ORDER
K. Sankararaman, Member (T)
1. These five appeals captioned above are directed against the Order No. 12/Cus/WB/1985 dated 9th August, 1985 passed by the Collector of Customs (Preventive), West Bengal, Calcutta, whereby he had absolutely confiscated 18205 pieces of readymade garments valued at Rs. 1.78 lakhs and imposed penalty of Rs. 500/- each on the abovementioned appellants.
2. The appeals filed separately by the appellants raise common grounds. The appellants were represented by the same Counsel Shri Prantosh Mukherjee in the hearing, who submitted that his arguments were common to all the appeals. Shri P.C. Jain, learned JDR appearing for the department in all these cases, agreed. Accordingly, we heard the cases together and proceed to dispose of these appeals by a common order.
3. The goods, confiscation of which is challenged in these appeals, had been seized by the Customs officers of Dinhata Customs, Preventive Unit and the Police officers of Cooch Behar from a godown belonging to one Shri Rewatmal Gunecha at Station Road, Dinhata, after a search of the said premises. The search was on 11-6-1984 and the seizure was effected on 13-6-1984. The present appellants submitted individual petitions on 9-7-1984 claiming ownership of the seized goods. In the statements recorded by the Customs officers on 13-7-1984 they reiterated their claim of ownership of the seized goods and stated that they had purchased the goods from different Hats of Gitaldah and Dinhata with a view to selling them at different places of Cooch Behar, Jalpaiguri and Darjeeling. They could not, however, produce any evidence showing the legal importation of the goods or their legal acquisition or possession of the seized goods. The goods were seized under Section 110 of Customs Act, 1962 on reasonable belief that they had been imported illegally from a foreign territory in violation of Section 3(2) of the Import/Export (Control) Act, 1947 read with Section 11 of the Customs Act, 1962 and hence liable to confiscation under Section 111 thereof. Show cause notices were issued to the appellants as well as some other persons who were engaged in sorting and packing of the goods in gunny bags. They were asked to show cause as to why the seized goods should not be confiscated under Section 111 of the Customs Act, 1962 and why penalty should not be imposed on each of them under Section 112 ibid.
4. The five appellants in the proceedings submitted replies to the Show Cause Notice individually but in the same lines, as follows :-
They were engaged in the business of purchasing and selling old, used and worn out garments, purchasing them in different rural and urban Hats of the locality, from house to house by cash or in exchange of different household materials. There was accumulation of stocks in the godown as they could not be despatched for sale due to heavy rainfall in Dinhata town. The allegation in the Show Cause Notice that the seized goods had been imported from Bangladesh without any valid permit was misconceived and unfounded. They denied that they had violated any provision of the Customs or allied laws and no penal liability could be imposed on them.
They were heard by the adjudicating authority namely the Collector of Customs (Preventive), West Bengal, Calcutta, through their Counsel, who is their Counsel in the present appeals before us. The Collector did not agree with the contentions raised in their defence and distinguished the cases before him from the ones relied upon by the appellants. He adjudicated the cases as stated above, which has led to the present appeals.
5. In the appeals before us the appellants have reproduced the following points which had been raised by them in reply to the Show Cause Notice :-
(i) There was no reasonable cause for the search of the godown and the seizure of the subject goods. The grounds alluded in support of the seizure in the Show Cause Notice was that the goods under seizure were of third country origin as evident from the markings, that there is a flow of such goods into India by way of illegal importation through unauthorised route from Bangladesh, that it transpired that these goods were stored in the godown for clandestine removal to other places in North Bengal;
(ii) No evidence was there in the seizure list that the subject goods bore any foreign marks;
(iii) No trade restriction in dealing with the subejct goods in border areas; (iv) Selling old garments is a primitive trade for the use of poor persons; (v) Subject goods abundantly available everywhere in the State; (vi) No evidence of importation from Bangladesh furnished with the Show Cause Notice;
(vii) Goods not covered under Section 123 of the Customs Act. Burden of proof is on the Department. Reliance placed on CEGAT decision in S.N. Sarkar v. Collector of Central Excise, New Delhi 1985 (22) ELT 186 (Tri.);
(viii) Suspicion is not evidence – CEGAT’s decision in Abdul Aziz & Sons v. Collector of Central Excise, New Delhi 1983 ECR 1727 relied upon;
(ix) Even in the case of goods where the burden of proof is on the person concerned to prove that the goods seized are not smuggled [vide Section 178A of the Sea Customs Act, 1878], the Madras High Court had held that the prosecution should prove that the articles brought are smuggled articles (AIR 1961, Madras 368 : Public Prosecutor v. M.L. Modi) ;
(x) The proposal to impose penalty was made in the Show Cause Notice under Section 112 of the Customs Act, 1962 without specifying which Sub-section namely (a) or (b) thereof was attracted. The ratio of the decision of the Hon’ble Madras High Court was cited [1983 (12) ELT 322];
6. The appellants have in the present appeals stated that after the hearing before the adjudicating authority they were informed by the Department that, on a reference to Superintendent, Customs, Dinhata, it had been ascertained that some of the pieces of readymade garments under seizure bear marks of foreign origin viz. Japan, Taiwan, Korea. That this established the fact that such goods of third country origin were illicitly brought into India through unauthorised route from the neighbouring foreign territory Bangladesh.
