The burden of proof under Section 123 of the Customs Act lies on the person from whose possession the goods are seized to prove that the goods are not smuggled goods, but the Customs Authorities must have a 'reasonable belief' that the goods are smuggled goods in order to invoke the presumption under Section 123.

( 1 ) THIS is a reference made at the instance of Rup Chand Jain (hereinafter referred to as the 'petitioner') against the order of the Collector of Customs. Originally, one question, was referred namely the following :-Whether on the facts and in the circumstances of the case the provisions of Section 123 of the Customs Act, 1962 as applied by the Tribunal in the instant case is available to the department in view of the fact that at the time of hearing the case, the diamonds were not in the list of 'notified Items'?

( 2 ) THEREAFTER upon the application of the petitioner the High Court directed the Tribunal to refer following, two questions, by its Order dated 18-8-1995 :-1. Whether the Tribunal was correct in holding that the applicant failed to discharge the burden of proving that the diamonds in question are not smuggled goods and whether the findings of the Tribunal in this regard is perverse? 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in upholding the levy of penalty upon the Applicant?

( 3 ) IN this way, we are required to decide the aforesaid three questions, in this reference which arise out of an order dated 6th July, 1993 passed by the Tribunal. The Tribunal dismissed the two appeals filed by Rup Chand Jain (petitioner) and Gunvant J. Mehta. As a result of dismissal the confiscation of diamonds and penalties imposed upon the appellants by the Collector of Customs were confirmed.

( 4 ) IT is significant that a reference application has been filed by G. Mehta to the High Court against the said order of the Tribunal (CEGAT) which is pending.

( 5 ) THE case of the petitioner before the Collector as also the Tribunal had been that loose diamonds under seizure mentioned at Sl. Nos. 6,9 to 13,15 and 16 of the search list were the part of the lot of 55. 05 Cts. of cut and polished diamonds purchased by him from G. Mehta who in his turn got it form Arihanta Diamonds, Bombay. Both the Collector and Tribunal did not accept the case of the petitioner.

( 6 ) WE are, however, to consider whether the petitioner discharged the burden of proof laid by Section 123 and the Tribunal erroneously did not consider the explanation offered.

( 7 ) SECTION 123 of the Customs Act provides as under :-"123 (1) where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be :- (a) In a case where such seizure is made from the possession of any person. (i) On the person from whose possession the goods were seized. (ii) If any person other than the person from whose possession the goods were seized claims to be owner thereof, also on such other person. (b) In any other case on the person if any who claims to be the owner of the goods so seized. (c) This section shall apply to gold or diamonds, watches and any other class of goods which the Central Government may by Notification in Official Gazette specify. "

( 8 ) SECTION 123 is a statutory exception to the general rule which requires the prosecution to prove the charges of which a person is alleged to be guilty. For applying under Section 123, however, it is necessary that the Customs Authority should have 'reasonable belief. 'reasonable belief means 'honest belief. Webster defines "reasonable" as meaning "just honest" (State v. Churchill, 100 P. 309, 314, 52 Wash. 210, quoting Tillery v. State, 5 S. W. 842, 24 Tex. App. 251,5 Am. St. Rep. 882 ). It is not on the basis of pretence that Section 123 can be resorted to. The person who is found to be in possession of smuggled goods, he would be required to prove that the goods found in his possession is not of foreign origin.

( 9 ) THE standard of proof required to discharge the legal burden depends upon whether the proceedings are criminal or civil, the standard being higher in the former than in the latter. Lord Denning in Bater v. Eater - (1951) p 35 at p 36