed to discharge the essential burden cast on them to establish that they had "reason to believe" that the goods i.e. Arecanuts were of foreign origin. Instead, the revenue authorities have only and heavily relied on their unfounded "belief" that the goods were of foreign origin. In absence of "reasons" formed on the strength of any tangible and credible material to support such belief, the entire a....
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....onesian arecanuts with almost equal in numbers. The quality of Arecanuts is good. Date: 17-11-2023" 17. Then, it has been submitted, the revenue authorities made further inquiries from the petitioner and its supplier. On its part, the petitioner failed to comply with four summons issued to him and failed to furnish any cogent explanation. At the same time, in view of the pleadings made in the Supplementary Rejoinder Affidavit and its reply, query was raised to learned counsel for the revenue to ascertain if the reply dated 2.12.2023 (Annexure RA 5 to the rejoinder-affidavit) was served on the respondents. Candidly, that fact was not disputed. 18. With respect to inquiries made from Sri Karni Traders, it is not the case of the revenue that the said dealer disputed the origin of goods from inside the country. No material is disclosed to have arisen in that inquiry as may have indicated to the revenue authorities that the goods in question were of foreign origin. 19. In such facts, relying on the order passed in State of U.P. Vs. GLS Films Industries Pvt. Ltd. 2022 (63) G.S.T.L. 3 (SC) and order passed by coordinate Bench of this Court in Adarsh Tobacco Co. Vs. State of U.....
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....Tax Invoices issued by the supplier, Sri Karni Traders. The discrepancy alleged in absence of Invoice Nos. 10 and 11 may not stand in face of undisputed facts that such documents were also made available to the revenue authorities with the reply sent through e-mail on 2nd December, 2023. 22. Those Tax Invoices were not required to accompany the goods. The petitioner's Tax Invoices that were issued to the purchaser Sri Balaji Traders were found accompanying the goods. Therefore, only a suspicion arose to the revenue authorities that the goods sold by the petitioners may have been procured from outside the country. Yet, to reason that the transaction, had originated from outside the frontiers of the country, there was no material with the revenue authorities, at that stage. The revenue only obtained purely subjective opinions - one from traders and another from ARDF. While the opinion of the traders (on the face of it) were subjective, formed on ocular observations of the two traders, the alleged expert opinion of the ARDF is no more than that. As extracted above, it only brings out that there exist two qualities of Arecanuts found loaded on the two trucks in question. No scientif....
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....ts are of foreign origin. However, the Tribunal refused to consider this certificate on the ground that the said Institution is not accredited and hence the report was not relied on. The Tribunal in this regard relied on the decision of the Patna High Court reported in 2020 (371) ELT 353 (Patna)." Therefore, we are not inclined to give any undue credence to the report of ARDF than it may otherwise deserve. 27. As to the other material, in the first place, the petitioner was not required to carry the Tax Invoice of purchases made by its supplier- Sri Karni Traders. Prima facie, the Tax Invoices issued by M/s Sri Karni Traders were evidence of valid purchase made by the petitioner within the country. In absence of a legal requirement, the absence of the purchase documents of Sri Karni Traders (during transportation by the petitioner), may never have led to formation of a "reason to believe" that goods were of foreign origin. At most, a suspicion may have arisen to the revenue authorities, at that stage. However, once the purchase documents of Sri Karni Traders were made available by the petitioner along with his reply dated 2.12.2023 and other reply (which the revenue does not ....
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.... the sufficiency of reasons for the belief. At the same time, it is necessary to observe that the belief must be held in good faith and should not be a mere pretence. 12. It may also be mentioned that at the stage of the issue of notice the consideration which has to weigh is whether there is some relevant material giving rise to prima facie inference that some turnover has escaped assessment. The question as to whether that material is sufficient for making assessment or reassessment under Section 21 of the Act would be gone into after notice is issued to the dealer and he has been heard in the matter or given an opportunity for that purpose. The assessing Authority would then decide the matter in the light of material already in its possession as well as fresh material procured as a result of the enquiry which may be considered necessary." (emphasis supplied) 29. Then, in Phool Chand Bajrang Lal Vs. ITO, (1993) 4 SCC 77, the same expression used in Section 127 of the Income Tax Act came up for interpretation before the Supreme Court. There, it was observed as below:- "25. From a combined review of the judgments of this Court, it follows that an Income-tax ....
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....ncome had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers." (Emphasis supplied) 31. Considering the above, in State of Uttar Pradesh & Others Vs. M/s Aryaverth Chawl Udyoug and Others (Supra) the Supreme Court has concluded as below:- 28. This Court has consistently held that such material on which the assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by the assessing Authority in pursuance of such belief. In case of absence of such material, this Court in clear terms has held the action taken by assessing Authority on such "reason to believe" as arbitrary and bad in law. In case of the same material being present before the assessing Authority during both, the assessment proceedings and the issuance of notice for re-assessment proceedings, it cannot be said by the assessing Authority that "reason ....