7. It is stated in the appeal that they objected to the above enquiry conducted after the conclusion of the hearing as it had not formed part of the notice issued under Section 124 of the Customs Act, 1962. Notwithstanding their objection, the Collector adjudicated the case, holding that the subject goods had been imported illegally into India in contravention of the provisions of the Customs Act, 1962 and that the appellants were the persons concerned within the ambit of Section 112(b) of the Customs Act, 1962. Accordingly, the subject goods were confiscated and penalties of Rs. 500/- had been imposed on each of the appellants.
8. In the appeals before us, apart from placing reliance on the same grounds urged by them before the Collector, which have been referred to already, they have raised the following points also :
(i) Copies of the documents relied upon in framing the charges not supplied to them inspite of their demand for the same;
(ii) The Collector’s findings that the smuggled character of the goods is proved by marks of foreign origin are bad in law. Mere markings could not be taken as proof of the fact of foreign origin of the goods as such marking and labels would be hearsay evidence. Privy Council decision in Controller of Customs v. Western Electric Company Ltd. reported in 1966 A.C. 367 (369) was cited;
(iii) Even the enquiry indicated that only some pieces bore marks of foreign origin and not all;
(iv) Foreign made garments are freely imported into India by persons returning from abroad. Old and used garments are received as free gifts for distribution among poor persons. Such old and used garments are also sold by the Customs department;
(v) Foreign made garments are neither notified goods nor covered under Section 123 of the Customs Act, 1962;
(vi) The Collector had not given his reasons why he did not accept the pleadings before him, particularly the preliminary points.
9. Arguing on behalf of the appellants, Shri Prantosh Mukherjee, learned Advocate, reiterated the contentions contained in the appeal memorandum, which have been referred to supra. He stressed the following points:
The charge of unauthorised importation from Bangladesh had not been spelt out with the evidence pointing to such a fact. The charge has also not been established by the Collector’s finding in the adjudication order. There is reference to markings which point to the goods being of third country origin, but the nature of markings had not been spelt out. Further, the Show Cause Notice referring to the claim of the appellants that they purchased the goods from the different Hats of Gitaldah and Dinhata, proceeds to make the observation that this version could not be accepted as correct “in view of the fact that according to Indian Customs old and used readymade garments are used to such an extent that there hardly remains any chance for resume and sell it in the market in lot”. It then concludes that it is, therefore, evident from the above note that the…persons are concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which they knew or have reason to believe are liable to confiscation under Section 111 of Customs Act, 1962 and they are also liable to penalty under Section 112 of the Customs Act, 1962. Referring to these the learned Counsel argued that this goes to show that the department had already come to a conclusion in the matter and there was, therefore, no scope for any further meaningful proceedings where the appellants could put up their defence. The authorities had already prejudged the issue and, therefore, the appellants had been prejudiced in the matter. He also stressed the point that the Panchnama had been typed out. This is required to be drawn up then and there after the seizure in the place of seizure. In this case, the fact that the Panchnama had been typed out would go to show that the same had been prepared not at the time and place of seizure but subsequently at the office. This will render the document unacceptable for the proceedings launched against the appellants.
10. In support of the submissions made by him, the learned Counsel cited the following decisions :-
(i) 1985 (22) ELT 186 (Tri.)
Shri S.N. Sarkar & Shri Abdul Latif v. Collector of Central Excise, New Delhi
“In an order of confiscation the Department must establish that the goods in question have been in fact smuggled.”
“Burden of proof lies with the Department and cannot be shifted on to the appellants.”
