Custom, Excise & Service Tax Tribunal
Aditi Hemendra Kothari vs Commissioner Of Customs-Air Special ... on 8 May, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO.2
CUSTOMS APPEAL NO: 85213 OF 2023
[Arising out of Order-in-Appeal No: MUM-CUSTM-PAX-APP-1809 TO
1812/2022-23 dated 22nd November 2022 passed by the Commissioner of
Customs (Appeals), Mumbai Zone -III.]
Aditi Hemendra Kothari
57, Seaview, Worli Seaface, Mumbai- 400025 ... Appellant
versus
Commissioner of Customs
Chhatrapati Shivaji Maharaj International Airport Sahar
Andheri (E), Mumbai - 400099 ...Respondent
APPEARANCE:
Shri Paritosh Gupta, Advocate for the appellant
Shri Deepak Sharma, Assistant Commissioner (AR) for the respondent
CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL)
HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL)
FINAL ORDER NO: 85474/2024
DATE OF HEARING: 17/01/2024
DATE OF DECISION: 08/05/2024
PER: CORAM
This appeal is before us in peculiar circumstances of seizure as
well as grant of option, in appellate proceedings and for the first time,
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2
to redeem confiscated goods under section 125 of Customs Act, 1962.
The foundational claim of the appellant before us is the inviolability
of section 123 of Customs Act, 1962, in the restricted sphere of its
legislative intent and the due discharge of onus thereof by the
appellant, erasing the taint cast on the provenance of the impugned
goods, from supposed 'reasonable belief' of seizing authority, to
preclude even commencement of proceedings, let alone confiscation
under section 111 of Customs Act, 1962, against them. It is not in
dispute that goods were not seized in a 'customs area' wherein mere
non-declaration, or misdeclaration suffices, to require the importer or
passenger to defend themselves against one or more of the
contingencies enumerated in section 111 of Customs Act, 1962. A
seizure outside the 'customs area' within the territorial frontiers of the
country places the onus of establishing charge of seized goods having
been smuggled on customs authorities save for the sole exception of
goods enumerated in section 123 of Customs Act, 1962 for which the
onus for proving the goods to be not smuggled rests on the person
from whom it was seized.
2. Before proceeding to consider the facts and circumstances in
the appeal, and considering the narrow compass in which the appeal
lies, a recollection of the statutory provision invoked against
impugned goods may be worthwhile. According to
'Section 123. Burden of proof in certain cases. -
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(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 class of goods which
the Central Government may by notification in the
Official Gazette specify.'
in Customs Act, 1962, the coverage of the impugned goods, and the
responsibility fastened therein, is unambiguously articulated. Learned
Counsel for the appellant submits that the case against the goods was
at one with that in the proceedings initiated against one Ms Vihari
Rajesh Sheth whose interception for being in possession of allegedly
smuggled jewellery led to investigations against the impugned goods
owned by the appellant herein and that the strict regimen intended by
section 123 of Customs Act, 1962 had been set out in the decision 1 of
1
[final order no. A/86062-86064/2022 dated 10th November 2022]
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the Tribunal in Vihari Jewels and others v. Commissioner of Customs,
Mumbai-III in appeal2 against order3 of the Commissioner of
Customs (Appeals), Mumbai-III at which stage the proceedings of the
appellant, among others, and the principal noticees had got
disengaged. Learned Authorized Representative contended that the
order of the Tribunal is under challenge before the Hon'ble High
Court of Bombay as is the outcome of proceedings in the Settlement
Commission resorted for closure of the case pertaining to seizure from
Ms Vihari Sheth.
