Case Law Details
Aliya Enterprise Vs Commissioner of Customs (Preventive) And 4 Ors (Guwahati High Court)
The Gauhati High Court allowed a writ petition challenging the seizure of 17,200 kilograms of Assam dried areca nuts by Customs authorities, holding that the seizure was without jurisdiction as the statutory requirement of “reason to believe” under Section 110 of the Customs Act, 1962 was not satisfied. The petitioner had sold the areca nuts through a documented commercial transaction supported by tax invoices, GST payment records, and an e-way bill, and the goods were being transported from Hailakandi to Nagaon when they were intercepted and seized on the suspicion that they had been illegally imported from Myanmar.
The Customs authorities justified the seizure on the ground that the goods were suspected to be of foreign origin and liable to confiscation under Section 111 of the Customs Act. Samples were collected to determine both the quality and origin of the areca nuts. Laboratory examination confirmed that the goods conformed to prescribed food safety standards and were fit for human consumption. However, the record did not contain any material establishing that the areca nuts were of foreign origin. Although the authorities also noted that the packages did not bear an FSSAI licence number, the Court observed that this issue fell within the jurisdiction of authorities under the Food Safety and Standards Act and did not establish illegal importation.
The Court examined Sections 110 and 111 of the Customs Act and observed that seizure under Section 110 can be exercised only when the proper officer has “reason to believe” that the goods are liable to confiscation. Since confiscation under Section 111 applies to goods brought from outside India, the existence of material indicating foreign origin was a necessary precondition. Referring to decisions of the Supreme Court, the Court reiterated that “reason to believe” requires a rational connection or live nexus between the available material and the belief formed by the authority. It distinguished “reason to believe” from “reason to suspect”, holding that suspicion, vague assumptions, or unsupported beliefs cannot justify the exercise of statutory powers. The Court also noted that the authorities had produced no contemporaneous material showing that the size, features, or any other characteristic of the areca nuts indicated foreign origin.
After examining the seizure records, laboratory reports, invoices, GST documents, and e-way bill, the Court concluded that there was no evidence linking the goods to any foreign source. The laboratory report established only that the goods were fit for human consumption and did not identify them as imported goods. Consequently, the Court held that the seizure was based merely on suspicion rather than on legally sustainable “reason to believe.” Since the foreign origin of the goods was not established, Section 111 of the Customs Act was inapplicable, and therefore the seizure under Section 110 lacked legal authority.
Accordingly, the Gauhati High Court quashed the seizure of the areca nuts and directed the Customs authorities to release both the seized goods and the truck used for transportation upon production of a certified copy of the judgment. The Court further directed the authorities to close the proceedings initiated against the petitioner unless fresh material subsequently comes into their possession to justify further action. No order as to costs was passed.
FULL TEXT OF THE JUDGMENT/ORDER OF GUWAHATI HIGH COURT
Heard Mr. AH Mollah, the learned counsel appearing on behalf of the petitioner. Also heard Mr. SC Keyal, the learned Senior Counsel as well as the Standing Counsel, Customs assisted by Ms. K Jain, the learned counsel who appears on behalf of the respondent Nos.1 to 5.
2. The petitioner, herein, which is a proprietorship firm of one Harun Rashid has filed the instant writ petition challenging the seizure of the Areca Nuts by the respondent authorities.
3. The brief facts of the present case as it would appear from the materials on record are that the petitioner collected from different sources 17,200 Kgs of Assam dried Areca Nuts, and sold it to one Harun Rashid.
4. At this stage, it is very pertinent to take note of that the proprietor of the petitioner firm is also one Harun Rashid, who is the son of Abdul Gafur and whose Aadhar Number is 6261 5717 9012 and PAN Number is ALHPR00006M and his date of birth is 07.07.1978.
5. The person to whom the petitioner firm sold the said 17,200 Kgs of Areca Nuts was also one Harun Rashid, who is the son of Hazrat Ali, whose Aadaar number is 2166 8362 2760 and PAN number is AYAPR9589F.
