The Commissioner of Customs vs T.V. Mohammed and Another

N. Kumar, J.—The Revenue has preferred this appeal challenging the order passed by the Tribunal, holding that the Revenue has not discharged their burden of proving that the goods were smuggled ones, following the judgment of the Tribunal in Naveed Ahmed Khan v. Commissioner of Customs, Bangalore, and setting aside the order confiscating the goods. Facts in brief are as follows.--

The Directorate of Revenue Intelligence, Bangalore Zonal Unit received intelligence that a Mitsubishi Lancer bearing registration No. TN 10-2219 parked in Hotel Broadway, K.G. Road, Bangalore was containing contraband goods liable for action under the Customs Act, 1962. On the basis of the information, the Customs Officers visited the hotel on 10-6-2003 and identified the Car which was parked in the hotel premises. The hotel authorities were asked about the ownership of the said vehicle, which revealed that the car belonged to the occupants of Room No. 113. The records available at the hotel indicated that one Sri Sameer M.P., Fathima Bhavan, Edapal, Mallapuram had checked into Room No. 113 of the said hotel at 2.00 a.m. on 10-6-2003. Thereafter the officers proceeded to Room No. 113 of the said hotel where two persons who introduced themselves as Shafiq and Sameer were present, Sri Shafiq acknowledged that the car belonged to him and that he had left from Edapal in Mallapuram, Kerala along with Sri Sameer on 9-6-2003 and reached Bangalore in the early hours of 10-6-2003 and checked into the hotel. On enquiry, they informed that they had carried computer parts in the said car from Edapal in Mallapuram in Kerala to Bangalore for sale in Bangalore on the directions of one Sri Mohammed of Edapal, Kerala. Examination of the Mitsubishi Lancer Car was carried out. Nineteen cartons containing 99 sets of Intel Pentium 4 Processors and Cooling fan of foreign origin valued at Rs. 7,92,000/- were found. M.P. Sameer and Anwar Shafiq were asked to produce documents for possessing and transporting these goods. They were unable to produce any documents for these goods. Those goods were seized under a Mahazar dated 10-6-2003 on the reasonable belief that the said goods have been smuggled into India. Mitsubishi Lancer Car was also seized. Thereafter proceedings were initiated.

After recording the statement of all the persona and giving them personal hearing, the Additional Commissioner of Customs held that quantum of goods seized, which comprises a variety of goods with clear cut markings regarding their foreign origin are the material evidence in this case. Though the goods under seizure are not notified, the same were found while transporting in the car which was parked in the Hotel premises at Bangalore without being accompanied with a valid document goes to prove that the notices are dealing in contraband goods with an intention to evade prohibition. None of the notices have produced or put forth any convincing explanation with regard to the manner in which they acquired possession of the said goods. In view of this, the burden of proof has been sufficiently and clearly discharged by the department that the goods in question are of foreign origin which have been smuggled into India illicitly. There is no direct evidence of illicit importation. The circumstantial evidence is sufficient to draw an inference. After referring to the various judgments of the Apex Court, he held that the department has discharged the burden of proof, which is placed on them at the first instance and the respondents have failed to discharge their burden and therefore, the order came to be passed confiscating the goods, car and penalty was imposed on several heads.

Aggrieved by the said order, the respondents preferred an appeal to the Commissioner of Customs (Appeals), who held that the burden of proof of the department was sufficiently discharged and therefore, the order of confiscation and imposition of penalty was upheld, dismissing the appeal. Aggrieved by the said order. T.V. Mohammed and M.P. Sameer preferred an appeal to the Tribunal.

The Tribunal held that it is seen from the statements of all the appellants that they have denied that the goods were smuggled ones, but all the goods were non-notified ones in terms of Section 123 of the Customs Act. These goods were freely available in the open market. The Revenue has not discharged their burden to prove that the goods were smuggled ones. The fact that such goods are freely available in the market is not denied or contested by the Revenue. The appellants have clearly stated that they had not smuggled the goods, but they had purchased the same from open market i.e., Burma Bazaar, Chennai, In those circumstances, the goods cannot be seized and confiscated. The judgment in the case of Naveed Ahmed Khan v. Commissioner of Customs, Bangalore clearly applies to the facts of the case, accordingly, it set aside the impugned orders. Aggrieved by the said order, the Revenue is in appeal.