3. The goods impugned here are 'diamond studded jewellery'
seized from the possession of Ms Aditi Hemachandra Kothari in
follow-up action consequent upon interception of the said Ms Vihari
Sheth at Chatrapati Shivaji Maharaj International Airport (CSMIA),
Mumbai upon arrival from Singapore on 30th July 2013 and the case
built up against her of having travelled several times for carriage of
contraband jewellery. According to the investigation, details of five
purchases, including that of Ms Aditi Kothari, obtained from
distinctly labelled files recovered during the search at M/s Vihari
Jewels on 7th August 2013 and 8th August 2013 were found to tally
with entries in the 'red diary' and 'mobile phone' seized from the
person of Ms Vihari Sheth and, thus, afforded the reasonable belief
that these had been smuggled into India. The articles in the possession
2
[customs appeal no. 86888-86890 of 2021]
3
[order-in-appeal no. MUM-CUSTM-AMP-APP-397-405/2021-22 dated 23rd July 2021]
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of the appellant, covered by two invoices for ₹76,83,169 issued in
March 2013 by M/s Vihari Jewels and valued at ₹ 76,71,080, were
subjected to seizure on 4th August 2014 under section 110 of Customs
Act, 1962. The records do indicate that the articles seized from the
nine individuals had been licitly purchased inasmuch as tax having
been discharged on the transaction was documented and the payments
thereof effected through banking channels.
4. The impugned goods were confiscated under section 111 of
Customs Act, 1962 by the original authority but offered for
redemption solely to Ms Vihari Sheth under section 125 of Customs
Act, 1962 on payment of fine of ₹ 2,50,00,000 along with applicable
duty. The purchasers, aggrieved by the offering of option to redeem to
a person other than themselves and who had not preferred claim to
those either, sought appellate remedy. Revenue was also in appeal
against the offer of redemption and pleaded for absolute confiscation
which did not find favour with the first appellate authority. In the
impugned order4, the cause canvassed by the purchasers from whom
the goods had been seized was accepted by Commissioner of Customs
(Appeals), Mumbai-III 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 appellant herein was permitted to redeem the goods on payment
4
[order-in-appeal no. MUM-CUSTM-PAX-APP-1809 to 1812/2022-23 dated 22nd November
2022]
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of fine of ₹ 11,52,475 and ostensibly on the ground that disproving of
the impugned goods having been smuggled to the satisfaction of legal
requirements was lacking and, thus, validating the finding of the
original authority that the goods had been smuggled by Ms Vihari
Sheth for sale through M/s Vihari Jewels.
5. The case of the appellant herein is that there was no
justification for invoking of section 111 of Customs Act, 1962 in view
of proper discharge of onus placed on her having been duly concluded
and, therefore, the first appellate authority acted in excess of
jurisdiction to uphold the confiscation even while concurring with her
plea for right to the goods as the owner.
6. The impugned order has set out the backdrop of the
proceedings thus
'3. Investigations done of smuggled gold studded diamond
jewellery sold in the past to the noticees No.4 to 12 in the
present case (SCN No.2) namely Mr.Manoj Modi, Ms.Bhakti
Modi, Ms.Smita Modi, Ms.Rina Jain, Ms.Aditi Hemendra
Kothari (appellant no 3), Mrs.Vinita Jaipuria (appellant no
1), Mrs.Devki Jaipuria (appellant no 2), Dr.Sujata Jetley
(appellant no 4) and Mr.Risabh Poddar was found to be have
been sold through various invoices generated in the records
of M/s.Vihari Jewels. The traces of concoted generation of
these invoices was supported by evidences viz. in the Red
Coloured Diary recovered from Ms.Vihari Sheth on
30/31.07.2013; from forensic analysis of electronic devices
(I-pad and Mobile phone) recovered from her, from the fake
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bills generated by Mr.Murari Mohan Pramanick for jobwork
done by him which came to light from the statement recorded
by DRI on 20.09.2013 during the course of investigation
wherein he deposed that he had met Mr.Jiten Sheth through
one person by name Dipak for job work in April 2013; that he
has merely issued the job work invoices for labour charges
without actually manufacturing the jewellery mentioned
therein and that he issued invoices on request of and as per
details given by Jiten Sheth; the bills were all issued in the
name of M/s.Vihari Jewels and payments received from Jiten
Sheth. It was observed that the payments for the so called job
charges bills were not made immediately but completed only
in last week of August 2013 i.e. after detection of the case.
Further Ms.Vihari Sheth in her statement dtd.31.08.2013
divulged that the entries in the red coloured diary with names
of certain persons with description of jewellery and amount
(in USD) were made by her and are true and correct but she
refused to explain the entries and also it was observed that
whose images were found in her I-pad/mobile phone were
sold through M/s.Vihari Jewels.
