Customs, Excise and Gold Tribunal - Mumbai
Tayyab Junus Khatri vs Commissioner Of Customs (Prev.) on 8 November, 2001
Equivalent citations: 2002(139)ELT433(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. These eight appeals have common facts. These are therefore taken up for disposal together.
2. The appeal numbers C/444/2000 and C/445/2000 are filed against the order of the Commissioner (Appeals) order No. 10/2000-BP, dated 23-2-2000. The appeal numbers C/798/2000 and C/799/2000 are filed against the orders of the Commissioner (Appeals) bearing No. 37/2000, dated 27-7-2000. Appeals numbers C/28/2001 to C/31/2001 are filed against the order-in-original passed by the Commissioner of Customs (Preventive) bearing No. CCP/ACP/Adj/24/2000, dated 28-2-2000.
3. M/s. New Alfa is a partnership firm engaged in selling consumer goods. Mr. T.J. Khatri, Shri N.B. Shah and Shri D.B. Shah are the partners in the firm. Shri S.A. Khatri is the Manager. The shop premises were searched on 9-7-1999. Miscellaneous consumer goods of foreign origin totally valued at Rs. 4,67,785/- were seized. The claim made by the partner Shri T.J. Khatri was that these goods were purchased from open market where they were freely available. It was claimed that their receipts indicated purchase thereof. The Joint Commissioner confiscated these goods permitting their redemption on payment of fine of Rs. 4,65,000/- He also imposed penalties on T.J. Khatri of Rs. 50,000/-. In disposing of the common appeal filed by the firm and Shri T.J. Khatri the Commissioner (Appeals) observed that while the wrist watches valued at Rs. 1,83,800/- were notified under Section 123 of the Customs Act, 1962, the other goods were not so notified. On this observation he reduced the fine from Rs. 4,65,000/- to Rs. 1,50,000/- and the penalty from Rs. 50,000/- to Rs. 15,000/-. This order has resulted in appeals numbers C/444/2000 and C/445/2000 being filed before the Tribunal.
4. On 21-7-1999 once again the shop premises were searched resulting in their seizure of similar goods valued at Rs. 5,23,960/-. This was proceeded by seizure of similar goods valued at Rs. 3,36,361/- from a tempo outside the shop premises. These goods were brought by Shri S.A. Khatri for sale in the shop. These goods were brought from Musafirkhana area. Shri S.A. Khatri confirmed such purchase. Both S.A. Khatri and T.J. Khatri in their statements claimed that the goods were openly available in Musafirkhana but that the documents indicating their importation was not available. The physical transport from Musafirkhana was confirmed by the driver of the tempo also. The seller at Musafirkhana could not be traced. After issue of a show cause notice and after hearing the noticees the Joint Commissioner passed orders. The goods were confiscated but were allowed redemption on payment of fine of Rs. 2,24,000/-. Penalties were imposed on T.J. Khatri and S.A. Khatri of Rs. 43,000/-. The tempo was confiscated but was allowed redemption on payment of fine of Rs. 10,000/-. Penalties of Rs. 2,000/- each were imposed on Imtiaz Ahmed Shaikh, driver of the tempo and also on Ismail Gad, owner of the tempo. Only T.J. Khatri and S.A. Khatri filed appeals against this order. The Commissioner (Appeals) observed the fact that the goods were purchased on cash basis could not result in the presumption that it was an illegal purchase. He observed that under the liberalised rules passengers were entitled to sell their baggage just outside the airport without any restriction. Such sales would ordinarily be in cash. He further observed that the liability to prove unlawful importation would be upon the department which burden has not been discharged in the present case. He observed that the lower authority had proceeded on presumptions and assumptions. He held that contraband nature of the goods had not been proved and therefore set aside the orders of confiscation of the tempo. On the ground that systematic accounts was not written of the goods, he held that penalties could sustain. He reduced the redemption fine of Rs. 1,00,000/-. He also reduced the penalties on T.J. Khatri to Rs. 25,000/- and on S.A. Khatri to Rs. 15,000/-. The appeal numbers C/798/2000 and C/799/2000 are filed against this order.
5. On 21-7-1999 searches were again conducted in the shop premises of New Alfa, another shop premises and also a godown, all belonging to them. Goods totally valued at Rs. 11,56,265/- were seized. The partners in the shop made identical statements to the effect that the goods were purchased from the open market and for some of the items they did not have any documents. 21 covering documents were presented for part of the goods. The claimed suppliers of these goods were summoned. 11 of the suppliers in their statements claimed that various goods were sold by them to the present appellants. The summons included passengers also. The show cause notice was issued alleging liability to confiscation of the goods and of the partners to penalty.