In this case, old garments of synthetic fabrics of foreign origin were involved. It was decided that in the absence of any proof to indicate that the goods claimed by the appellants were not legally imported; the appellants are entitled to the release of the goods claimed by them.
(ii) 1983 ECR 1727 (Cegat)
Shri Abdul Aziz & Sons v. Collector of Central Excise, New Delhi
– Suspicion cannot amount to evidence. (iii) 1988 (37) ELT 577 Cegat (WRB)
M.P. Jain v. Collector of Customs
“Adjudicating authority should invariably allow cross-examination of seizing officers and the Panch-witnesses.”
(iv) 1989 (41) ELT 69 (Tribunal) B.M. Auto India v. Collector of Central Excise
“Cross-examination of the witnesses should have been afforded to the appellants as requested”.
(v) 1966 A.C. 367 (369) Privy Council – Controller of Customs v. Western Electric Company Ltd.
– “Mere markings could not be taken as proof of the fact of foreign origin of the goods as such marking and labels would be hearsay evidence”
(vi) 1983 (12) ELT 322 – B. Lakshmichand v. Govt. of India
– Where it was not held as to which of the clauses of Section 112 of the Customs Act was relevant and would be attracted it can be said that there was a failure to apply one’s mind.
11. Replying to the arguments of the learned Counsel for the appellants, Shri D.N. Bhowmik, the learned JDR strongly urged that in quasi-judicial proceedings, cross-examination of witnesses is not a must and refusal of the said facility does not constitute denial of natural justice. He relied upon the decision in Manindranath v. Collector of Central Excise -1977 Tax L.R. 1754 referred to in the judgement of Madras High Court in K. Balan v. Govt. of India (1982 ELT 386) wherein it was held that the right to cross-examine is not necessarily a part of reasonable opportunity and depends upon the facts and circumstances of each case. It largely depends upon the adjudicating authority who is not guided by the rules of evidence as such but who must afford such opportunity to the party concerned as would ensure him proper opportunity to defend himself.
12. Refuting the stand of the appellant that the department’s allegation that the seized goods had been smuggled from Bangladesh is not supported by any evidence, Shri Bhowmik stated that this is not a case of no evidence. The mere fact that a large quantity of foreign made garments had been found during the search of the godown in Dinhata situated close to the India-Bangladesh border is itself a pointer to their smuggled nature. He strongly relied upon the stand taken by the Supreme Court in Collector of Customs v. D. Bhormull in regard to the burden of proof and the sufficiency of evidence in smuggling cases. He referred in particular to paragraphs 30 and 32 of the said judgement 1983 (13) ELT 1546 (SC). Extracts of the said paragraphs are reproduced below :-
“(The burden of proving that the goods are smuggled goods, is on the Department) is a fundamental rule relating to proof in all criminal or quasicriminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it we must pay due regard to other kendered principles no less fundamental, of universal application. One of them is that the prosecution or the department is not required to prove its case with mathematical precision to a demonstrable degree…El Dorado of absolute proof being unattainable, the law accepts for it, probability as a working substitute in this workaday world. 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.
31. …Since it is exceedingly difficult if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused it is not obliged to prove them as part of its primary burden.
32. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards it is impossible for the preventive department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish these facts is cast on the person concerned: and if he fails to establish or explain those facts an adverse inference of facts may arise against him which coupled with the presumptive evidence adduced by the prosecution or the department would rebut the initial presumption of innocence in favour of that person and in the result prove him guilty…this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the department altogether of the burden of producing some evidence in respect of the fact in issue. It will only alleviate that burden to discharge which by slight evidence may suffice.
44. …The broad effect of the application of the basic principle underlying Section 106, Evidence Act to cases under Section 167(8) of the Sea 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.”
13. Having referred to the above position of law as laid down by the Hon’ble Supreme Court, Shri Bhowmik, learned JDR argued that the department had shifted the burden of proving the licit importation/acquisition of the foreign made garments on the appellants by pointing out the foreign made labels in the garments, the presence of a large quantity of the garments found in the godown in Dinhata town, which is near the Indo-Bangladesh border which is by way of raising presumptive evidence of the smuggled nature of the goods. On the contention of the learned Counsel for the appellants that the labels showing foreign make is only hearsay evidence and cannot be taken as evidence of the foreign nature of the goods, he referred to the opposite view taken by the Supreme Court in Balumal Jamunadas v. State of Maharashtra (AIR 1975 SC 2083) which was referred to by the Kerala High Court in S. Nagarajan v. Vasantha Kumar, reported in 1988 (34) ELT 571 where it has been held that there cannot be any doubt that the markings can be taken as a circumstance to infer that the goods were of foreign origin. In the circumstances, he strongly opposed the contentions raised by the appellants and submitted that the appeals may be dismissed and the adjudication order sustained.
