Customs | Goods Cannot Be Confiscated Solely On Local Market Survey/Opinion Without Proof Of Smuggling: CESTAT Allahabad

The Allahabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that goods cannot be confiscated merely on the basis of a local market survey or opinion in the absence of proof of smuggling. The Tribunal observed that the burden to prove that the goods are smuggled lies on the department.

P.K. Choudhary (Judicial Member) stated that the Department has not discharged its burden. Since betel nuts are also produced in India. In the absence of any evidence that confiscated goods were illegally smuggled into India, the same cannot be confiscated merely based on local market survey/opinion.

In this case, the revenue recovered 8890 kgs of betel nuts from the assessee/appellant while the goods were being transported from Assam to Delhi.

The Customs officials entertained a view that seized betel nuts were of foreign origin, and the samples were shown to the local vendors of betel nuts, who mentioned that the betel nut does not appear to be of Indian origin.

On the basis of the above market survey and reasonable belief, it was construed that the betel nuts are of foreign origin. The entire consignment totaling 8890 kgs (127 bags), was seized.

The assessee argued that he had purchased the seized betel nuts from the traders of the betel nut Mandi of Nalbari. He also mentioned that he had paid Mandi Cess.

A show-cause notice was issued to the assessee, which was adjudicated by the Adjudicating Authority. The Adjudicating Authority confiscated the seized betel nuts with an option to redeem on payment of a redemption fine of Rs.5,25,000/-.

The vehicle carrying the betel nuts was also seized, and an option to redeem was given on payment of a redemption fine of Rs.1,00,000/-. Penalty of Rs.4,00,000/- was imposed on the assessee under Section 112 of the Customs Act, 1962.

Being aggrieved, the assessee filed an appeal before the first Appellate Authority, which was dismissed.

The bench found that the betel nuts are not notified under Section 123 of the Customs Act, 1962 and therefore, the burden of proof lies with the Department to prove the same. It is not just enough to prove by negative inference. An allegation requires to be proved by cogent and positive evidence.

The Tribunal noted that the Revenue bases its case on the local market opinion and the fact that the owners could not establish the Indian origin of the betel nuts.

The bench opined that the betel nuts being non-notified goods; burden to prove the fact of smuggled goods lies on the Department, and the same has not been discharged.

The Tribunal stated that the goods are neither imported nor proved to be smuggled, and hence, no confiscation is warranted.

The bench held that the seizure of the impugned betel nuts is not justified and needs to be set aside.

In view of the above, the Tribunal allowed the appeal and set aside the penalty of Rs. 4,00,000/- imposed on the assessee under Section 112 of the Customs Act, 1962.

Case Title: Shri Surendra Kumar Jain v. Commissioner of Customs (Preventive), Lucknow

Case Number: Customs Appeal No.70033 of 2024

Counsel for Appellant/ Assessee: Anuj Agarwal

Counsel for Respondent/ Department: A. K. Choudhary

Click Here To Read/Download Order