6. On the basis of a transaction carried out on 30.11.2025, 17,200 Kgs of Areca Nuts having the total invoice value of Rs.33,81,000/- was sold to Sri Harun Rashid by the petitioner firm.
7. The said Areca Nuts were required to be transported by truck from Hailakandi to Rupohihat Godown at Nagaon, which is around 352 kilometers. The said truck was intercepted at Karimganj area by the Badarpur Customs Authorities. The said Areca Nuts thereupon were seized by the Inspector of Customs (Preventive Force), Badarpur on 02.12.2025.
8. The reason for the seizure was mentioned in the Inventory of the Goods seized. The reason for seizure was on the ground that an attempt of smuggling/illegal import into India through a route other than the route specified under Section 7(1)(c) of the Customs Act 1962 (for short, ‘the Act of 1962’), without having licit documents in support of its legal possession/transportation /importation, and in violation to Section 11, ibid read with Export (Control) Order No.1/88, dated 30.03.1988 as made applicable to Section 3 & 4 of the Foreign Trade (Development and Regulation) Act 1992.
9. The records further reveal that the petitioner thereupon on coming to learn requested for provisional release of the said Areca Nuts on 07.01.2026. On 13.02.2026, the petitioner was informed that the petitioner’s application for provisional release was disallowed vide an order dated 12.02.2026.
10. The order dated 12.02.2026 is relevant, inasmuch as, the said order recites the reason as to why the seizure was made. It was mentioned at Sub-paragraph (e) and (f) of paragraph 2 of the order dated 12.02.2026 that it was reasonably believed that the Areca Nuts were of foreign origin, which were suspected to have been illegally imported into India from Myanmar.
11. Sub-paragraph (i) of Paragraph 2 of the order dated 12.02.2026 is also of much relevance for the purpose of the present adjudication, inasmuch as, it was mentioned that samples were drawn from the seized goods from all the bags as mentioned in the Schedule to the Inventory. It was further mentioned that two representative samples, each weighing 500 grams, were carefully drawn randomly from the consignment, securely packed, sealed, and duly marked as Sample Nos. ‘S-01’ and ‘S-02’. These samples were taken to ensure that they accurately represent the entire quantity of the seized material. The purpose behind taking of the sample was also mentioned i.e. to facilitate their subsequent laboratory examination and testing in order to determine the nature and origin of the goods and to find out whether the goods in question were fit for human consumption in accordance with the applicable quality and safety standards.
12. It was further mentioned in the said order dated 12.02.2026 that the laboratory examination report was submitted by the State Public Health Laboratory, Bamunimaidan, Assam and it was opined that the samples conformed to the prescribed standards as per the Food Safety and Standards Regulation with respect to the test carried out.
13. A further perusal of the order dated 12.02.2026 would show that though the goods were found to be fit for human consumption, but on examination of the packages, no FSSAI License Number was printed on the packages as required under the FSSAI Act, 2006.
14. For the purpose of the present proceedings, it is relevant to take note of that the samples of the consignment were drawn to ascertain two material considerations. One, as to whether it was fit for human consumption; and second, as to whether the Areca Nuts in question were of foreign origin. In spite of the test being carried out, nothing could be shown that the Areca Nuts, in question were of foreign origin, and this aspect would be apparent from the order dated 12.02.2026.
15.Be that as it may, the application so filed for provisional release of the Areca Nuts was rejected. It is under such circumstances, the petitioner being aggrieved had approached this Court by filing the present writ petition.
16. The learned Coordinate Bench of this Court vide an order dated 25.05.2026, issued notice making it returnable by 2(two) weeks. It is also taken note of that in pursuance to the directions passed by this Court, the petitioner had filed an additional affidavit detailing out the manner in which the Areca Nuts in question were seized and further providing the details of the petitioner who was the consignor and Shri Harun Rashid, who was the consignee.
17. This Court had heard the learned counsels appearing on behalf of the petitioner, as well as the learned Senior Counsel, who appears on behalf of the respondents. Mr. SC Keyal, the learned Senior Counsel appearing on behalf of the respondents had also produced the records of the proceedings before the authorities which have been duly perused.