3.1 During the course of investigation, summons were
issued to the persons, whose names were found mentioned in
the red coloured diary of Ms. Vihari Rajesh Sheth or in the
data recovered from her mobile phone or in other records
taken over during investigation. In response to the summons,
the concerned persons submitted their jewellery along with
the invoices issued by M/s. Vihari Jewels and payment details
by themselves or through their authorised persons before the
investigating agency. All the jewellery items and diamonds
mentioned in the invoices issued by M/s. Vihari Jewels were
seized under panchanamas having different dates under the
reasonable belief that these were smuggled items and hence
were liable for confiscation under the provisions of Customs
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Act, 1962. The statements of concerned persons were
recorded under Section 108 of the Customs Act, 1962 on
different dates. In some cases, the private records in red diary
and data recovered from the mobile phone of Ms. Vihari
Sheth pertaining to these goods show their value in US $
which apparently points to the overseas origin of the goods.'
and, having decided on pre-deposit thus
'7. It is observed that the appellants are noticees in the
adjudication proceedings having purchased diamond
jewellery from Ms.Vihari Sheth (Noticee No.l) apparently
being illegally imported by her without declaration to
Customs and non-payment of legitimate customs duty and
sold to the appellant. I find that there is no link established
against the appellants in the smuggling case of diamond
studded gold jewellery seized from Ms.Vihari Rajesh Sheth on
her arrival at CSMI Airport. Further, investigation by DRI
has not proved that the appellants had purchased or acquired
the goods with guilty-knowledge of their illicit importation
and hence no penalties have been imposed on the appellant
by the A/Authority vide the impugned order. Thus, as
declared in the Form CA-1 no amount is required to be
deposited by the appellant in terms of Section 129E of the
Customs Act, 1962. Accordingly, I proceed further to decide
the case on merits.',
proceeded to hold that
'12.2 It has been contended by the appellants that the
authorities assumed that since Ms.Vihari was a frequent
traveller, the jewellery purchased by her was also smuggled
into India.
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In this regard, I find that the department has proved the
smuggled nature of goods through the confessional voluntary
statements of Mrs. Vihari Rajesh Sheth and Mr. Jiten Sheth.
Further, analysis of the data stored in the said Samsung
mobile seized from Mrs. Vihari Rajesh Sheth and entries
found to be made in the red diary indicated that she had
apparently indulged in smuggling of diamonds and diamond
studded gold jewellery in the past. It is also revealed from the
statements recorded under the Customs Act, 1962, evidences
from the forensic examination and other documents that her
uncle, Jiten Sheth was using M/s. Vihari Jewels, Mumbai as a
front to market and sell the jewellery smuggled in the past.
From the records in the red colour diary and the voluntary
statements of various persons recorded under section 108 of
the Customs Act, 1962, it is evident that Mrs. Vihari Rajesh
Sheth was personally canvassing the sale of the smuggled
diamond jewellery with most of the buyers of the smuggled
jewellery whose goods were seized by the investigation.
Also, Ms.Vihari in her statement recorded on 08.10.2013
stated that she has not personally purchased any jewellery in
India at any time. Again, Mr. Jiten Sheth submitted fabricated
and false back dated documents showing the licit acquisition
of the jewellery which was unearthed by the investigation.
The Government-approved Valuer also told in his report that
the subject goods appear to be imported. I find A/Authority
has rightly held the goods liable for confiscation. Thus, there
is no merit in the contentions raised by the appellant and are
unsustainable.
In this regard, I also rely on judgment passed by the Apex
court in case of CC v. D Bhoormull 1983 (13) ELT 1546 (SC)
= 1985 ECR 2284 = 1974 (2) SCC 544 = 1974 (3) SCR 833
= AIR 1974 SC 859, where it was held that "Department is
not required to prove its case with mathematical precision,
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but what is required is the establishment of such a degree of
probability that a prudent man may on its basis believe in the
existence of facts in the issue. Prosecution is not obliged to
prove as part of its primary burden the facts which are
especially within the knowledge of the accused. Since
smuggling is done secretly, it is impossible for the preventive
department to unravel every link of the process. If a person is
proved to be in possession of stolen goods, the prosecution
will be deemed to have established the charge that he either
was the thief or had received those goods knowing them to be
stolen. If his possession was innocent and lacked the requisite
incriminating knowledge, then, it is for him to explain or
establish those facts within his peculiar knowledge, failing
which the prosecution will be entitled to take advantage of the
presumption of facts arising against him, in discharging its
burden of proof. Department would be deemed to have
discharged its burden (of proof) if it adduces so much
evidence, circumstantial or direct, as is sufficient to raise a
presumption in its favour with regard to the existence of fact
sought to be proved."
