ORDER
Moheb Ali M., Member (T)
1. These five appeals are taken up together for disposal as the subject matter and the legal issues involved are identical. These appeals arose out of five different orders passed by the Commissioner of Customs (Imports), Mumbai, on various dates. The Commissioner in the impugned orders confiscated the goods, imposed redemption fines and also imposed penalty on the person from whose possession the goods were seized. Hence these appeals.
2. The details of the appeals are summarised in a tabular form below:
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Appeal Description Quantity Value of Duty Redemp- Penalty
No. of goods of MT goods (Rs.) (Rs.) tion fine (Rs.)
(Rs.)
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C/151 Imported 16.8 10,31,875/- 6,92,248/- 1,10,000/- 28,400/-
stainless
steel coils
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C/170 -do- 25.780 15,83,437/- 10,62,270/- 1,70,000/- 42,454/-
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C/148 -do- 28.960 17,78,756/- 11,93,303/- 1,90,928/- 47,732/-
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C/167 -do- 21.940 13,47,580/- 9,04,043/- 1,44,647/- 36,161/-
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Stainless
steel CR/HR 19.260 12,46,425/-|
C/105 sheets | 10,72,288/- 1,71,568/- 42,892/-
SS coils 5.730 3,51,943/- |
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3. On gathering information that stainless steel coils, HR/CR sheets etc. on which no duty of customs paid were being sold in Mumbai, the officers of Customs took up investigation and searched various godowns in Mumbai where such goods were stored by different stockists. The officers found such goods in those godowns, found the owners of the goods who warehoused them, made enquiries with such owners as to where they procured the goods in question, contacted the persons who were supposed to have sold the goods to the appellants, recorded statements of such sellers, confronted the appellants with the depositions made by the sellers, asked the appellants to indicate as to whether they were in possession of any bills of entry under which the goods were imported into the country and after ascertaining that the appellants were not in possession of any valid document nor were they in a position to explain as to where they got the goods from, show cause notices were issued to the owners of the goods asking them to explain as to why the goods in question should not be confiscated, duty demanded and penalties imposed. The Commissioner adjudicated the cases. The facts are almost identical. Each of the owners of the goods was asked to explain as to where they got the goods from. The fact that these goods are of foreign origin is not denied by anyone. The owners explained that they received the goods after they purchased them from various stockists/importers in Mumbai. The department thereupon contacted the stockists/importers and enquired with them whether they have sold the goods found in the appellants’ premises. They in their statements recorded under Section 108 denied having sold the goods in question to the appellants. The Commissioner in the impugned orders mainly relied on the fact that the appellants could not explain the possession of the imported goods nor were they in a position to explain as to where they got the goods from nor were they in a position to say whether duty had been paid on the goods or not. To come to the conclusion that the goods are smuggled and therefore were liable to confiscation, the Commissioner relied on the above evidence even though the goods in question were not notified under Section 123 of the Customs Act. He mainly relied on the decision of the Supreme Court in D. Bhoormull’s case and of Kanungo & Co.’s case [1983 (13) ELT 1564 and 1983 ELT 1284 respectively]. Quoting from the decision of the apex court in D. Bhoormull’s case, he observed that 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. He observed that the incidence, extent and nature of the burden of proof for proceeding for confiscation under the Customs Act may not be the same as in proceedings when the imposition of penalty is contemplated. In regard to sufficiency of evidence, he relied on the decision contained in Bhoormull’s case by stating that it is enough if the department furnishes prima facie proof of the goods being smuggled stock. The broad effect of the application of the basic principle underlying Section 106 of the Evidence Act to cases under Section 111 of the Customs Act is that the department would be deemed to have discharged its burden if it adduces only so much evidence, circumstantial or direct, as is sufficient to raise a presumption in its favour with regard to the existence of the fact sought to be proved. The Commissioner also relied on the Supreme Court’s decision second cited above to say that the customs authorities discharged the burden cast on them by falsifying any material particulars of the story put forward by the appellants. The court also held that it cannot be disputed that a false denial could be relied on by the customs authorities for the purpose of coming to the conclusion that the goods had been illegally imported.
4. The Commissioner also discussed the various case law filed by the appellants before him and distinguished those cases in the light of what has been stated by the apex court in the two decisions cited above. He proceeded to confiscate the goods in the light of these observations, imposed redemption finds, demanded duty and imposed penalties.
