SAFEMA Tribunal Sets Aside Forfeiture Of Property Bought Nine Years Before Smuggling Offence

A property purchased nine years before a smuggling offence cannot be forfeited on mere assumption that it was funded through illegal earnings, the Appellate Tribunal under SAFEMA has held, setting aside a 2023 forfeiture order against a Karaikal resident.

The tribunal held that the competent authority failed to establish any “link or nexus” between the 1990 purchase of the property and a 1999 smuggling case. Member V. Anandarajan observed that the authority had acted on assumption without conducting any enquiry to substantiate its “reason to believe”.

The case arose from proceedings initiated against the Mohammed Ismail after he was convicted in 2000 under the Customs Act for smuggling 932.8 grams of gold through the Chennai airport in 1999. He had also been detained under COFEPOSA in 1999, though that detention order was later quashed by the Supreme Court.

The property in question was purchased in March 1990. It was later settled in favour of his wife through a gift deed executed in 2002. In August 2004, the competent authority issued a notice calling upon him to disclose the source of funds used to acquire the asset. A forfeiture order was passed in June 2023, leading to the appeal.

Before the tribunal, the appellant argued that the property had been acquired nearly nine years prior to the 1999 smuggling incident and therefore could not be treated as “illegally acquired property.” He contended that there was no material linking the asset to the offence.

The tribunal examined the “reasons to believe” recorded by the authority. The authority had relied on his admission of smuggling and concluded that “the income earned from smuggling activities has been invested in the above said property.”

Rejecting this reasoning, the tribunal held that no material had been placed on record to demonstrate such a connection. It noted that the authority is empowered to conduct enquiry or investigation before forming its belief.

“However, no such enquiry or investigation was apparently caused in the present case by the Competent Authority which could have led to the formation of valid reasons to believe,” it said.

Emphasising the chronological gap, the tribunal held: “Considering the above facts, the property acquired in 1990 could not have any link or nexus with smuggling activity carried out in the year 1999.”

Allowing the appeal, the tribunal set aside the forfeiture order. It, however, granted liberty to the authority to issue a fresh notice on the basis of a fresh “reason to believe,” if permissible under law.

For Appellant: Advocates Rishabh Rai, C.R. Malarvarnnan, Dushyant Jaitley

For Respondent: Advocate Reena Bajaj