The Allahabad High Court held that for natural products grown within India, the presumption of smuggling cannot be made. It was emphasized that customs authorities must provide credible material to establish a “reason to believe” to justify confiscation under the Customs Act, 1962.
It was observed that, Here, no material existed to doubt the origin of Arecanut from within the country. Thus, revenue has failed to discharge its burden.
The Present writ petition was filed by the petitioner to challenge the seizure order and detention-memo dated whereby 49,210 Kgs of Arecanuts being transported by the petitioner on two trucks had been seized.
The petitioner counsel submitted that, under the Customs Act, 1962, seizure of goods is an action preceding confiscation of prohibited goods. Thus, goods liable to confiscation under Section 111 of the Customs Act may be seized under Section 110 of the Customs Act.
However, before seizure of goods may arise, the Proper Officer must have “reason to believe” that such goods are liable to be confiscated under the Act. Unless such “reason to believe” exists, no seizure may arise.
It was also contended that, For “reason to believe” to be recorded, the goods (here Arecanuts), must be such as may have been imported from outside the country without valid customs clearance. Failing valid import, they would remain prohibited goods liable to be confiscated and therefore exposed to seizure proceedings.
The court emphasized the serious consequences of curtailing free trade and highlighted that while revenue authorities have jurisdiction to seize smuggled goods within customs frontiers, no presumption of smuggling exists for natural products grown domestically unless proven otherwise by the importer.
The court held that jurisdiction can only be assumed upon the presentation of credible material and objective consideration by authorities to record the belief that goods are of foreign origin. Once the “reason to believe” is established, it falls upon the importer to prove legality. The court found that in this case, the revenue authorities failed to provide cogent and credible material to justify confiscation.
Furthermore, the court stressed the importance of objective scientific tests to determine the origin of goods. It disregarded the report of the Arecanuts Research and Development Foundation, Mangalore, due to lack of accreditation and inconclusive findings.
The petitioner was not required to carry documents regarding the purchase of goods but only the tax invoices of sale, which were present with the goods.
The Division Bench of Justices Manjive Shukla and S D Singh noted that, “At the same time, in absence of objective material and in absence of “reasons” the belief that the goods were of foreign origin may remain non-actionable. It may give rise to no jurisdiction either to seize or confiscate the goods or to undertake any proceedings to that effect.”
It was also observed by the Allahabad High Court Bench that revenue authorities had hopelessly failed to bring out to record the objective material and had further failed to establish formation of any “reason” for the “belief” entertained by them that goods were of foreign region.
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