14. We have given careful consideration to the submissions made by both the sides. We have also perused the record. We find that the Collector had, while adjudicating the case, dealt with mainly the same submissions which the appellants have now reiterated in the appeals also. The earlier Tribunal decision in the case of S.N. Sarkar and Abdul Latif v. Collector of Central Excise [1985 (22) ELT 186 (Tribunal)] was relied upon by the appellants at the stage of adjudication also in support of their contentions that the department had failed to initially prove, or at least prima facie establish the smuggled character of the goods. Rejecting this contention, the Collector observed that this decision of the Tribunal was given in respect of a case where the goods were confiscated even after producing the documents by the appellant evidencing the legal possession of the goods whereas in the case before him the persons who claimed ownership of the seized goods had not been able to produce evidence showing their legal importation/acquisition/possession. He has held that the smuggled character of the goods is proved by the marks of foreign origin and that the ratio of the earlier Tribunal decision cannot be said to be relevant to the instant case. It was this aspect of the Collector’s order that was stressed by the learned JDR while stressing the point that as laid down in the D. Bhourmul case by the Supreme Court it is not necessary to establish in a smuggling case every link in the chain of the clandestine activity. In that case the Supreme Court had, while conceding that no direct evidence of the illicit importation of the goods was adduced by the department, it had made available to the Collector several circumstances of a determinative character which coupled with the inferences arising from the dubious conduct of Baboothmull and Bhourmull could reasonably lead to the conclusion drawn by the Collector that they were smuggled goods. Examining this criterion to the present case, we find that the department has not, however, established even a preliminary or prima facie case of the goods having been smuggled. Barring the fact that some of the pieces of readymade garments bore marks of foreign origin viz. Japan, Taiwan, Korea, there is no other evidence. There is no dubious conduct on the part of the appellants who claimed ownership of the goods unlike the Bhourmull case. They had explained that the goods seized had been procured from the local people on valuable consideration. The accumulation of stocks has been explained by the appellants as caused by heavy rainfall in Dinhata town in the monsoon season as a result of which the goods could not be despatched to the different Hats. There is no finding by the Collector that this defence was considered by him and rejected as untenable. Further, the appellants’ contention that the foreign made labels were there only on some of the garments and not in all of them has also not been considered. A basic objection had actually been raised by the appellants is that the evidence regarding marks of foreign origin on the garments never formed part of the grounds of the Show Cause Notice. The report of the Superintendent of Customs, Dinhata about the marks of foreign origin had been furnished to the Collector behind the back of the appellants which, they contend, is against the fundamental principles of judicial practice. On this question, we find that the Show Cause Notice had actually mentioned that the goods seized were of third country of origin as evident from the markings. The information about the actual country of origin had not been contained in the Show Cause Notice. The department should have placed all the available evidence necessary to sustain the charge in the Show Cause Notice and not furnished it after the personal hearing before the adjudicating officer was over. However, in view of the ultimate decision in the matter being taken by us, this deficiency in the procedure followed by the department loses its relevance.
15. We have said earlier that the appellants have contended that the marks of foreign origin as communicated by the department to them were there in some of the garments. There was no indication that they were there in all the garments. We feel that where the only basis on which the garments were confiscated was the marks of foreign origin it would not be in order to confiscate all the garments as if all of them were of foreign origin, when admittedly such marks were found in only some of them. Further, the thrust of the judgements cited by the learned JDR regarding the effect of the marks of foreign origin is only that they were of foreign origin or that they had been imported. That does not mean that these goods had been smuggled into the country rendering them liable to confiscation.