6. Before the Commissioner the claim was made that due to liberalisation of Import Policy the baggage goods could be sold openly. Such goods could also be imported either under OGL or under special import licence. It was claimed that there was no restriction on such sale of goods imported in such manner. Certain case law was cited before the Commissioner. The Commissioner held that certain goods were found to have been acquired during the course of business and that the goods were found to be in order. He, however, listed the cases in which either the bills were not produced or some deficiencies were noticed in the documents. He repeatedly remarked that the payments were made in cash. He accepted the statements that barring watches other items were not notified under Chapter IVA of the Customs Act, 1962 or under Section 123 of the said Act. He, however, in his order observed as follows :
"The very fact that a company whose turnover is more than 2 crores and not maintaining any books of record of purchase/sales transactions very well leads to its doubtful credibility of its functioning and its sole intention is only to perpetuate frauds and to circumvent tax obligation.
The noticees in this case have also failed to indicate the source of acquisition of the impugned goods nor produced the relevant documents under which the transactions have taken place. The Department has therefore discharged the burden initially cast upon as there is no avenue for the investigations to take further cause of action.
In the absence of non production of corroborating evidence in support of the seized goods in question, I am inclined to hold that the impugned goods now under seizure and valued at Rs. 10,03,224.00 which includes Wrist Watches covered under Section 123 of Customs Act, 1962 are liable to confiscation under Section 111(d) of Customs Act, 1962 and for contravention of Section 5 and Section 11 (a) of the Foreign Trade (Development and Regulation) Act. For the said act of omissions and commissions S/Shri Tayab Yunus Khatri, Nancy Bhanji Shah and Deepak B. Shah, all parties of M/s. New Alfa are liable to penalty under Section 112(a), (b) of the Customs Act, 1962."
7. He confiscated the goods valued at Rs. 10,00,324/- permitted their redemption on payment of fine and imposed penalty on T.J. Khatri and N.B. Shah and D.B. Shah. The appeal numbers C/28/2001 to C/31/2001 are filed against this order.
8. I have heard Dr. D.M. Mishra for the appellants and Shri A.K. Jain, for the Revenue.
9. In the three cases the seized goods include watches valued at Rs. 4,43,225/-. These are admittedly goods notified under the provisions of Section 123 of the Act. Shri Jain arguing for Revenue stated that this provision placed burden of proving the licit importation of the watches on the person from whom such watches are seized. Dr. Mishra counters this and submits that the Courts have laid down substantial case law requiring the adjudicator to be satisfied that the requirements built into the said section were followed. This would be that there should be a specific information of the existence of such goods and only such goods alone could be seized. In the course of general search and seizure of business goods the section does not stand at all. He further referred to the Tribunal judgment in the case of S.K. Chains v. CC [2001 (127) E.L.T. 415]. In the judgment the Tribunal was dealing with a case where gold bars of foreign marking were confiscated under the provisions of this Section. The Tribunal quoting statistics observed that over 1000 tones of gold had been imported over a period of 5 years on payment of duty under various schemes including that by importation of baggage. The Tribunal also observed that there were no restrictions in force on the resale of such goods. The Tribunal observed that the continuing inclusion of gold under this provision of law had created peculiar problems. In paragraph 7 of the judgment the Tribunal observed as under :
"Thus, today there exists a very peculiar situation. On the one hand the Customs Act considers it necessary to ask a person to establish the legality of the origin of the gold seized from him while on the other hand in pursuance of the relaxation made in the Import Policy and the Baggage Rules framed under that very Act, there is a flood of foreign marked gold in the town. Such gold changes hands several times on importation. Since the repeal of the Gold (Control) Act in 1968, there is no legal requirement for the buyers and sellers of gold to maintain any registers nor is there any requirement to issue invoices under any Central Act."
10. After deliberation the Tribunal held that in the situation lawful acquisition should be taken to be the proof of lawful importation.
11. Gold was a commodity prone to greater degree of smuggling than watches. The law so laid down by the Tribunal therefore would be attracted in the case of watches also. I also take note of Dr. Mishra's statement that these watches were of diverse makes and were not of the same type or value because these watches were also imported by various passengers and were sold in the open market.
12. Learned counsel also relies upon a number of Tribunal judgments dealing with cases where the goods were not prohibited under Section 123 of the Act. In the case of Chandrakant U. Shah v. CC [2000 (123) E.L.T. 730], the issue involved was of liability to confiscation of 51 fax machines. The Tribunal held that although the strong ground for suspicion notwithstanding, there was no basis for the finding that the goods were smuggled, since suspicion could not take place of conviction. In the case of Jatin Mehta v. CC [2000 (120) E.L.T. 108] the Tribunal was dealing with a situation where the goods were purchased from and sold to anonymous persons where no bills were raised. Once again the Tribunal held that although this practice was suspect, it could not enable the Customs to sustain an order of confiscation of the goods. Similar view was held by the Tribunal in the cited case of Ashoke Shamooi v. CC [2000 (116) E.L.T. 503]. In the judgment in the case of CC v. Surya Rao [2000 (115) E.L.T. 521] the Tribunal had observed that, even if some goods were in large number and even if their foreign origin was established, the goods could not be confiscated on the suspicious of smuggling. It was claimed that a number of persons could have imported T-shirts and the seller could have clubbed them together for sale.
13. Thus there is a plethora of judgments laying down the law that where the goods were not notified under Section 123 or under Chapter IVA of the Act the mere fact that they were goods of foreign origin, in large number and were without cover of documentation, could not render them liable for confiscation.