The learned Counsel for the appellant-Revenue assailing the impugned order of the Tribunal contends that as the goods involved in this appeal do not fall within Section 123 of the Customs Act, in the first instance, the burden of proving the confiscated goods are smuggled goods is on the department. The said burden is discharged by them by showing that the goods seized all had foreign markings. They were seized from the car which was parked in the Hotel, The statement recorded u/s 108 of the Act shows that these goods were purchased from Burma Bazaar, Chennai, but there were no receipts evidencing the same. Admittedly, it had been transported from Chennai to Mallapuram and then to Bangalore for the purpose of sale at Bangalore. Therefore, the initial burden which was on the department has been duly discharged and then the burden shifts on the respondents, who have failed to establish that the said goods have suffered duty under the Act and that it is not smuggled goods. Therefore, he submits that the impugned order passed by the Tribunal requires to be set aside.

Per contra, the learned Counsel for the respondents supported the impugned order.

The substantial question of law that arises for our consideration in this appeal is:

When the confiscated goods do not fall u/s 123 of the Act, what is the burden of proof which lies with the department to prove that the seized goods are smuggled goods and when exactly the said burden is said to have been shifted to the person from whose possession the goods are seized?

The Customs Act, 1962 is a consolidating Act. Section 2 is the definition clause.

Section 2(25) defines what "imported goods" means as under:

(25) "Imported Goods" means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.

Section 2(39) defines "smuggling" as under:

(39) "Smuggling" in relation to any goods, means any act or omission which will render such goods liable to confiscation u/s 111 or Section 113.

Section 111 deals with confiscation of improperly imported goods, etc., whereas Section 113 deals with confiscation of goods attempted to be improperly exported, etc. Section 122(a) deals with the procedure for adjudication of confiscations and penalties.

Section 123(1)(a) deals with burden of proof in certain cases which reads as under:

(1)(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.

Sub-section (2) of Section 123 mandates that the said section shall apply to gold (and manufacturers thereof) watches and any other class of goods which the Central Government may by notification in the Official Gazette, specify.

In respect of those goods which are seized under the 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 whom whose possession the goods were seized and if any person, claims to be the owner thereof, such person, and anything other than the goods, the owner of the goods. This Section 123 is an exception to the law relating to the burden of proof, which imposes an obligation on the owner or the person from whose possession the goods are seized to prove that it is not a smuggled goods. In other words, statutorily the negative is expected to be proved by the owner or the person from whose possession the goods are seized. This presumption is that in respect of the goods covered under the said section, if it is found in the possession of the owner or the person in possession, it is a smuggled goods. However, this section has no application to the goods which do not fall within the said section. In respect of those goods, the burden of proving that the goods seized are smuggled goods is on the person who has asserted it to be a smuggled goods. Here the general law of evidence is attracted.

Section 101 of the Indian Evidence Act, 1872 provides that - whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. Section 102 provides that the burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side. Section 106 provides that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. This provision is in the nature of an exception to Sections 101 and 102.

Section 106 is not intended to relieve any person of that duty or burden. It says that when a fact to be proved (whether affirmative or negative) is peculiarly within the knowledge of a party, it is for him to prove it. It embodies a rule that where the subject-matter of the allegation lies peculiarly within the knowledge of one of the parties, the party must prove it, whether it be of an affirmative or a negative character, and even though there be a presumption of law in his favour.

Dealing with smuggled goods, the Apex Court had an occasion to consider this principle in detail. In the case of Collector of Customs, Madras and Others Vs. D. Bhoormall, which arose under the Sea Customs Act, 1878 in the context of clause (8) of Section 167 to which Section 178-A does not apply. The Supreme Court laid down the following principles:

The burden of proving that the goods are smuggled goods is on the department. This is a fundamental rule relating to proof in all criminal or quasi-criminal 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 kindred principles, no less fundamental, or 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; for, in all human affairs absolute certainty is a myth, and as Prof. Brett felicitously puts it "all exactness is a fake". E1 Dorado of absolute Proof being unattainable the law, accepts for it, probability as a working substitute in this work-a-day 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.

The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered -- to use the words of Lord Mansfield in Blatch v. Archar, (1774) 1 Cwop. 63 at p. 65 "according to the proof which it was in the power of one side to prove, and in the power of the other to have contradicted". 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.

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 of the Indian Evidence Act, 1872, the burden to establish those 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. As pointed out by Best in ''Law if Evidence'' (12th Edition, Article 320, page 291), the "presumption of innocence is, no doubt, presumption juris: but every day''s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property", though the latter is only a presumption of fact. Thus the burden on the prosecution or the department may be considerably lightened even by such presumption of fact arising in their favour. However, 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 that fact in issue. It will only alleviate the burden to discharge which very slight evidence may suffice.

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 personam 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 illicit 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 proceeded against was concerned in the smuggling.

