Goods smuggled from Foreign Origin without customs clearance in absence of reasons to believe was invalid

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.

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