5. Heard both sides.
6. The appellants before us strongly pleaded that the goods in question were not notified under Section 123 or Chapter 4 of the Customs Act; the burden to prove that they are smuggled is on the department and it has not been discharged by it; the fact that the sellers of the goods have stated that the goods in question have not been sold by them does not establish that the goods are smuggled; that the goods had foreign markings on them does not imply that they are smuggled because they could have been legally imported into the country as well; that these goods are freely available in the market as there is no prohibition against their import at the relevant time; that the Commissioner’s reliance on the D. Bhoormull’s and Kanungo’s cases is misplaced as no presumption is raised against the appellants by the department that the goods are of smuggled nature; that the appellants are under no obligation to retain bills of entry and other import documents permanently in respect of imported goods; that the department was trying to throw the burden cast on it on the appellants who were innocent traders in the impugned goods; that there is abundance of case law that in respect of non-notified goods to say that the burden to prove that the goods are smuggled is on the department; that if the case of the department is that the goods in question were imported under DEEC and were diverted to local market, the proper authority to adjudicate the case would be the Commissioner in charge of the port through which the goods were imported and not the Commissioner, Mumbai; and that in any view of the matter, the department failed to establish that the goods were smuggled into the country and on the basis of mere presumptions and assumptions the goods cannot be confiscated under Section 111(d) of the Customs Act.
7. We have carefully considered the rival submissions and perused the records. We observe that the customs authorities have powers to investigate cases irrespective of whether the goods involved are notified or non-notified. In the present case, the officers on gathering certain intelligence made investigations to find out whether goods stored in various warehouses were legally imported into the country. They then proceeded to make enquiries with the owners of such goods after ascertaining the fact that the goods were brought into the country from a place outside India in view of their make as well as the markings on them. The appellants gave details as to where they got the goods from. The department thereupon verified the veracity of these statements. The officers found that the statements tendered by the appellants were not true and correct. They confronted the appellants with the statements of the alleged sellers of the goods who denied having sold the goods in question to the appellants. The officers wanted an explanation from the appellants in view of these denials. The appellants stated that they had nothing to say in the matter. The department had come to a blind end at that point. The goods involved were worth lakhs of rupees. The persons who would have a complete knowledge as to where they got the goods from did not choose to explain and identify the sellers. In a situation of this nature, the observations of the apex court in D. Bhoormull’s case become very relevant. The department is deemed to have discharged its burden if it adduces so much evidence, circumstantial or direct, as is sufficient to raise presumption in its favour with regard to the existence of the fact sought to be proved. The circumstances prevailing in the present appeals suggest that the department is able to raise a presumption in its favour with regard to the existence of the fact sought to be proved when the owners of the goods refused to divulge correctly as to where they got the goods from. That the goods are of foreign origin is not denied by the appellants. The Supreme Court also observed in Kanungo’s case that a false denial could be relied by the customs authorities for the purpose of coming to the conclusion that the goods had been illegally imported. Thus, when the appellants claim that they have purchased the goods from some persons and when the latter deny having sold the goods to the appellants, it can be concluded that the appellants were making a false statement. The conduct of the appellants also is relevant to draw a presumption in favour of the department. When asked to explain as to how the goods were transported, they came out with various explanations which were found to be false in view of what the godown keeper himself had said.
8. The various case law relied upon by the appellants has also been perused by us. The degree of evidence that is required to prove smuggling is well laid down by the Supreme Court in the cases cited above. The various decisions cited by the appellants were of either the Tribunal or other judicial forums which are inferior to the Supreme Court. None of these decisions seemed to have taken the broad principles laid down by the Supreme Court on the issue related to sufficiency of evidence to establish that certain goods are smuggled. We are therefore of the opinion that if the department is able to establish that they have satisfied the principles laid down by the Supreme Court, they are deemed to have established their case. We, therefore, see no reason to find fault with the findings that the goods in question are smuggled into the country. Their confiscation under Section 111(d), as done by the Commissioner, has to be upheld. The Commissioner pointedly makes a reference to the fact that the goods which were brought into the country in contravention of the Customs Act or any other law for the time being in force are liable to confiscation. It is not necessary that the goods should be prohibited from import under FTDR for them to be confiscated under Section 111(d). We observe that if the goods are brought by a person who does not have an I.E. code, they are liable to confiscation. In this case since the allegation is that the goods have been removed without payment of customs duty, they are liable to confiscation under Section 111 (d) of the Customs Act.
9. The Commissioner imposed various penalties on the persons from whose possession the goods had been seized under Section 112(b) of the Customs Act. It is now well established that mens rea is an important ingredient for imposing a penalty on the persons enumerated in Section 112(b) of the Customs Act. The goods may be liable to confiscation for contravention of the provisions of the Customs Act but the person who is in possession of the goods need not necessarily have anything to do with either smuggling or dealing with them knowingly. The evidence brought out by the department nowhere suggests that the appellants were aware that the goods in question were smuggled into the country. Their dealing in such goods, whose tainted nature they are unaware of, is not covered under Section 112(b) of the Customs Act. The penalties imposed on these persons, therefore, cannot be sustained while upholding confiscation of the goods. We, therefore, set aside the penalties imposed in each of these appeals.
10. In fine, we pass the following order:-
(a) Confiscation and redemption fine are upheld.
(b) Duty demands are upheld.
(c) Penalties are set aside.
11. Appeals are partly allowed.