12.3 Further, it is contended that A/Authority has referred to
forensic analysis of electronic devices but has failed to
appreciate that there was no tangible evidence against the
appellants
As discussed supra, neither Ms.Vihari Sheth nor her uncle
Shri Jiten Sheth could produce any documentary evidence to
prove licit procurement/manufacture of impugned items
which were sold to the appellant and infact Shri Jiten Sheth
was fabricating documents to show on record its licit
procurement. Hence, I don't find any merit in the above
contention of the appellant.'
and dealt with requirements of section 123 of Customs Act, 1962 thus
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'12.6 As regards contention that Section 123 of the Act is not
attracted in this case as the burden to prove that goods are
not smuggled is on the person from whose possession they are
seized; the burden is on the department to prove that the
goods were smuggled with concrete and substantive evidence.
As discussed supra, the investigations and evidences gathered
clearly indicated smuggled nature of the goods. Further, with
regard to burden of proof as required under Section 123 of
the Customs Act, 1962, I find that "department is not required
to prove its case with mathematical precision, but what is
required is the establishment of such a degree of probability
that a prudent man may on its basis believe in the existence of
facts in the issue......" as held by the Apex court in case of CC
v. D Bhoormull 1983 (13) ELT 1546 (SC) = 1985 ECR 2284
= 1974 (2) SCC 544 - 1974 (3) SCR 833 = AIR 1974 SC 859
as discussed in para 14.2 above.
12.7 The Appellants have contended that Ms.Vihari Sheth
was neither the owner of the goods nor the person in whose
possession the goods were found and hence the appellants
were legally entitled to be given an option of redeeming
the goods on payment of fine determined under the impugned
order passed, but erroneously the option has been extended to
Ms.Vihari and hence the impugned order is erroneous on said
ground.
I find that the said issue of redemption has already been
decided in respect of some of the appellants (other buyers of
impugned jewellery from M/s. Vihari Jewels and seized by
DRI) in the same case of gold/diamond jewellery smuggled by
Ms.Vihari Sheth by Hon'ble Commissioner (Appeals) vide
Order-in-Appeal No.MUM-CUSTM~AMP-APP-397 to 405/
2021-22 dated 23.07.2021 wherein the option to redeem the
jewellery has been extended to the bona-fide purchasers/
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appellants in the said case. I find it relevant to reproduce the
findings of the said order as under:
xxxxx
In view of the above, I am inclined to take a similar view in
the present appeals and totally agree with the contention of
the appellants. I find that the appellant being a bona-fide
purchasers are the real owners of the goods as well as goods
were seized from the possession of the said bona-fide
purchasers and in terms of Section 125 of the Customs Act,
1962 the redemption of the goods should only be given to the
bona-fide purchasers/appellants.'
7. Thus, a number of contradictions emerge. The goods could not
have originally been 'believed' by the investigators to be without any
provenance whatsoever; these were billed on purchase in a valid
transaction. In the absence of discountenancing of title of M/s Vihari
Jewels, the sale and tax paid on sale do, prima facie, validate the title
and possession save for the proceedings enabled by section 123 of
Customs Act, 1962 and section 111 of Customs Act, 1962 which does
not vitiate ownership even while attaching taint to the goods for
consequential detriment available in law. The proceedings before the
original authority placed onus on Ms Vihari Sheth, and not on the
owner-appellant before the first appellate authority, for discharge of
onus envisaged in section 123 of Customs Act, 1962 and can only be
perceived as 'vicarious' burden that, in the light of
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'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 persuade us to adopt his
proposition on the justifiability of penalty imposed on the
appellant.
