2025(09)LCX0063

Subhankar Sarkar

Versus

Commissioner of Customs (Preventive)

Customs Appeal No. 70205 of 2022 decided on 16-09-2025

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
E-Hearing
REGIONAL BENCH - COURT NO.I

Customs Appeal No.70205 of 2022

(Arising out of Order-in-Appeal No.73-CUS/APPL/LKO/2022 dated 03.02.2022 passed by Commissioner (Appeals) Customs, CGST & Central Excise, Lucknow)

Shri Subhankar Sarkar,
Proprietor of M/s S.S. Import & Export                     …..Appellant
(Village & P.O.- Jagatballavapur, Distt.-Howrah,
West Bengal-711408)

VERSUS

Commissioner of Customs (Preventive),
Lucknow                                                                 ….Respondent
(Hall No.3, 5th & 11th Floor, Kendriya Bhawan,
Sector-H, Aliganj, Lucknow-226024)

APPEARANCE:

Shri Harendra Kumar Pandey, Advocate for the Appellant
Shri A. K. Choudhary, Authorized Representative for the Respondent

CORAM: HON’BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)

FINAL ORDER NO.- 70655/2025

ATE OF HEARING : 01.05.2025
DATE OF PRONOUNCEMENT : 16.09.2025

The present appeal has been filed by the Appellant assailing the Order-in-Appeal No.73-CUS/APPL/LKO/2022 dated 03.02.2022 passed by Commissioner (Appeals) Customs, CGST & Central Excise, Lucknow.

2. The facts of the case in brief are that the Appellant is engaged in import of garments from Bangladesh and during the period from 15.02.2019 and 20.07.2019, he imported some 17 consignments of garments collectively valued at Rs.3.35 crores by filing proper Bills of Entry, assessment and clearance thereof for home consumption. Thereafter, the goods so imported were sold to different customers in normal course of business. M/s Kotty Life Style Pvt. Ltd., of Delhi (GSTIN 07AAGCK0951K1ZF) was one of his customers to whom he sold 2000 pcs Trousers, 400 pcs Kids trousers and 505 pcs short pants having a value of Rs.1,11,095.25 inclusive of IGST of Rs.5,290.25. The sale was duly reflected in the periodical GST return. On 14/15 July, 2019, Officers from Lucknow Customs(Preventive) apprehended one Truck No.HR38X0317 which was loaded with readymade garments. The driver produced a number of Invoices and e-way bills including the one issued by the Appellant to M/s Kotty Life Style of Delhi. All the goods alongwith the truck was seized under Section 110 of the Customs Act, 1962. A summon was served on the Appellant asking for his appearance before the Investigating Officer to which he replied that the goods sold by him were properly imported and duly invoiced in the name of the buyer. He sent copies of the Bills of Entry etc., which are verifiable online. Show Cause Notice dated 07.01.2020 proposing confiscation of the goods and the carrier vehicle was served to the Appellant as a co-noticee.

3. In reply to the said notice, he submitted that since he had sold the goods, the ownership was transferred to the buyer. It was pointed out that it is not the case that the truck was carrying goods sold by him only or imported goods only. The truck was admittedly loaded with both Indian and foreign made garments bought by a number of customers who might have bought from different sellers in Kolkata/Howrah. Howrah has a readymade garment Haat famous for its cheap clothing. It was not a case that the seized goods were packed/packaged in any separate packet/package having the identity of the goods sold by the Appellant to the said buyer. It was all mixed up. The learned Adjudicating Authority observed that the Appellant never appeared before the Investigation and that he failed to specify the Bill of Entry through which he imported the seized garments and corresponding purchase invoice, E-way bills, Bilty in respect of seized garments. It was also submitted that he had not imported branded garments but the seized goods were having different brand names. That the goods with alleged brand names did not belong to the Appellant nor there was any specific allegation that those garments with alleged brand names were sold by him. Such garments affixed with different brand names are freely available in local markets which are not necessarily imported. The learned Adjudicating Authority confiscated the foreign origin goods giving an option to redeem it on payment of R. F. of Rs.7 lakhs. Penalty of Rs.3 lakhs is imposed on the Appellant. Being aggrieved, the Appellant filed appeal before the learned Commissioner (Appeals) and the learned Commissioner (Appeals) has upheld the adjudication order. Hence, the present appeal before the Tribunal.

4. The learned Advocate appearing on behalf of the Appellant submitted that from the sequence of event, it would be clear that in a truck load of garments, a portion thereof were having foreign brand garments also and were seized enroute from Kolkata to Delhi at Lucknow. The goods are neither notified under the Customs Act nor is the place of seizure near any International border. Some of the goods suspected to be of foreign origin were said to be imported by the Appellant. That he had imported garments without any marking legally and had sold a part thereof to the customers.

