Customs, Excise and Gold Tribunal - Delhi
R.R. Sen And Brothers vs Commissioner Of Customs on 20 November, 2000
Equivalent citations: 2001(128)ELT187(TRI-DEL)
ORDER Jyoti Balasundaram, Member (J)
1. The brief facts of the case are that on 11-7-1997, DRI officers intercepted three persons - Shri Abdul Kader Gulkhan, Shri Khan Shakeel Abubacker and Shri Riyaz Abedin Sheikh at the domestic airport at Santa Cruz, Bombay. While Shri Gulkhan was in the process of handing over a zipper hand bag to Shri Khan Shakeel Abubacker, the officers swooped on them. Shri Gulkhan stated that the zipper hand bag contained foreign currency of US $ 1,50,000/- which he had carried from Delhi to Mumbai by Sahara Airlines Flight No S-2/507.
2. On the same day, the DRI officers at New Delhi apprehended Shri Firoz Batliwala, brother of Shri Khan Shakeel Abubacker at the Delhi Airport and search of his residence resulted in recovery of Rs. 3,35,000/- which was seized under a panchnama. Certain incriminating documents were recovered and seized from the residence of Shri Riyaz Abedin Sheikh.
3. During the course of investigation, statements of various persons were recorded by the DRI under the provisions of Section 128 of the Customs Act, 1962. Shri Gulkhan deposed that he had travelled to New Delhi by the morning flight of Jet Airways and carried two pay orders of Centurion Bank which had been handed over to him by Shri Abubacker and one Shri Rehan; that on reaching Delhi, he handed over the pay orders to Shri Feroz Batliwala who had in turn given him two packets containing US $ 1,50,000/- which he brought with him to Mumbai by the evening flight of Sahara Airlines and after landing, he was intercepted while in the process of handing over the money to Shri Abubacker.
4. Shri Abubacker deposed that the address of Tiruchi Enterprises given in the RBI licence was fictitious; that the pay orders had been given to Shri Gulkhan by Rehan and the foreign currency so brought in by Shri Gulkhan was later on sold at the prevailing unofficial market rate to one Shri Rasheed and one 'Mama', a Marwadi man who used to smuggle the same out of India.
5. Statements of Shri R.A. Sheikh and Feroz Batliwala were also recorded. Shri Feroz Batliwala deposed that he and Sajid Warsi had obtained RBI licence for dealing in foreign currency after giving a fictitious address and fictitious proprietor; that bank accounts of Tiruchi Enterprises were opened in 1997 in different banks; that the accounts in these banks were used for drawing pay orders or demand drafts in the name of Full Fledged Money Changers (FFMC, in short) for obtaining foreign currency which was later sold in the local market on cash transaction basis without any bills or accounts; that the foreign currency was smuggled out of India by the buyers and used by various persons for smuggling. He stated that the foreign currency purchased by him in the name of Tiruchi Enterprises was out of the sale proceeds in Indian rupees of foreign currency smuggled out of India by unknown persons. His statement was again recorded after a lapse of five months on 11-12-1997 when he was under detention at Central Prisons in which he stated that management of M/s. R.R. Sen & Bros, New Delhi (the appellant herein ) and others were aware that Tiruchi Enterprises, Bombay was a non-existent fictitious firm; that the appellant (who is a FFMC) was aware that he (Firoz Batliwala) was not Manager or Proprietor or employee of Tiruchi Enterprises and for this reason, the FFMCs were charging higher rate per dollar for selling the same to Tiruchi Enterprises; that the foreign currency obtained in the name of Tiruchi Enterprises was being smuggled out of India by one Shri Gulab Chand alias Mamaji; that apart from Sh. Gulab Chand, foreign currency was sold to one Shri Rashid and Shakeel Razak Pandurwala for being smuggled out of India; that these three persons were providing Indian currency for depositing in the bank account of Tiruchi Enterprises.
6. Statement of Shri Firoz Batliwala was corroborated by Shri Sajid Warsi. The statements of Shri S. Mukherjee, Manager of the appellant and Shri Mohan Sen, partner of the appellant were recorded in which they admitted that their firm had transactions with Firoz Batliwala who was acting on behalf of Tiruchi Enterprises; that they had confirmed from the RBI Bombay that a FFMC licence had been granted to Tiruchi Enterprises and that they had not received 30% of the profits alleged to have been earned by Feroz Batliwala from the sale of the foreign currency made by the appellants to Shri Batliwala.
7. On the basis of the investigation, the Department was of the view that several persons were part of a syndicate for acquiring foreign currency by depositing huge amounts of Indian currency in cash in different banks; selling the same among others to Gulab Chand and Rashid who used the same for smuggling gold into India and making over the sale proceeds of that in Indian currency for rolling the same regularly. The allegation against the appellants was that they had violated the instructions contained in paragraphs 3,9,16,17, 19, 20(i) and 26 of the Memorandum of Instructions issued by the RBI under Section 73(3) of the FERA, 1973, hence rendering the appellants liable to penalty.