14. Therefore, the doubts in mind the learned Commissioner of Customs therefore would not go to sustain the orders of confiscation. In fact, in one of the orders impugned before me in this batch of cases, [Order-in-Appeal No. 37/2000 BP] the learned Commissioner observed as follows :
"It is observed that Jt. Commissioner has held the goods to be smuggled on the ground that the entire transaction had taken place strictly on cash basis with implied knowledge that the goods were smuggled. The reasoning of the Jt. Commissioner is faulty and I am inclined to agree with the learned counsel of the appellant that a cash transaction is not illegal per se, the illegitimacy of a transaction has to be proved by substantial evidence and not by sweeping presumption. Under the existing liberalised provisions of the Customs Act and Rules the passengers are entitled to bring brand new goods even under Transfer of Residence facility and can sell the same even outside the Airport or the Docks. Obviously such transactions would mainly be in cash and not through cheque procedure."
15. Thus it would appear that he was following the correct law. However, he maintains the order of fine and penalty on the ground that the appellants had not maintained systematic account of the goods that they had detected, thus going away from his earlier discussion.
16. Shri Jain here submits that on this ground this order could not be challenged. He submits that this was the view earlier held by the Tribunal also, in the judgment reported in 1986 (25) E.L.T. 811 (T) in the case of Jain Enterprises. He submits that this judgment has been relied upon by the Commissioner in his order. I have seen the judgment. This judgment ranks prior in time to the judgments cited by the learned counsel. The ratio of this judgment has been consistently departed from in almost all subsequent judgment of all the benches of the Tribunal.
17. In the order-in-appeal No. 10/2000 BP which is one of the contested orders before me in this batch of cases, the Commissioner had held that barring the wrist watches which were also in one or two pieces and were of different brands the other goods did not require maintenance of any statutory records under the Customs Act. On this ground he has reduced considerably the quantum of fine. This judgment of the Commissioner (Appeals) counters the belief of the adjudicating Commissioner that confiscation is warranted for non-maintenance of accounts. The noting on the page of this order of the Commissioner (Appeals) shows that his judgment was accepted by the jurisdictional Commissioner on 29-2-2000. It would therefore appear that the adjudicating Commissioner in his order now impugned had gone away from the logic earlier accepted by him.
18. In the result I find that the orders of confiscation of the goods which were not notified under Section 123 or under Chapter IVA of the Act do not survive. The confiscation of these goods is set aside and appropriate relief is ordered.
19. The show cause notice dated 17-1-2000 answerable to the Joint Commissioner does not invoke the provisions of Section 111(p) of the Act. The show cause notice dated 24-4-2000 answerable to the Commissioner also does not invoke these provisions. The show cause notice dated 9-5-2001 alleges liability to confiscation under Section 111(d) of the Act. The show cause notice therefore do not make any allegation that any of the goods were notified under Chapter IVA at the material time nor was there any discussion that the liability arose under Section 111(d) of the Act. The orders of confiscation also do not relate to these provisions.
20. As regards the provisions of Section 123 the cited judgment of S.K. Chains would cover the possession of the goods where the lawful acquisition can be established by the appellant. It appears that in a number of cases such goods were covered on account of bills, etc. In certain cases the claim made was that those were baggage items which were purchased in cash. In such a situation there may not be any difficulty in accepting the claim of lawful acquisition especially when this sentiment has been voiced by one of the Commissioner (Appeals) in one of the orders leading to the present appeals.
21. Not too far back in time, there was restriction on the re-sale of baggage goods. The Baggage (Conditions of Exemptions) Rules made in 1963 as well as in 1975 had laid down very rigid restrictions as to the conditions under which the baggage goods could be sold or offered for sale or put forth for sale. Generally speaking this could not be done until the value had depreciated to more than 50%. These rules were removed even before liberalisation took place. Today in the absence of any restriction on the post importation trading an anomaly has been created between the requirement of Section 123 of the Act and the lack of restriction on the trading of restricted articles. The officers will have to evolve their own standards of acceptance of the claim made by the traders in the absence of documentary evidence also keeping in mind the views expressed by the Tribunal in the case of S.K. Chains (supra).
22. As regards the watches are concerned the proceedings are remanded to the jurisdictional Commissioner for all the three cases. The appellants shall be free to raise all the legal issues before him.
23. Ordinarily where the orders of confiscation are set aside the orders of penalty are automatically set aside. In this set of cases the situation is peculiar, in that a part of the goods are being referred back to the Commissioner for adjudication de novo. Without speculating on the outcome of such deliberations and at the stage of disposal of these appeals the orders of penalty imposed on all the appellants will have to be set aside. The Commissioner shall be free to form an opinion as to the liability to penalty on them at the end of his deliberations on the liability of the watches to confiscation.
24. Appeals are allowed in these terms.
25. Dr. Mishra here submits that duty has been paid on the goods not covered under Section 123. He requests specific instructions for refund of these amounts. There should be no difficulty for the Customs to refund such sums. It is so ordered.