18. The question which arises for determination in the instant proceedings is as to whether the power exercised by the concerned respondent authorities to seize the Areca Nuts in question was in accordance with Section 110 of the Act of 1962?
19. A perusal of Sub-section (1) of Section 110 of the Act of 1962 stipulates that if the proper Officer has ‘reason to believe’ that any goods are liable to confiscation under the Act of 1962, he may seize such goods. Sections 111 and 113 of the Act of 1962 stipulates when goods are liable to be confiscated. A perusal of Section 111 of the Act of 1962 would show that the power to confiscate is solely in respect to goods brought from a place outside India. Section 113 also empowers confiscation when goods are attempted to be improperly exported. Taking into consideration, the facts involved, wherein the reasons for seizure was importing of goods, Section 111 of the Act of 1962 would be relevant for the purpose of the present dispute.
20. A conjoint reading of Section 110(1) and Section 111 of the Act of 1962 would show that only in respect to goods which are brought from a place outside India, the same are liable for confiscation and it is only when there is/are reason(s) to believe that the goods in question are liable for confiscation in terms of Section 111 of the Act of 1962, the power can be exercised.
21. This Court finds it very pertinent to take note of the expression ‘reasons to believe’, which is employed in Section 110 of the Act of 1962. The Supreme Court in the case of Income Tax Officer, I Ward, Dist, Vi, Calcutta & Ors Vs. Lakhmani Mewal Das reported in (1976) 3 SCC 757, categorically observed that the reasons for formation of the belief must have a rational connection with or relevant bearing to the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Officer and the formation of his belief that there has been escapement of income. The Supreme Court categorically observed that there is a difference between the terminology of ‘reason to believe’ with ‘reason to suspect’. Paragraphs 11 and 12 of the said judgment being relevant are reproduced hereinbelow:
“11. As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words “definite information” which were there in Section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in Section 147 of the Act of 1961 would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.
12. The powers of the Income Tax Officer to reopen assessment though wide are not plenary. The words of the statute are “reason to believe” and not “reason to suspect” The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the Income Tax Authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income Tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter’s failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs.”
22. From the above principles laid down, it is apparent that there is a foundational distinction between the phrases ‘reasons to believe’ with ‘reasons to suspect’. This foundational distinction is one of degree, quality and judicial reviewability. From the above-quoted paragraphs, it would show that when the phrase ‘reasons to believe’ is used, the Legislature have chosen a higher threshold than a mere suspicion. It cannot be on the basis of wholly vague, indefinite, farfetched and remote considerations. The reasons for formation of the belief must be in good faith and should not be a mere pretence, rather it should have live link or close nexus between the material available before the Officer and the belief which he has to form to the effect that the goods in question were of foreign origin. The Customs Officer should have materials for the formation of the belief that the goods in question were of foreign origin. A mere hunch or a suspicion would not confer the jurisdiction upon the Customs Officer to exercise the power of seizure in terms with Section 110(1) of the Act of 1962.
23. In the case of Collector Of Customs Vs. Charan Das Malhotra reported in (1971) 1 SCC 697, the Supreme Court observed that though Section 110(1) of the Act of 1962 do not contemplate an enquiry at the stage of seizure, but reasons to believe that the goods are liable for confiscation by reason of their illegal importation have to be relevant and not extraneous.
24. In a recent judgment of the Supreme Court in the case of Radhika Agarwal Vs. Union of India & Ors. reported in (2025) 6 SCC 545, the Supreme Court considered the term ‘reasons to believe’ as mentioned in Section 69 of the Central Goods and Service Tax Act, 2017 where the Commissioner if he has reasons to believe that a person had committed any offence specified in Clauses (a) to (d) of Sub-section (1) of Section 132, may authorize any Officer of Central or State Tax to arrest such person. The Supreme Court categorically observed that the exercise of the power should be undertaken in right earnest and not mere ipse dixit without foundational reasoning and material. Paragraph 59 of the said judgment being relevant is reproduced herein below:
“59. The aforesaid exercise should be undertaken in right earnest and objectively, and not on mere ipse dixit without foundational reasoning and material. The arrest must proceed on the belief supported by reasons relying on material that the conditions specified in sub-section (5) of Section 132 are satisfied, and not on suspicion alone. An arrest cannot be made to merely investigate whether the conditions are being met. The arrest is to be made on the formulation of the opinion by the Commissioner, which is to be duly recorded in the reasons to believe. The reasons to believe must be based on the evidence establishing—to the satisfaction of the Commissioner—that the requirements of sub-section (5) to Section 132 of the CGST Act are met.