8. During the course of investigation, the DRI officers directed the Centurian Bank not to make payment of Rs. 47,58,000/- covered by two demand drafts, one for Rs. 18,30,000/- issued by Jan Kalyan Sehkari Bank Ltd. and other for Rs. 29,28,000/- issued by Punjab & Maharashtra Cooperative Bank Ltd. to the appellant from whom Tiruchi Enterprises had obtained foreign currency of US $ 1,30,000/-
9. A show cause notice dated 3-11-1997 was issued to Shri Gulkhan, Sh. Abubacker, Sh. Riyaz Abedin Sheikh, Sh. Firoz Batliwala, M/s. Tiruchi Enterprises, Sh. Sajid Azmat Warsi, Sh. Gulabchand Jain, the appellants herein and other concerned persons proposing recovery of US $ 1,50,000/- seized at Santa Cruz Airport, confiscation of Indian currency and proposing imposition of penalties. The Adjudicating Authority upheld the confiscation of Indian currency on the ground that it represented the sale proceeds of foreign currency sold to persons who had paid rates higher than the prevailing market rates, as the buyers wanted to export the same illegally. The pay orders obtained by using the name of Tiruchi Enterprises was held to be from out of funds which Shri Batliwala and Sajid Warsi knew and had reason to believe, came from the sale proceeds of smuggled goods and hence the confiscation of the Indian currency covered by these pay orders, was upheld. The seized foreign currency of US $ 1,50,000/- was directed to be handed over to the Directorate of Enforcement for action according to law since no one claimed the same. Hence this appeal against the confiscation of Rs. 47,58,000/- under Section 121 of the Customs Act, 1962. The alternative prayer of the appellant is for release of US $ 1,30,000 (out of 1,50,000 US $ handed over to Enforcement Directorate) which is the amount paid by the appellants to M/s. Tiruchi Enterprises as FFMC, purchased by M/s. Tiruchi Enterprises for Rs. 47,58,000/-.
10. We have heard Shri R.K. Handoo, learned Advocate and Shri S.K. Das, learned DR. The amount of Rs. 47,58,000/- covered by two demands seized/frozen by the DRI from the bankers of the appellants, has been held to represent sale proceeds of foreign currency which had been sold by Sh. Feroz Batliwala and Shri Sajid Warsi, to two persons who had paid to them, rates higher than the prevailing market rates as the buyers wanted to export the same illegally in return for gold smuggled into India. The further finding is that Tiruchi Enterprises is a fictitious firm floated by the above mentioned two persons with the sole purpose of running a hawala racket and that these two persons had knowledge of the source of the funds for obtaining the different pay orders which have been seized from the bankers of the appellants. The finding that there was a hawala racket is against other noticees namely Shri Batliwala, Shri Sajid Warsi, Shri G.C. Jain, etc. and not against the present appellants, therefore, the challenge to the finding that the Indian currency seized from the bankers of the appellants represent sale proceeds of smuggled goods can only come from those persons who have been held to be involved in the offence of smuggling. The appellants have thus no local standi to challenge this finding. Since the persons who have been held to be involved in the offence of smuggling and in running the hawala racket, have not filed any appeal against the impugned order, we uphold the confiscation of the Indian currency under the provisions of Section 121 of the Customs Act. However, we see force in the alternative submission of the appellants for return of US $ 1,30,000 sold by them to M/s. Tiruchi Enterprises. This amount of foreign currency is, by no stretch of imagination, tainted money. The Commissioner has recorded a clear finding that the appellants have not directly violated any prohibition imposed under the Customs Act in selling foreign currency to another FFMC, duly licensed by the RBI, and that the appellants did not have any prior knowledge or reason to believe that they were indulging in act of omission or commission, which would have rendered the foreign currency supplied by them to M/s. Tiruchi Enterprises liable to confiscation. The foreign currency has been directed to be handed over to the Directorate of Enforcement, in the absence of any claimant for the same, as seen from para 5.1. of the impugned order. However, we find that, throughout the proceedings, the appellants have claimed US $ 1,30,000 sold by them to M/s. Tiruchi Enterprises. This is amply clear from the written submissions dated 7-5-1999 filed before the Commissioner of Customs after the personal hearing on 26-4-1999. In para (vi), the appellants have clearly challenged the liability to confiscation of both Indian currencies in the form of demand drafts as well as the foreign currency of $ 1,30,000. Even in the appeal memorandum filed before us, the alternative prayer is for direction for release of the seized currency sold by them to Tiruchi Enterprises. In view of our finding that US $ 1,30,000 is not tainted money, we accept the alternative prayer of the appellants and direct the respondents to return the seized amount of US $ to the appellants. The appeal is disposed of in the above terms.