Reason to Believe for Confiscation of Goods under Customs Act must be based on Credible Material: Allahabad HC [Read Order]

In a recent decision the Allahabad High Court observed that the reason to believe for the confiscation of goods under the Customs Act, 1962 must be based on some credible material. The present writ petition has been filed by the petitioner to challenge the seizure order, the detention-memo whereby 49,210 Kgs of arecanuts being transported by the petitioner on two trucks.

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 (“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.

The primary submission of the counsel for the petitioner is, under the Customs Act, seizure of goods is an action preceding confiscation of prohibited goods. Thus, goods liable to confiscation under Section 111 of the Customs Act may be seized under Section 110 of the Customs 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 Customs Act. Unless such “reason to believe” exists, no seizure may arise. The 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 Arecanuts. Both opined that the goods were of foreign origin. Not relying on such opinion alone, the revenue authorites then obtained report of the ARDF.

A Division Bench of Justices Manjive Shukla and S.D. Singh, observed that “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 may have led to formation of the “belief” that the goods are of foreign origin. Whenever such exercise is completed successfully, the jurisdiction may arise to the revenue authorities to detain and seize the goods.

Thereafter, it may 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 may give rise to no jurisdiction either to seize or confiscate the goods or to undertake any proceedings to that effect.” “For the reasons noted above in the present facts, we find that the revenue authorities have hopelessly failed to bring out to record the objective material and have further failed to establish formation of any “reason” for the “belief” entertained by them that goods were of foreign region” the Court concluded.

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