18. Customs Act, 1962 is not merely a legislated
enactment for furtherance of Article 265 of the Constitution in
conjunction with the enablement of levy in the Seventh
Schedule of the Constitution - for that the charging provision
of section 12 and the valuation standard in section 14 would
have sufficed along with recoveries empowered by section 28
and facilitation of refund in section 27 of Customs Act, 1962;
it is also not merely a legislated enactment for ensuring that
only permissible goods are imported into or exported out of
the country - an empowerment attached, not unnaturally, to
an agency of the State concerned with policing of the
frontiers. It is also replete with several procedural
regulations intended to funnel all imports and exports
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towards 'proper officers' for facilitating assessment to duties
and ascertaining of conformity to the permissible.
19. The procedural stipulations encompass control over
conveyances during sojourn over Indian land, in Indian skies
and on Indian waters, control over the goods contained in or
carried on board such conveyances, control over custodians
of imported goods and keepers of warehoused goods,
oversight of goods in transit and under transshipment, control
over coastal shipping and designating of responsibility for
not tainting the goods. It is the breach of these procedural
threads that are visited by the detriment of confiscation under
the authority of section 111 and section 113 of Customs Act,
1962 and the sequence of arrangement therein reflects the
progression of goods through the statutory barriers with
recourse to later enumerations only upon non-recourse to the
preceding cause for confiscation. We do not dwell on this
aspect of confiscating power for the nonce.
20. These statutory norms are obligatory prescriptions
devolving on person-in-charge of conveyances, custodians
and keepers and importers and exporters; the contours of
control leave no gap for slippage through the net. The trail on
failure to comply is, thus, not difficult to establish and it is
intended that only by breach in the normative dimension
emplaced on inanimate goods are these to be rendered as
offending in the eyes of law; the onus of proving that goods
are, in consequence, smuggled lies upon the 'proper officer'
proximate to the funnel. 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,
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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, 1962, has
an interesting genealogy. It has a forebear in Sea Customs
Act, 1878 albeit not in its original design; after the Republic
came into being and, on the basis of
'(1) to make smuggling a criminal offence, and (2) to
transfer the onus of proof in respect of offences relating to
smuggling to the person in whose possession any dutiable,
restricted or prohibited goods are found.'
in the recommendations in the report of the Taxation Enquiry
Commission in 1954, by Sea Customs (Amendment) Act, 1955
(Act 21 of 1955)
'178A. Burden of proof . - (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 on the person from
whose possession the goods were seized.
(2) This section shall apply to gold, gold manufactures,
diamonds and other precious stones, cigarettes and
cosmetics and any other goods which the Central
Government may, by notification in the Official Gazette,
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specify in this behalf.
(3) Every notification issued under Sub-section (2) shall be
laid before both Houses of Parliament as soon as may be
after it is issued.'
was incorporated in much the same manner as carried
forward in Customs Act, 1962 thereafter 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 on the
person from whose possession the goods were seized
(2) This section shall apply to gold, diamonds, manufactures
of gold or diamonds, watches, and any other class of goods
which the Central Government may by notification in the
Official Gazette specify.'
though with the intendment, manifested in sub-section (2)
and (3) of section 178A of the predecessor statute, severely
restricted from that contemplated in Bill no. 48 of 1954, as
introduced and explained thus
'Clause 14. - At present when action is taken against
persons who are in possession of smuggled goods, it is not
always easy for customs authorities to prove that the goods
are smuggled goods. this clause places the burden of proof
in such cases on persons, from whose possession suspected
smuggled goods are seized. Such a provision is necessary in
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
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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 class of goods which the
Central Government may by notification in the Official
Gazette specify.'
23. The significance of legislative will, evident on the
occasion of enactment of the special provision in Sea
Customs Act, 1878, cannot be overemphasized while
reflecting upon the scope of an intendment that runs counter
to the general principle of customs authorities having to
introduce sufficient evidence, other than presumption, to
enable shifting the burden of response to the recipient of
notice for invoking detriment of confiscation and penalty
under Customs Act, 1962. In like manner, the subsequent
amendments to the special provision are not just textual but
contextual and deserving of particular attention. That in the
report of the Select Committee of Parliament dated 12th
November 1962, which considered Customs Bill, 1962 (No
56A of 1962) and overhauled some of the proposals therein,
the dissenting attention of a tenth of the thirty law makers was
drawn to section 123 is earnest of the extent of deviation from
normative rule of law and sufficient authority for its
implementation within the narrow confines of legislative
articulation.
