2000(03)LCX0183

IN THE CEGAT, WEST ZONAL BENCH, MUMBAI

Shri J.N. Srinivasa Murthy, Member (J)

ARVINDBHAI NYALCHAND MEHTA

Versus

COMMISSIONER OF CUS., AHMEDABAD

Order No. 909/2000-WZB/C-I dated 3-3-2000 in Appeal No. C/276/99-Bom

Cases Quoted

Hindustan Bearing Corporation v. Collector — 1990(03)LCX0003 Eq 1990 (050) ELT 0091 (Tribunal)
— Referred                                                                                                                       [Para 2]

Kulbhushan Jain v. Commissioner — 1999 (111) ELT 906 — Relied on                              [Para 8]

Ravi Mittal v. Commissioner — 1999(04)LCX0092 Eq 2000 (117) ELT 0182 (Tribunal) — Relied on                [Paras 2, 8]

Santosh Gupta v. U.O.I. — 1986(06)LCX0017 Eq 1990 (048) ELT 0210 (Bom.) — Referred                                     [Para 6]

Shantilal Mehta v. U.O.I. — 1983 (014) ELT 1775 — Relied on                                       [Paras 6, 7]

Advocated By : Shri S.B. Patil, Advocate for the Appellant.

Shri K.M. Patwari, JDR, for the Respondents.

[Order]. - This appeal is filed by Arvindbhai Nyalchand Mehta against the above captioned impugned order dated 22-1-1999 praying for setting aside the same as department has not produced any evidence to show the seized ball and roller bearings are notified item, and they are smuggled goods, and release them and for such other relief as deemed fit.

1. The brief facts of the case are that the residential and business premises and godown of appellant was searched at Rajkot on 16-1-1998 by the officers of Jamnagar Customs division, on the basis of intelligence collected. 8124 pieces of foreign origin of ball bearings were found in the business premises namely M/s. Ball bearings and Machinery Co. and 1289 pieces of source type was found in godown. Appellant could not produce any document or explain about the import of the above material as the owner of the above premises. Goods worth Rs. 1,07,294/- (from business premises) and Rs. 1,70,075/- (from godown) were seized, and kept in boxes for safe custody, under the panchnama dated 19-1-1998. Statement of appellant was recorded on 16-1-1998 and 27-2-1998. Show cause notice was issued on 3-7-1998 to the appellant to show cause as to why the above seized goods should not be confiscated under Section 111(d) of Customs Act, and penalty should not be imposed on him under Section 112(b) of the Customs Act. Appellant replied it on 21-7-1998 through the consultant, who represented in personal hearing on 2-12-1998 and submitted arguments and filed written submission. On going through all the material on record, impugned order was passed on 22-1-1999 confiscating the seized goods with redemption fine of Rs. 21 lakhs, and imposed penalty of Rs. 1.5 lakhs. Hence this appeal.

2.  Shri S.B. Patil, the ld. Consultant for appellant, has argued that ball or roller bearing under chapter heading 84.82 is freely importable under 1992-97 Exim Policy and it is openly available in market. As per 1999(04)LCX0092 Eq 2000 (117) ELT 0182 (Tribunal) = 1999 (085) ECR 0085 (paragraph 5) in the case of Ravi Mittal v. CCE, it is for the department to prove that the seized goods is a prohibited goods liable for confiscation and the appellant liable for penalty. Appellant, retail dealer in different types of bearings purchased in open market. Unconditional stay is granted in this case, showing prima facie case for appellant. There are no reasonable belief under Section 110 of customs act at the time of seizure of goods 1990(03)LCX0003 Eq 1990 (050) ELT 0091 (Tribunal) = 1991 (035) ECR 276 is relied on showing general inter alia in Hindustan Bearing Corporation v. CC, Calcutta. Impugned order has not dealt with all points raised, nor considered the rulings cited. Irrelevant case law is relied. Goods seized are single items from different sources. Non accountal of possession does not render the above goods liable for confiscation. Unless department proves that they are covered under Chapter IVA or section 123 of Customs Act, which is not shown.

3.  Shri K.M. Patwari, the ld. JDR for respondent has argued that this is a case of town seizure. Appellant's statement admit that seized goods are of foreign origin. Appellant, though undertook, failed to produce documents for licit possession of seized goods. Seizure is on 16-1-1998. Period of import is not clear from the policy. Ball bearing comes under REP/OGL, with condition of actual user, but not under free category. Burden is shifted to the appellant, which is not discharged as per the appellant's statement, with his admission, impugned order is correct. In the reply arguments, it is urged that circumstantial evidence is not relevant to unmodified goods. Statement of appellant is exculpatory. Ball bearings are not imported, but purchased from brokers. Paragraph 3 of the above ruling is clear.