5. Learned Departmental Authorized Representative filed a written submission and submitted that no record has been provided or had been brought on record by the Appellant to show that the sale of the goods covered under the impugned order was on “High Sea Sale Basis”. Unless or otherwise a documentary proof is submitted to substantiate the claim, that they are no longer the owners of the impugned goods, the liability of Appellant as an importer under the provisions of Sub-section 26 of Section 2 of the Customs Act, 1962 cannot be unfastened. He submitted that the appeal regarding waiver of penalty is meritless and thereby the Order-in-Appeal needs to be upheld by the Tribunal.

6. Heard both the sides and perused the appeal records.

7. The present appeal has been filed assailing the imposition of penalty of Rs.3,00,000/- under Section 112(b) of the Customs Act, 1962. I find that the Appellant having been engaged in the business of import of ready-made garments from Bangladesh, had sold 2400 pcs. of Trousers and 505 pcs of short pant to Kotty Lifestyle Pvt. Ltd., vide Invoice No.G-209 dated 12.07.2019 valued at Rs.1,11,095.25 inclusive of IGST of Rs.5,200/-. The buyer informed the Appellant about seizure of the goods and asked him to give a declaration regarding sale of the said goods. As a good gesture, he authorized him to do the needful in respect of the goods sold by him. Subsequently, he came to know that the said letter was treated as claim for the goods which was never the Appellant’s intention. The Appellant subsequently submitted to the Investigating Officers and the Adjudicating Authority that after sale, the buyers got the goods collected from his premises, and as he was subsequently informed, booked through M/s M. R. Cargo, packed with goods procured from other sellers for onward transportation. After completing the investigation, a Joint SCN was issued to (i) Mohd. Danish, Proprietor of M/s Imperial Export & M/s H. D. International (ii) Ms. Shama Parveen, Proprietor of M/s D. S. Enterprise, (iii) Shri Subhankar Sarkar, Proprietor of M/s S. S. Import & Export and (iv) Mohd. Nazish, Proprietor of M/s M.R. Cargo Express, wherein it was proposed as to why the aforementioned recovered and seized foreign origin goods i.e. clothes valued at Rs.67,92,400/- which have been illegally imported in India should not be confiscated under Section 111 of the Customs Act, 1962. The aforementioned recovered & seized Indian Origin clothes valued at Rs.2,58,200/- which were used for concealing the said foreign origin goods, should not be confiscated under Section 119 of the Customs Act, 1962. In reply to the said SCN, the Appellant submitted inter-alia, that he is engaged in the business of Readymade Garments. During the period between 15.02.2019 and 20.07.2019, he imported Readymade Garments from Bangladesh as below:-

8. During normal course of business, the Appellant sold 2400 pcs. of Trousers and 505 pcs of short pant to Kotty Lifestyle Pvt. Ltd., vide the Invoice No. G-209 dated 12.07.2019 valued at Rs.1,11,095.25 – inclusive of IGST of Rs.5,200/-, out of his stock-in-trade. The buyer got the goods collected from his premises, and as he was subsequently informed, booked through M/s M. R. Cargo, packed with goods from other sellers for onward transportation. Pertinent to mention that the goods sold by the Appellant were not even packed at his premises. It was collected through porter as per prevalent practice. The entire consignment of Kotty Lifestyle was seemingly loaded in Truck No. HR-38X0317 belonging/hired by said M/s M. R. Cargo which was detained and seized by Lucknow Customs under the provisions of the Customs Act, 1962. Since the ownership of goods got transferred to the buyer, the Appellant was not claiming ownership of the goods seized. Goods sold by him, though imported, did not have any brand name and he had nothing to do with the goods which did not resemble with identity of the imported goods, the Appellant submits.

9. It is the case of the Appellant that the seizure had been made at a place inside Indian Territory and the seized goods are mixed up. The seized goods do not have any marking and number that it could be correlated with the import documents which only bear the description of the goods like pants, jackets etc. It is a settled law that the goods once imported for home consumption, loses its foreign character and is to be treated at par with indigenous goods. In the instant case, the goods are not covered under Section 123 of the Customs Act, 1962 nor are notified under Section 11 ibid. The Appellant is neither the owner of the goods nor was in anyway concerned with its transportation etc., and therefore no penalty under Section 112(b) of the Customs Act, 1962 is imposable on the Appellant. I find from the records that the Appellant is a regular importer and had imported substantial quantity of Garments from Bangladesh, which is subjected to statutory physical examination by the proper officers of Customs. It is also on record that the Appellant did not claim ownership of the goods in view of the fact that on sale, the ownership of the goods stood transferred to the buyer. The sale had taken place under proper invoice supported with GST returns and lawful possession of the foreign garments had been duly explained by producing Bills of Entry for the relevant period. It was open to the Customs Authority at the Port to invoke provisions of the Intellectual Property Rights (Imported goods) and Enforcement Rules, 2007. The goods were cleared by the Customs on examination as per norms and no violation of IPR was noticed. I find that the facts of the present case are squarely covered by the decision of the Tribunal in the case of Sukumar Mondal vs. Collector of Customs (Prev.) 1990 (48) E.L.T. 56 (Tri.), relevent paras are reproduced for ready reference:

“14. We have given careful consideration to the submissions made by both the sides. We have also perused the record. We find that the Collector had, while adjudicating the case, dealt with mainly the same submissions which the appellants have now reiterated in the appeals also. The earlier Tribunal decision in the case of S.N. Sarkar and Abdul Latif v. Collector of Central Excise [1985 (22) E.L.T. 186 (Tribunal) = 1984 ECR 2296] was relied upon by the appellants at the stage of adjudication also in support of their contentions that the department had failed to initially prove, or at least prima facie establish the smuggled character of the goods. Rejecting this contention, the Collector observed that this decision of the Tribunal was given in respect of a case where the goods were confiscated even after producing the documents by the appellant evidencing the legal possession of the goods whereas in the case before him the persons who claimed ownership of the seized goods had not been able to produce evidence showing their legal importation/acquisition/possession. He has held that the smuggled character of the goods is proved by the marks of foreign origin and that the ratio of the earlier Tribunal decision cannot be said to be relevant to the instant case. It was this aspect of the Collector’s order that was stressed by the learned JDR while stressing the point that as laid down in the D. Bhourmul case by the Supreme Court it is not necessary to establish in a smuggling case every link in the chain of the clandestine activity. In that case the Supreme Court had, while conceding that no direct evidence of the illicit importation of the goods was adduced by the department, it had made available to the Collector several circumstances of a determinative character which coupled with the inferences arising from the dubious conduct of Baboothmull and Bhourmull could reasonably lead to the conclusion drawn by the Collector that they were smuggled goods. Examining this criterion to the present case, we find that the department has not, however, established even a preliminary or prima facie case of the goods having been smuggled. Barring the fact that some of the pieces of readymade garments bore marks of foreign origin viz. Japan, Taiwan, Korea, there is no other evidence. There is no dubious conduct on the part of the appellants who claimed ownership of the goods unlike the Bhourmull case. They had explained that the goods seized had been procured from the local people on valuable consideration. The accumulation of stocks has been explained by the appellants as caused by heavy rainfall in Dinhata town in the monsoon season as a result of which the goods could not be despatched to the different Hats. There is no finding by the Collector that this defence was considered by him and rejected as untenable. Further, the appellants’ contention that the foreign made labels were there only on some of the garments and not in all of them has also not been considered. A basic objection had actually been raised by the appellants is that the evidence regarding marks of foreign origin on the garments never formed part of the grounds of the Show Cause Notice. The report of the Superintendent of Customs, Dinhata about the marks of foreign origin had been furnished to the Collector behind the back of the appellants which, they contend, is against the fundamental principles of judicial practice. On this question, we find that the Show Cause Notice had actually mentioned that the goods seized were of third country of origin as evident from the markings. The information about the actual country of origin had not been contained in the Show Cause Notice. The department should have placed all the available evidence necessary to sustain the charge in the Show Cause Notice and not furnished it after the personal hearing before the adjudicating officer was over. However, in view of the ultimate decision in the matter being taken by us, this deficiency in the procedure followed by the department loses its relevance.

15. We have said earlier that the appellants have contended that the marks of foreign origin as communicated by the department to them were there in some of the garments. There was no indication that they were there in all the garments. We feel that where the only basis on which the garments were confiscated was the marks of foreign origin it would not be in order to confiscate all the garments as if all of them were of foreign origin, when admittedly such marks were found in only some of them. Further, the thrust of the judgements cited by the learned JDR regarding the effect of the marks of foreign origin is only that they were of foreign origin or that they had been imported. That does not mean that these goods had been smuggled into the country rendering them liable to confiscation.