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24. The special provision for shifting the onus from the
agent of the State to an individual rests upon three pillars:
that it is limited to goods enumerated in sub-section (2),
that reasonable belief of being smuggled must have
prompted the seizure under section 110 of Customs Act,
1962 and that onus lies on the person in possession at the
time of seizure with additional obligation vesting in any
other person claiming ownership. Akin to the traditional
pillars of classical Greek architecture - Doric, Ionic and
Corinthian - in which the functional essentiality of the first
two was, by evolution, elevated to a thing beauteous by the
third, the interests of the larger good are sufficed by
discharge of the legislated onus in a restricted sphere while
retaining the integrity of rule of law for all others
generally.
25. From as far back as 1955, several disputes on the
constitutional validity, the scope of enforcement reach and
the consequences of resort to the special provision had
surfaced before the constitutional courts. These, by and large,
were considered by the Hon'ble Supreme Court in rendering
judgment in Collector of Customs, Madras v. Nathella
Sampathu Chetty [1962 SCR (3) 786] in which it was held
that
'(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
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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 provenance, which may well be less than sinister,
for the consequence of confiscation under section 111 of
Customs Act, 1962. Judgements have examined the state of
'reasonable belief' on such pleadings by referring to facts
and circumstances that were considered by adjudicating
authorities and appellate bodies including the Tribunal. The
decision of the Hon'ble Supreme Court in Indru Ramchand
Bharvani and ors v. Union of India [(1988) SC 247], relied
upon by Learned Special Counsel, did, in the light of
challenge by the appellants, examine conformity with the
prescription of 'reasonable belief' as a pre-requisite for
seizure of goods to which section 123 of Customs Act, 1962 is
brought to bear by customs authorities. It is evident that
power to seize, which flows from section 110 of Customs Act,
1962, is circumscribed by the state of mind of the officer
effecting the seizure irrespective of coverage within section
123 of Customs Act, 1962 or not. This has been additionally
emphasized by settled law, in relation to seizure of goods
enumerated in section 123 of Customs Act, 1962, owing to the
judicial obligation to protect innocent persons from this
'sledgehammer' entrusted to an agency of the State even as
the imperative is acknowledged judicially.
26. It is, nonetheless, of import, though not directly in the
matter before us, that section 110 - the power to seize - is
contingent on 'reasons to believe' that goods are liable to
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confiscation while section 123 of Customs Act, 1962 is
triggered upon seizure of goods in the 'reasonable belief' of
having been smuggled with 'smuggling' being
'(39) .... in relation to any goods, means any act or omission
which will render such goods liable to confiscation under
section 111 or section 113;'
This facet of the reversal of onus and to establish absence of
offence is also parked for the nonce to be reverted if of
relevance later in the proceedings. Suffice it to say that such
onus is triggered upon valid seizure of goods enumerated in
section 123 of Customs Act, 1962 and the proof of licit
ownership is sufficient defense against proposal to confiscate
such goods under section 111 of Customs Act, 1962. It is
needless to state the obvious, and in the light of judicial
exposition, that the presumption of such goods having been
smuggled cannot, of itself, lead to confiscation but may, in
circumstances of the person 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 the onus. The High Court answered the second
C/85213/2023
21
question in the negative. In our opinion, the High Court was
right.
There is, however, one aspect of the matter which was
emphasised before us, i.e. that the conclusions of the fact-
finding body or statutory authority must be arrived at after
giving a fair opportunity to the party to be effected by the
order to be passed. As has been reiterated by a Bench
decision of the Calcutta High Court in Bal Kissen Kejriwal
v. Collector of Customs, Calcutta & ors., AIR 1962 Cal 460
a fair hearing has two justifiable elements. The first is that
an opportunity of hearing must be given and the second is
that the opportunity must be reasonable. Whether a person
has a fair hearing, can be gone into by the Court and the
Court's conscience must be satisfied that an Administrative
Tribunal charged with the duty of deciding a dispute has
conformed to the principles of natural justice..... In our
opinion, judged by the aforesaid two aspects a reasonable
and fair hearing was afforded to the petitioners. Hence, it
cannot be accepted that there was a legitimate cause of
grievance.'