25. In the backdrop of the above, if this Court duly takes note of the grounds of seizure, as mentioned in the Schedule to the Inventory of the goods seized, there is nothing mentioned in the said document as to why there was a ‘reason to believe’ that the Areca Nuts, in question were believed to be of foreign origin. It was only mentioned that there was an attempt of smuggling/illegal import into India through a route other than the route specified under Section 7(1) (c) of the Customs Act 1962 (for short, ‘the Act of 1962’), without having licit documents in support of its legal possession/transportation /importation, which was in violation of the provisions of law. There are also no contemporaneous materials produced before this Court by the respondents to show that from the size or features of the Areca Nuts in question, the Officer could have reasons to believe that the Areca Nuts were of foreign origin. Under such circumstances, it, therefore, appears that the seizure of the Areca Nuts were based upon a mere suspicion having no live link or rational nexus.
26. This Court has also perused the materials on record, i.e. the tax invoices and the payment of the GST, including the e-way bill, which clearly show that the documents in question were there to show that there was a sale between the petitioner as well as Shri Harun Rashid, and it is in pursuance to the sale, the goods were moving from Hailakandi to Rupahihat in Nagaon district.
27. This Court also takes note of that samples were drawn, as would be apparent from a perusal of the order dated 12.02.2026, to verify as to whether the Areca Nuts in question were fit for human consumption, and also as to ascertain the nature and origin of the Areca Nuts. The laboratory reports categorically mentioned the goods to be fit for human consumption, but there is nothing on record which have been produced to show that there are reports that the Areca Nuts in question which were seized were of foreign origin.
28. It surprises this Court to take note of that the Customs authorities were more bothered on the petitioner not having an FSSAI license, the jurisdiction of which lies upon the authorities under the FSSAI Act. Under such circumstances, as there is nothing on record to show that the Areca Nuts in question were of foreign origin, the question of the same being brought from outside India does not arise. If the goods in question are not brought from outside India, there cannot be an applicability to Section 111 of the Act of 1962 and if Section 111 of the Act of 1962 cannot be pressed into service, the seizure so carried out under Section 110 of the Act of 1962 would not be permissible.
29. It is also the opinion of this Court that as there are no materials to show that the goods in question were of foreign origin, the basis on which the seizure was carried out cannot be said to be based upon ‘reasons to believe’, but rather it was on account of suspicion and, therefore, it was without jurisdiction, inasmuch as, ‘reasons to believe’ is a condition precedent for exercise of power under Section 110 of the Act of 1962.
30. Accordingly, the instant writ petition, therefore, stands disposed of with the following observations and directions:
i. The seizure of the Areca Nuts in question made in terms with the Schedule to the Inventory of goods seized by the Inspector of Customs (Preventive Force), Badarpur on 02.12.2025 is without jurisdiction and authority of law, for which the same is set aside and quashed.
ii. The Customs Authorities, more particularly, the Inspector of Customs (Preventive Force), Badarpur in whose possession the Areca Nuts in question are lying shall release the same forthwith upon production of a certified copy of this judgment.
iii. The Truck (TATA LPT 1916) bearing Registration No.AS 08 C 3453, which was also seized, be released forthwith upon production of the certified copy of this judgment.
iv. The respondent authorities shall bring to a closure the proceedings initiated against the petitioner on the basis of the instant judgment, unless any fresh materials have come to the possession of the respondent authorities, to hold otherwise.
v. No costs.
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