4.  The point for consideration is whether there are sufficient and satisfactory grounds to allow the appeal? My finding is in the affirmative.

5.  Perused the show cause notice, reply, written submission, and impugned order and appeal memorandum. Also perused the 1992-97 Exim Policy, Chapter IVA and Section 123 of Customs Act and also the rulings cited in the case which are considered and dealt with in the below paragraphs. Also perused the documents produced by appellant. As per the appeal memorandum, goods involved is 8124 pieces of ball roller bearings of 926 types of assorted of different origin, Germany, Japan, USA, Australia, Sweden, England, Russia, China, France, Czechoslovakia, Hungary and 1289 bearings of foreign origin. Also assorted of different origin, seized from the business premises M/s. Ball bearings and Machinery Co. and godown of the appellant, during the search on 16-1-1998. The appellant is a dealer retainer, doing business for the last 14 years as per the statement under Section 108 of Customs Act. According to him, he was never an importer at any time, nor he had any licence to import. He had purchased them on piece meal basis in cash from the salesman visiting his shop, considering the requirement of trade. He was not given any documents from the salesman nor he had invited them. He had purchased them from salesmen duly approved by All India Ball Bearings Merchant Association and Ball and roller bearings Merchant Association coming from Mumbai and other cities of India. They met him personally for selling of bearings from open market. After purchase, when he approached for documents, they assured that such documents would be produced by them, if demanded. However to avoid Customs involvement, nobody could come forward. The department mainly relied on the above material and issued show cause notice.

6.  The goods are searched and seized on 16-1-1998 and 19-1-1998 under panchnama. They are ball roller bearings. Even under 1997-2002 Policy, ITC Classification of Import and Export items under Chapter 84.82 ball or roller bearings, all types are freely importable at pages 791-792 issued by Ministry of Commerce, Government of India. The contention of the JDR that it is under REP or OGL cannot be upheld Notification No. 23/98, dated 2-6-1998 as referred in Budget edition, business data publishing Co., New Delhi at page 433. There is no material available on record that seized goods come under the category of goods referred under Section 11 of Customs Act and Section 123 of said Act. On the other hand, Schedule A of notification regarding specific prohibition and restrictions of exportation and importation Items 1 to 97 at pages 4.136 to 4.166 issued under Section 11 of the Act does not contain the ball or roller bearings. Notification under 123 of Customs Act, regarding burden of proof on certain case containing 7 items under Notification No. 52 Cus/27-3-1968 and 13 items under Notification No. 204 Cus., dated 20-7-1984 as amended noted under No. 4/93-Cus. (N.T.), 15-1-1993 in page 4.227. Both under Part IV of Customs Law Manual for 1997-98 do not cover the goods ball and roller bearings covered under this case. In view of this position, the contention of the appellant, regarding the nature of goods and burden of proof that it is for the department to establish that the goods seized are prohibited goods under Section 111(d) of Customs Act has to be, and is accepted. Proceedings under Customs Act being penal in nature, burden is always on the department to establish the case as per 1986(06)LCX0017 Eq 1990 (048) ELT 0210 (Bom.) = 1991 (033) ECR 380 in the case of Santosh Gupta v. UOI. In order to attract Section 123 of Customs Act, the essential goods must be smuggled goods. The term "smuggled" means goods of foreign origin and imported from abroad. There must be some thing suggesting their foreign origin and their recent importation from abroad. It cannot, from unaccounted goods be referred that they are smuggled goods; for they must be stolen goods as per 1983 (014) ELT 1775 in the case of Shantilal Mehta v. UOI. So with this background, the impugned order is examined below.