27. Thus, it would appear from the inherent vulnerability
of this special provision, the curtailment of the onus proposed
in the amendment bill by legislative wisdom, the proceedings
of the Select Committee of Parliament entrusted with detailed
consideration of the then new and comprehensive customs
statute and attention to the facts and circumstances of each
such dispute carried to the Hon'ble Supreme Court that
section 123 of Customs Act, 1962 is not amenable to
stretching by appeal to morality or for mitigating the burden
of the enforcement agency entrusted with anti-smuggling. To
begin with, only a few, even if significant, goods are
enumerated therein as to conjecture imminent threat to the
State but for by latitude afforded to enforcement authorities to
be subjected to less than rigid oversight. For another, in a
vast country of teeming millions there are bound to be quite a
few in possession of such goods and to subject them to
criminal consequences merely for lack of diligence and
meticulousness in maintaining personal records is to place a
premium on an obligation that is not even contemplated by
the law. The question that begs answer, therefore, is whether
C/85213/2023
22
a person who was intercepted once with such goods for
proceedings under the regular 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 smuggled goods were seized and,
in the event of any such assertion, on the person claiming
ownership. It is on record that the impugned goods were
neither seized from any, or all, of the appellants and nor have
any of them claimed to be the owner; the first is
incontrovertible fact and the second is not one that can be
foisted for reason of an established past, or probability of a
future, incident of offence. The statute does not acknowledge
putative ownership. At least, it cannot be under a law for
punitive detriment that the customs statute is. It cannot also
C/85213/2023
23
lend itself to being an instrument of investigation that would
permit elimination in a regressive trail till a link is fastened
with offence merely for being unable to establish licit
possession. It is an instrument for conviction in the specific
circumstances envisaged therein. The special provision is
explicit in listing the persons who may have such onus
devolving on them which none of the appellants can be.
30. Much has been made of the description of the
impugned goods, including the headings and contents of the
appropriate column of the First Schedule to Customs Tariff
Act, 1975 which, in any case, is of relevance only for section
12 of Customs Act, 1962 and, incidentally, running counter to
the proposition of jurisdictional incompetence of the
Tribunal, to emphasize recourse to section 123 of Customs
Act, 1962 with its near-permanent applicability to 'gold and
manufactures thereof' and thereby shift the onus to the
appellants herein. The goods, nonetheless, are 'studded
jewellery' which is a description, in common parlance, of
precious stones set in articles of precious metals, most
commonly gold, and to those not familiar with the
chronological mutation of section 123(2) of Customs Act,
1962 coverage of the impugned goods therein may even be
acceptable. But we have taken note supra that with effect
from 26th October 1989, 'diamond and manufactures'
included therein was legislatively rescinded to exclude
'diamonds and manufactures' thereof. It is, therefore, moot if
the presumption in section 123 of Customs Act, 1962 can
continue to apply to articles that have 'diamonds' embedded
in them and it would appear that legislative intent was to
restrict applicability to gold in primary form and articles
made of gold. The alternative proposition of Revenue reduces
the rescinding to the absurdity of not fastening the
presumption to 'diamonds' of themselves but to 'diamonds set
C/85213/2023
24
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 mere source of
documents and the other as supplier operating under the
radar - which advances no proof of the impugned goods not
having been produced in India and the conformity of designs
in a workbook of Ms Vihari Sheth, purportedly valued in
foreign currency, with the goods recovered from customers to
whom 'studded jewellery' had been sold by Mr Jiten Sheth.
Each of these is not objectionable on its own but taken
together these contain as many rents and gaps as to detract
from being fabric entire of itself. There are no statements to
fill these blanks and render the story complete. Absence of the
persons allegedly concerned with the entire exercise from
investigations should not, in the absence of legally satisfied
presumption, be construed to their detriment. In the absence
C/85213/2023
25
of recourse to section 123 of Customs Act, 1962, the linkage
of the several inferences and suppositions must be established
with material and/or oral evidence to be compliant with
normative requirement of customs officials having to
establish that one or the other reasons for confiscation under
section 111 of Customs Act, 1962 are manifest. The essential
requirement of evidencing association with goods liable for
confiscation has not been discharged even by the guidelines
set out in Collector of Customs, Madras and others v. D
Bhoormul [1974 SCR (3) 833] which also took note that
'...These goods, without exception, were all of foreign
origin... They were all lying packed as if they had been
freshly delivered, or were ready for dispatch to a further
destination...'