16. The appellants had explained how they had acquired the goods. There is no mention in the Collector’s order that this had been disbelieved and that we found contentions untenable and hence rejected the same. The only reason given is that they did not produce only evidence regarding their legal importation/acquisition and possession. Examining the appellants’ contentions the Collector has observed in his adjudication order that the seizure list did not indicate the marks of foreign origin and that on a reference to the seizing unit it had been ascertained that the goods under seizure bore marks of foreign origin, viz. Japan, Taiwan, Korea etc. and this information was communicated to the advocate. He has held that the marks of foreign origin borne on the goods under seizure bore conclusively prove their smuggled character and these goods of third country origin were brought into India illicitly through unauthorised routes from the neighbouring foreign territory Bangladesh. This point has already been examined by us. The foreign make marks found in some of the garments can only mean at the most those garments had been made in those foreign countries. It cannot lead to the conclusion that other goods without such markings are also made in foreign countries and that all the goods including those with the foreign made labels had actually been smuggled from a foreign country into India. The distinction sought to be made out between the present case and the other case which was decided by the Tribunal (S.S. Sarkar and Abdul Latif, supra) is not correct. The contention of the appellants regarding the manner of acquisition of the garments has not been specifically repelled by the Collector. On top of it, to say that the persons have not been able to produce evidence showing legal importation/acquisition/possession of the goods would only mean that he has transferred the burden cast on the department to prove the smuggled nature of the goods of the appellants, asking them to prove the licit nature of their acquisition. In the case of S.S. Sarkar and Abdul Latif supra, the concerned parties had also only made a claim that they had acquired the goods (which also happened to be old garments) from various persons including persons who had purchased them from authorised auction sources. The claim regarding the method of acquisition of the goods covered in the present appeal though not exactly similar to the one made in the earlier case decided by the Tribunal is not such as to warrant a conclusion that they are smuggled goods. The Tribunal had held in the said case that though all the goods in question were of foreign origin which fact was not a matter in dispute, there could not be any presumption whatsoever that they must have been smuggled into India. The Collector’s observation in that case that the fact that the seized goods were imported and that such imports were restricted or prohibited and that the seizure was effected on the basis of specific information, would give rise to a presumption of the smuggled character of the goods was repelled by the Tribunal holding that such a conclusion was unjustified. The goods were neither notified under Section 123 of the Customs Act, 1962 nor covered by Chapter IV A of the Act. Hence, placing the burden on the appellants to prove the lawful origin of the goods in India was not justified. The ratio of this case squarely applies to the present appeal.
17. The contention of the appellants that mere suspicion cannot amount to evidence and in absence of reliable evidence penalty is not sustainable, is based upon the decision of the Tribunal in Abdul Aziz & Sons v. Collector of Customs, New Delhi [1983 ECR 1747 Cegat] . This has been rejected by the Collector with the observation that as in the above case the appellants were accused of smuggling Hashish in wooden furniture etc. misdeclared to Customs, the facts of that case are distinctly different from the instant one, the ratio of the decision cited was not relevant to the case before him. This is a palpably wrong conclusion by the Collector. The stand that suspicion cannot amount to evidence is an unexceptionable generalisation which is truly applicable to any case irrespective of the difference in the nature of case, or the commodity or modus operandi involved.
18. The Collector was, however, on better ground while dealing with the contention of the appellants about the absence of reference to Sub-section (a) or (b) of Section 112 in the Show Cause Notice, but the reference being only to Section 112 itself in support of which they had cited the judgement of the Madras High Court in B. Lakshmichand v. Government of India [1983 (12) ELT 322 (Mad.) ]. He has observed in the said case, penalty had been imposed under Section 112 of Customs Act, 1962 whereas the case before him was under process of adjudication and no penalty had been imposed under Section 112 without specifying Clause (a) or Clause (b) thereof and he thereby concluded that the ratio of the case cited did not apply in the case before him. We also find that in the Lakshmichand case supra, neither in the Show Cause Notice nor the order passed, there was reference to Act and that the essential ingredients have not been speficically spelt out with reference to either of the clauses. The Collector had reached a finding in his adjudication order under appeal before us now that the appellants had engaged themselves in selling, purchasing or in any other manner dealing with any goods which they knew or had reason to believe were liable to confiscation and hence they were the persons concerned within the ambit of meaning of Section 112(b) of the Customs Act, 1962. But paradoxically the imposition of penalty of Rs. 500/- in each of the appellants is without reference to even Section 112, not to talk of Sub-section (a) or Sub-section (b) thereof. However, in this discussion as he had referred to them as the persons concerned within the ambit of the meaning of Section 112(b) of the Customs Act, 1962 the absence of reference to these provisions while imposing penalty on them does not, on that score vitiate the order. But as we have observed earlier, the identity of goods as smuggled goods liable to confiscation not having been established, we have no hesitation in accepting these appeals setting aside the Collector’s order. The confiscation of the goods in question and the order of imposition of penalty on each of the five appellants are set aside. The appellants will be entitled to the consequential reliefs arising from this order.