7.  On the perusal of the impugned order, under the heading Findings in page 2 and 3, the Commissioner of Customs, Ahmedabad has concluded that the seized goods are smuggled on the basis of appellant's admission in his statement that they are of foreign origin, and the failure on his part is not producing any documents to prove their licit import. The basis for search and seizure is the intelligence collected. As contended by appellant, the department has not explained the nature of intelligence and what was the reasonable belief on the part of seizing officer to seize the goods from appellant. On what basis the Commissioner has held that the appellant knew that the bearings were illegally imported is not clear. Failure to insist for documents from the vendors, and to enter in his records of sale and purchase is made the basis of knowledge. Panchnama drawn is not available on record. The records of the shop of the appellant are neither seized, nor produced in support of the above observation. In page 3 and 4, Commissioner has rejected the case of the appellant in reply to show cause notice, written submission and oral arguments by holding that receipt of information or intelligence or other citation is immaterial on foreign made ball bearings were seized from the appellant's premises. Panchnama copy was supplied to him. Service of search warrant was not complained by the appellant. It is further observed that appellant should have accounted for the possession or acquisition of foreign ball bearings, and its importation, which he has failed, and kept silent irrespective of the fact that it may not be notified goods, nor coming under Section 123 of Customs Act. It is for the appellant to prove the fact, and it never shifts. Appellant has failed to discharge that burden of showing licit possession of seized goods. The question of department discharging the burden arises, when the appellant produces documents showing licit possession of seized goods. The above finding in the light of decisions of Tribunal, goes against the basic principles of Quasi Penal nature of Procedures under Customs Act and the requirement of department to establish two facts as observed in the two decisions referred in paragraph 6 of the order. The adjudicating authority has mainly based the finding on the statement of the appellant, and admission therein, that foreign origin ball or roller bearings were found with the appellant, without any licit documents accounting for possession. This is not sufficient to treat the seized goods as smuggled one as per the ruling in paragraph 6 of this order. No supporting material to the raid admission by way of records of appellant showing not entering or circumstances are pointed out in support of the findings. Failure to account possession of seized goods is made the basic plank to decide the seized goods is smuggled one which is opposed to the decision in 1983 (014) ELT 1775 in the case of Shantilal Mehta v. UOI. So the finding in the impugned order cannot be upheld.

8.  The ruling in 1999(04)LCX0092 Eq 2000 (117) ELT 0182 (Tribunal) = 1999 (085) ECR 85 in the case of Ravi Mittal v. CC, New Delhi in paragraph 5 of the order fully supports the case of appellant. Regarding burden of proof - "According to it, burden to prove that the ball bearings (which the appellant claimed to have purchased from a dalal) were actually smuggled goods, lay on the department, since ball bearings are not goods specified/notified under Section 123 of Customs Act". This case is identical to the case on hand, even as per the admission of the appellant in his statement, which is the sole basis to confiscate seized ball or roller bearings and to impose penalty on appellant. The department has not even tried to establish it. Further it is clearly held that burden of proof shifts to assessee only when the department has discharged the initial burden falling on it. Since ball bearings are not prohibited goods, it cannot be presumed that the impugned goods were brought illegally into the country, and confiscation is not justified. The decision aptly applies to this case. Another latest decision in 1999 (111) ELT 906 in the case of Kulbhushan Jain v. Commissioner of Customs, both regarding town seizures of ball bearings is dealt with. As per JDR this is a case of town seizure. Paragraph 18 and 19 of the order is relevant wherein it is clearly held that - "foreign origin of goods by itself is not evidence when goods are freely importable by actual users and there are no restrictions on their purchase and sale under Customs Act 1962. Lack of accounts of purchase and sale, no doubt a circumstance against the appellant, but not sufficient by itself to show an inference of smuggled nature of goods. Section 111(d) of Customs Act - "This decision a death blow to the impugned order. The other rulings relied on by appellant in his written submissions, being earlier to the above rulings does not require any consideration, in view of the latest legal position in the above case laws.

9. Now coming to the facts of the case, appellant is retail in dealer in ball and roller bearings for the last 14 years. The Xerox copy of the list of goods seized, appeal memorandum, reply to the show cause notice, and written submission shows that 209 types of one piece each 142 types of 2 pieces each, 68 types of 3 pieces each, 81 types of 4 pieces each, 40 types of 5 pieces each, 12 types of 7 pieces each, 25 types of 8 pieces each of bearings were seized. Totally 926 types of ball and roller bearings were seized. The list runs to 28 pages, giving size, name, mark, quantity, unit price, amount in tabular column. It is signed by seizing officer and panchas. From the above, it is seen that, the case of the appellant that he is not an importer, but a retail dealer and he has never imported any bearings and he received them from salesmen of Association, is quite probable. Even the department does not dispute this. So under these circumstances, the case of the appellant deserves to be upheld for the reasons discussed above and it is accordingly upheld. The point raised is answered in the affirmative. Hence, I pass the following order.

ORDER

For the reasons discussed above, the impugned order is set aside, and the appeal is allowed with consequential relief, according to law.

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Equivalent 2000 (119) ELT 97 (Tribunal)