Maa Kamakhya Trader Vs Commissioner of Customs (Preventive) And 2 Others (Allahabad High Court)
Conclusion: In the absence of “reason to believe” recorded by the authorities, revenue authorities had hopelessly failed to bring out to recordthat the goods (here Arecanuts) imported from outside the country was without valid customs clearance.
Held: In the instant case, it was held that seizure of goods was an action preceding confiscation of prohibited goods. Thus, goods liable to confiscation under Section 111 of the Act may be seized under Section 110 of the Act. However, before seizure of goods may arise, the Proper Officer must have “reason to believe” that such goods were liable to be confiscated under the Act. Unless such “reason to believe” exists, no seizure might arise. Here, at the stage of detention and even at the stage of seizure the Customs Authority only considered: two trade opinions allegedly expressed by persons involved in the trade of Arecanuts; a report of the Arecanuts Research and Development Foundation, Mangalore (hereinafter referred to as “ARDF”) dated 17.11.2023; alleged discrepancy of the total quantity and weight of Arecanuts purchased by assessee from its supplier, Sri Karni Traders and, doubts expressed as to valuation of goods disclosed by assessee, a consistent view exists – where exercise of executive power and assumption of jurisdiction hinges on prior recording of “reason to believe” that true objective test in law must be satisfied by the authority wielding the Curtailment of free trade had serious consequences. While the revenue authorities would be within their jurisdiction to exercise their power to seize and confiscate goods that may have been smuggled inside the customs frontiers, yet with respect to natural products, that were also grown inside the country, no presumption was available to presume or assume that such goods were smuggled unless the assessee or the citizen otherwise satisfied that they were of Indian origin. For assumption of jurisdiction in such cases, credible material must be shown to exit in the hands of the authorities and objective consideration must be shown to have been made to such material – to record the “reason” that might have led to formation of the “belief” that the goods were of foreign origin. Whenever such exercise was completed successfully, the jurisdiction may arise to the revenue authorities to detain and seize the goods. Thereafter, it might remain for the assessee to establish all defences. 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 might give rise to no jurisdiction either to seize or confiscate the goods or to undertake any proceedings to that effect. Allahabad High Court Bench held 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.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Shubham Agrawal, learned counsel for the petitioner and Sri Dhananjay Awasthi & Sri Gaurav Mahajan, learned counsel for the revenue.
2. Present writ petition has been filed by the petitioner to challenge the seizure order dated 04.01.2024 (passed during pendency of the writ petition), the detention-memo dated 25.10.2023 whereby 49,210 Kgs. of Arecanuts being transported by the petitioner on two trucks bearing Registration Nos. UP-35-T-3671 and UP-71-T-9095 have been seized. The confiscation proceedings have not arisen yet.
3. Pleadings have been exchanged.
4. Besides the main Counter Affidavit and Rejoinder Affidavits filed, parties have also exchanged Supplementary Counter Affidavit & Supplementary Rejoinder Affidavit. Sri Awasthi has filed another Supplementary Counter Affidavit in reply to the Supplementary Rejoinder Affidavit.
5. Primary submission of learned counsel for the petitioner is, under the Customs Act, 1962 (hereinafter referred to as “the Act”), seizure of goods is an action preceding confiscation of prohibited goods. Thus, goods liable to confiscation under Section 111 of the Act may be seized under Section 110 of the 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.
6. 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.
7. On the contrary, if the Arecanuts are of Indian origin, no reason to believe may ever arise to confiscate such goods under the Act. Therefore, they may never be subjected to seizure proceedings under the Act.
8. On that test, it has been submitted, existence of “reason to believe” that the goods are liable to be confiscated is a sine qua non to uphold the seizure. While sufficiency of reason may never be an issue to be examined in a writ proceeding, it has been vehemently urged that for a “reason to believe” to exist, the belief that the goods were of foreign origin must be based on reasons arising from objective material.
9. Here, at the stage of detention and even at the stage of seizure the Customs Authority only considered: two trade opinions allegedly expressed by persons involved in the trade of Arecanuts; a report of the Arecanuts Research and Development Foundation, Mangalore (hereinafter referred to as “ARDF”) dated 17.11.2023; alleged discrepancy of the total quantity and weight of Arecanuts purchased by the petitioner from its supplier, Sri Karni Traders, Guwahati and, doubts expressed as to valuation of goods disclosed by the petitioner.
10. Reliance has been placed on the decision of the Hon’ble Supreme Court in State of Uttar Pradesh & Others Vs. M/s Aryaverth Chawl Udyoug and Others 2017 U.P.T.C.-262 to submit, no material exists to form any “reason to believe” and no “reason” exists to support the “belief” that the goods were of foreign origin. Reliance has also been placed on the decision of a coordinate bench of this Court passed in Jaymatajee Enterprise (Seller) and Another Vs. The Commissioner of Customs (Preventive) And 2 Others in Writ Tax No. 573 of 2020 (Neutral Citation No. – 2020:AHC:91647-DB).
11. Then relying upon the decision of the Meghalaya High Court in C. (Preventive), NER Region, Shillong Vs. Laltanpuii 2022 (382) E.L.T. 592 (Meghalaya), as affirmed by Hon’ble Supreme Court in Commissioner of Customs (Preventive) Vs. Laltanpuii 2022 (382) E.L.T. 588 (S.C.), it has been urged that the ARDF is not an accredited laboratory and no reliance could have been placed on its report to draw up any “reason to believe”.
12. Relying on another decision of a coordinate bench of this Court passed in Commissioner Customs, (Preventive) Vs. M/S Maa Gauri Traders in Customs Appeal No. 3 of 2019 decided on 21.08.2019 (Neutral Citation -2019:AHC-LKO:18689-DB), it has been submitted, in any case the report of ARDF has not expressed any definite opinion that the Arecanuts in question were of foreign origin. Therefore, no “reason to believe” may have arisen on the strength of such an ambiguous report.
13. Relying on the Tax Invoices issued by the supplier, Sri Karni Traders including Invoice Nos. 10 and 11 dated 19.10.2023 and 20.10.2023 for sale of 9,800 kgs. and 11,200 kgs. of Assam Dried Arecanuts, it has been submitted (in the alternative) tangible, credible and undoubted material existed as was shown to the authorities-specifically by means of reply dated 1.12.2023 filed on 2.12.2023 through email mode that the entire quantity of 49,210 kgs. of dried Arecanuts was of Indian origin. Inquiry made from M/s Karni Traders did not bring out any doubt as to the Indian origin of the
14. Relying on such facts, it has been submitted, the revenue authorities have hopelessly failed to discharge the essential burden cast on them to establish that they had “reason to believe” that the goods i.e. Arecanuts were of foreign origin. Instead, the revenue authorities have only and heavily relied on their unfounded “belief” that the goods were of foreign origin. In absence of “reasons” formed on the strength of any tangible and credible material to support such belief, the entire action of seizure proposing to confiscate the goods, is without jurisdiction.
15. The alleged discrepancy in valuation of goods is described as inconsequential in as much as no reason to believe may arise on the strength of such allegation.
16. On the other hand, learned counsel for the revenue heavily relied on the fact circumstance that the revenue authorities have acted bona-fide. Upon detention of the goods, they obtained opinions of two traders dealing in Both opined that the goods were of foreign origin. Not relying on such opinion alone, the revenue authorites then obtained report of the ARDF. That report reads as below:
“TEST REPORT OF ARECANUT