and precluded from presuming otherwise because
'..They were not lying exhibited for sale in the show cases of
the shop...'
before going on to observe that
'...One of them is that the prosecution or the Department is
not required to prove its case with mathematical precision to
a demonstrable degree; for, in all human affairs, absolute
certainty is a myth.....The law does not require the
prosecution to prove the impossible. All that it requires is the
establishment of such a degree of probability that a prudent
man may, on its basis, believe in the existence of the fact in
issue. Thus, legal proof is not necessarily perfect proof; often
it is nothing more than a prudent man's estimate as to the
probabilities of the case.
.....It will be sufficient to reiterate that the penalty of
confiscation 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.
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....
"........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 conclusion drawn by the Collector. There was no violation of the rules of natural justice. The Collector had given the fullest opportunity to Bhoormull to establish the alleged acquisition of the goods in the normal course of business. In doing so, he was not throwing the burden of proving what the Department had to establish, on Bhoormull. He was simply giving him the fair opportunity of first rebutting the first and foremost presumption that arose out of the tell-tale circumstances in which the goods were found, regarding their being smuggled goods, by disclosing facts within his special knowledge.....'
32. Learned Special Counsel has been selective in extracting from the judgement in re D Bhoormull to urge as the authority for even remote evidence to suffice in departmental proceedings; no greater disservice could be rendered to rule of law for the enduring framework of adjudicatory responsibility spelt out by the Hon'ble Supreme Court as obligations on the part of customs authorities and the persons charged are, often and thus, conveniently glossed over. The sequential logic that found favour in the decision in re D Bhoormull has been stood on its head here; while there, it was the goods that were shown to have been smuggled with the person concerned obligated to establish his lack of illicit association thereto, here the attempt has been to impute that Ms Vihari Sheth is a smuggler, abetted by Mr Jiten Sheth, of the goods associated with them which, unable to defend themselves, are assumed as having been smuggled. The distinct cleavage from the harmonious construct in the decision in re D Bhoormull cannot be more glaring.
C/85213/2023 27
33. Licit possession in the course of domestic transaction having been satisfactorily furnished, without being controverted by the lower authorities, on the part of owners of the impugned goods, the arbitrary arrogation of empowerment to subject the sellers to the presumption of having been in possession of 'smuggled goods' sans authority of law to do so deprives the finding of liability to penalty under section 112 of Customs Act, 1962 of legal sanctity. Without evincing illicit trafficking, in the form in which it was recovered from customers, from outside the country, even by the stretched framework of preponderance of probability, there is no onus on the appellants to establish that the conjectures entertained by customs authorities are incorrect.' as held by the Tribunal in re Vihari Jewels and others, is untenable.
8. In appellate proceedings of M/s Vihari Jewels, Ms Vihari Rajesh Sheth and Shri Jiten Sheth, the entirety of burden, as proposed in the show cause notice, was decided, in relation to the very same goods among others, without reference to the status of the appellant herein vis-à-vis the impugned goods. The consequences of the approval of the order of the original authority, which had kept the appellant herein out of its ken and as upheld in entirety against those persons, was set aside by the Tribunal in re Vihari Jewels. Despite that, and notwithstanding the decision of the Tribunal having been rendered before finalisation of the order impugned here, the first appellate authority proceeded to give a different treatment to the goods already impugned before the Tribunal. The impugned order is, C/85213/2023 28 thus, in ignorance of essential facts that impinge upon the options available to the first appellate authority at the time deciding the appeal impugned now.
9. In these circumstances, it would be appropriate to set aside the impugned order and restore the dispute to the first appellate authority to decide the appeal afresh in the light of law - as legislated and judicially determined - after affording fresh opportunity to the appellant herein to make written and oral submissions. The appeal is, thus, disposed off by remand to Commissioner of Customs (Appeals), Mumbai.
(Order pronounced in the open court on 08/05/2024) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as