16. The appellants had explained how they had acquired the goods. There is no mention in the Collector’s order that this had been disbelieved and that we found contentions untenable and hence rejected the same. The only reason given is that they did not produce only evidence regarding their legal importation/acquisition and possession. Examining the appellants’ contentions the Collector has observed in his adjudication order that the seizure list did not indicate the marks of foreign origin and that on a reference to the seizing unit it had been ascertained that the goods under seizure bore marks of foreign origin, viz. Japan, Taiwan, Korea etc. and this information was communicated to the advocate. He has held that the marks of foreign origin borne on the goods under seizure bore conclusively prove their smuggled character and these goods of third country origin were brought into India illicitly through unauthorised routes from the neighbouring foreign territory Bangladesh. This point has already been examined by us. The foreign make marks found in some of the garments can only mean at the most those garments had been made in those foreign countries. It cannot lead to the conclusion that other goods without such markings are also made in foreign countries and that all the goods including those with the foreign made labels had actually been smuggled from a foreign country into India. The distinction sought to be made out between the present case and the other case which was decided by the Tribunal (S.N. Sarkar and Abdul Latif, supra) is not correct. The contention of the appellants regarding the manner of acquisition of the garments has not been specifically repelled by the Collector. On top of it, to say that the persons have not been able to produce evidence showing legal importation/acquisition/possession of the goods would only mean that he has transferred the burden cast on the department to prove the smuggled nature of the goods of the appellants, asking them to prove the licit nature of their acquisition. In the case of S.N. Sarkar and Abdul Latif supra, the concerned parties had also only made a claim that they had acquired the goods (which also happened to be old garments) from various persons including persons who had purchased them from authorised auction sources. The claim regarding the method of acquisition of the goods covered in the present appeal though not exactly similar to the one made in the earlier case decided by the Tribunal is not such as to warrant a conclusion that they are smuggled goods. The Tribunal had held in the said case that though all the goods in question were of foreign origin which fact was not a matter in dispute, there could not be any presumption whatsoever that they must have been smuggled into India. The Collector’s observation in that case that the fact that the seized goods were imported and that such imports were restricted or prohibited and that the seizure was effected on the basis of specific information, would give rise to a presumption of the smuggled character of the goods was repelled by the Tribunal holding that such a conclusion was unjustified. The goods were neither notified under Section 123 of the Customs Act, 1962 nor covered by Chapter IVA of the Act. Hence, placing the burden on the appellants to prove the lawful origin of the goods in India was not justified. The ratio of this case squarely applies to the present appeal.

17. The contention of the appellants that mere suspicion cannot amount to evidence and in absence of reliable evidence penalty is not sustainable, is based upon the decision of the Tribunal in Abdul Aziz & Sons v. Collector of Customs, New Delhi [1983 ECR 1747 CEGAT]. This has been rejected by the Collector with the observation that as in the above case the appellants were accused of smuggling Hashish in wooden furniture etc. mis-declared to Customs, the facts of that case are distinctly different from the instant one, the ratio of the decision cited was not relevant to the case before him. This is a palpably wrong conclusion by the Collector. The stand that suspicion cannot amount to evidence is an unexceptionable generalisation which is truly applicable to any case irrespective of the difference in the nature of case, or the commodity or modus operandi involved.

18. The Collector was, however, on better ground while dealing with the contention of the appellants about the absence of reference to Sub-section (a) or (b) of Section 112 in the Show Cause Notice, but the reference being only to Section 112 itself in support of which they had cited the judgment of the Madras High Court in B. Lakshmichand v. Government of India [1983 (12) E.L.T. 322 (Mad.)]. He has observed in the said case, penalty had been imposed under Section 112 of Customs Act, 1962 whereas the case before him was under process of adjudication and no penalty had been imposed under Section 112 without specifying Clause (a) or Clause (b) thereof and he thereby concluded that the ratio of the case cited did not apply in the case before him. We also find that in the Lakshmichand case supra, neither in the Show Cause Notice nor the order passed, there was reference to Act and that the essential ingredients have not been specifically spelt out with reference to either of the clauses. The Collector had reached a finding in his adjudication order under appeal before us now that the appellants had engaged themselves in selling, purchasing or in any other manner dealing with any goods which they knew or had reason to believe were liable to confiscation and hence they were the persons concerned within the ambit of meaning of Section 112(b) of the Customs Act, 1962. But paradoxically the imposition of penalty of Rs.500/- on each of the appellants is without reference to even Section 112, not to talk of sub-section (a) or sub-section (b) thereof. However, in this discussion as he had referred to them as the persons concerned within the ambit of the meaning of Section 112(b) of the Customs Act, 1962 the absence of reference to these provisions while imposing penalty on them does not, on that score vitiate the order. But as we have observed earlier, the identity of goods as smuggled goods liable to confiscation not having been established, we have no hesitation in accepting these appeals setting aside the Collector’s order. The confiscation of the goods in question and the order of imposition of penalty on each of the five appellants are set aside. The appellants will be entitled to the consequential reliefs arising from this order.”

10. In view of the above discussions, the penalty of Rs.3,00,000/- imposed under Section 112(b) of the Customs Act, 1962 is set aside. The appeal filed by the Appellant is allowed with consequential relief, if any, as per law.

(Order pronounced in open court on - 16.09.2025)

Sd/-         
(P. K. CHOUDHARY)
MEMBER (JUDICIAL)