Goods can’t be treated as ‘Smuggled’ in the absence of Books of Accounts, IT or Sales Tax Registartion: Bombay HC [Read Judgment]

A two-judge bench of the Bombay High Court recently held that the goods cannot be treated as ‘smuggled’ on the ground of non-keeping of Books and non-registration with the Income Tax or Sales Tax department.

A bench of Justice Riyaz I Chagla and Justice M S Sanklecha observed that in the absence of evidence in the form of regular Books of Account, Registration under the Income Tax and Sales Tax, etc., cannot ispofacto lead to the conclusion that the seized gold bars, are smuggled gold bars.

“These may lead to proceedings for breaches of other Acts but it does not follow from it that the gold bars are smuggled goods,” the bench said.

It was held that “Moreover, smuggling as defined under Section 2 (39) of the Act, is an act or omission which will render goods liable to confiscation under Sections 111 of the Act for import and 113 of the Act for exports. On reading of Sections 111 and 113 of the Act, not keeping proper books of accounts or not being registered with the Income Tax and/or Sales Tax Authorities, is not an omission which renders the good liable for confiscation i.e. smuggled goods.”

With regard to the issue of onus of proof under section 123 of the act, it was contended on behalf of the department that the burden is upon the Respondent and that has to be discharged up to the hilt. We are unable to understand the above submission.

However, the bench rejected the contention and held that Section 123 of the Act, statutorily imposes a reverse burden of proof i.e. not upon the person (Revenue) who assert that the gold in possession of the Respondent No.1 is smuggled gold but on the person (Respondent No.1) who is found in possession of goods notified under Section 123 of the Act.

“However, this reverse burden of proof does not do away with the manner of discharging the burden of proof. Thus, the manner of discharging the burden of proof by shifting of the onus would be as applicable to all other civil proceedings,” the bench said.

“It is important to bear in mind that it is not the case of the Revenue before us that burden of proof cast by Section 123 of the Act will only be satisfied when the legal import of gold bars is evidenced by the documents, establishing its import by also having Bills of Entry, and an order for home clearance by the Customs, in his possession. Advisedly so, as after the repeal of Gold (Control) Act, gold is available as a item of trade, like any other goods. The satisfactory discharge of burden of proof, will in the absence of any legislative parameter for its satisfaction, would necessarily be the satisfaction of the Authority concerned. This satisfaction of discharge of burden of proof would depend upon appreciation of the facts by the Authority concerned as there is no absolute standard of burden of proof. In civil cases, discharge of burden of proof would be varying degrees of probability. Therefore, if the Tribunal is satisfied that burden is discharged and the finding is not perverse, then no case for interference in second appeal is, warranted,” the bench added.