From the aforesaid authoritative pronouncement of the Apex Court laying down the legal principle, it is clear that the cases to which Section 123 is not attracted, the adjudicating authorities and the Courts have to bear in mind whether they are proceeding against the goods or against the person. If they are proceeding against the goods, the standard of proof that is required is far less when compared to a proceedings in which they are proceeding against that person. Similarly, in all cases to which Section 123 is not attracted, the initial burden of proving that the goods are smuggled goods is on the department. Under no circumstances, it changes, but in discharge of that burden, ones the department adduces evidence, the question is whether that burden of proof shifts to the opposite party, if so, at what stage. It is in this context, Section 106 is attracted as the smuggling being a 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.

It is here the underlying principle of Section 106 is attracted and once prima facie evidence is adduced to show that the goods seized are smuggled goods, the burden of showing that it is not the smuggled goods shifts to the person from whose possession these goods are seized. There is a presumption of innocence, but it may be successfully encountered by the presumption of guilt arising from the unexplained lawful possession of the property. Therefore, the question whether the department has discharged the burden of proof in a given case and the principle underlying Section 106 is attracted to the facts of the case depends on the facts of each and every case. There cannot be any hard and fast rule and it cannot be defined in a straitjacket formula.

In this background, the Tribunal proceeded to hold that the goods are not smuggled goods relying on the law laid down by the CESTAT South Zonal Bench, Bangalore, in the case of Naveed Ahmed Khan.

We have gone through the said judgment. It was contended that it is a well-written judgment of the Tribunal, where the judgments rendered by various Courts and Tribunals in the country have been considered and the law has been laid down. What we notice from the aforesaid judgment is it refers to more than 30 cases. The head notes of each cases are printed in an order. The Head Notes shows they are cases rendered under Sections 111(d), 123, 111, 112 and 125 and most of which are u/s 123. In the body of the judgment, we do not find reference to any of those judgments. According to the Tribunal, the said judgments lay down the law and following the law, they have laid down the law in the process. We are unable to make out what is the law which is clearly laid down. It is unfortunate that a Tribunal which is a specialised body, instead of applying its mind to the facts of this case, to the statutory provisions and the principles evolved for more than four decades, and decide the case has followed judgment which cannot be approved and cannot be treated as a judgment which is rendered after referring to those judgments to which a reference is made. The judgment in Naveed Ahmed Khan''s case, lays down no law. If only the Tribunal has looked into the aforesaid judgment of the Apex Court to which we have made a reference in detail, it would have thrown light regarding how these matters are to be dealt with by Courts, in what context Section 106 is applicable, in what context Section 123 is to be understood and above all, how smuggling and smuggled goods have to be considered by Courts. That exercise has not been done. In that view of the matter, the said judgment has no assistance in deciding this case.

Now coming to the facts of this case, admittedly, 99 sets of Intel Pentium four processors and cooling fan of foreign original valued at Rs. 7,92,000/- were found in the Mitsubishi Lancer Car which was parked in Hotel Broadway at Bangalore. It is the case of the respondents that the goods were purchased by them in Burma Bazaar, Chennai. Admittedly, they were not in possession of any documents to show that they purchased those goods from Burma Bazaar, Chennai. It is admitted that they are in the business of selling these electronic items which is for the purpose of selling them. These items were brought from Chennai to Bangalore through Mallapuram. If their statement is to be ignored, there is nothing on record to show that these goods were readily available in plenty in the open market. The goods which were seized were not meant for their personal use. It was meant for sale. If any person is carrying on a lawful business, he should have possessed the documents showing title to the said property. If he has purchased it from a dealer or a wholesaler, there should be some documents evidencing such purchase. It is not forthcoming. Therefore, the initial presumption of innocence cannot be extended to the respondents. As the said goods are all having foreign markings, in the absence of any material to show that it is purchased from a registered dealer dealing with those goods and in the light of what they have stated in the statement u/s 108, burden of proving that they were acquired lawfully shifts on the respondents. They have miserably failed to substantiate their case. The respondents either should have produced documents showing that those goods were meant for home consumption on payment of duty, as sought to be made out in their statements or they have purchased it from the open market where it is available in plenty from Burma Bazaar, Chennai. They have failed to prove both the versions given by them. Therefore, the only irresistible conclusion that could be reached is the goods which were seized are smuggled goods. The respondents are in the business of sale of smuggled goods and as no duty is paid on these goods, they are liable for confiscation under the Act. Both the adjudicating authority as well as the Appellate Commissioner have come to the said conclusion based on the material on record. Unfortunately, the Tribunal relying on a judgment which strictly cannot be construed as a judgment, has lightly interfered with the well-considered order passed by the Appellate Authority which was based on the legal evidence. In that view of the matter, the order passed by the Tribunal cannot be sustained. Hence we pass the following:

ORDER

(i) The substantial question of law as framed by us is answered in favour of the Revenue and against the assessee.

(ii) The impugned order is set aside.

(iii) The orders passed by the original authority as well as the Appellate Authority are restored.

Parties to bear their own costs.