No Independent Evidence of Betel Nuts Smuggling: CESTAT Rules ARDF Report Unreliable; Sets Aside Confiscation and Customs Penalties [Read Order]
Relying on Judicial Precedents, the Bench reiterated that for Non-notified goods, Department must adduce Independent Evidence of Smuggling
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has set aside the confiscation of a consignment of betel nuts and the penalties imposed under Section 112(b) of the Customs Act, 1962, after holding that the Revenue failed to produce any independent evidence demonstrating that the goods were smuggled. The Tribunal also held that reliance on the test report issued by the Arecanut Research & Development Foundation (ARDF) was misplaced as the institution lacked the competence to determine foreign origin.
The appeals were filed by Priyanka Devi Mourya, Proprietress of M/s Kumar Traders & Company, and Babita Devi Mourya, Proprietress of M/s Kumar Enterprise, challenging the orders upholding confiscation of 98.39 MT and 94.28 MT of betel nuts respectively, along with penalties of ₹40 lakh each under Section 112(b).
The conflict erupted when betel nuts that were kept in several containers were confiscated because they were thought to be from overseas. Samples were drawn and transmitted to ARDF, which believed that the commodities were foreign. Based solely on this report, the adjudicating body ordered absolute confiscation with an option of redemption and imposed penalties on the appellants.
The appellants asserted that betel nuts are not notified under Section 123 of the Customs Act, and so the burden of establishing smuggling rests squarely on the Department. They stated that ARDF is not an approved body capable of detecting provenance and that the Department had supplied no corroborative evidence such as foreign markings, transport routes, or any material link to unlawful import. Additionally, they relied on market receipts that demonstrated domestic purchases.
The Tribunal, comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member), found that the entire case of the Department was formed exclusively on the ARDF report, which bears no evidence value for detecting foreign origin. It noted that there was no additional proof, oral or written, that the betel nuts were illicitly traded.
Relying on consistent judicial precedents, including rulings in Maa Gauri Traders, Laltanpuii and Subodh Das, the Bench reiterated that for non-notified goods, the Department must adduce independent evidence of smuggling.
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The Bench noted that the commodities had no foreign markings, were confiscated far from any international boundary, and that no incriminating material appeared during examination to indicate unlawful importation. It held that suspicion could not substitute legal proof and that the Revenue had failed to satisfy the burden imposed upon it.
Consequently, the Tribunal concluded that the confiscation ordered by the lower authority was legally unsustainable and also set aside the penalties imposed under Section 112(b). The appeals were granted with consequential relief.
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