Custom, Excise & Service Tax Tribunal
Mahesh B Mali vs Commissioner Of Central Excise on 9 July, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.C/798/10 (Arising out of Order-in-Original No.07/2010-2011 dated 30/07/2010 passed by Commissioner of Customs, Pune) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Mahesh B Mali Appellant Vs. Commissioner of Central Excise, Respondent Pune Appearance: Shri.Makrand Joshi, Advocate for appellant Shri.A.K.Prabhakar, AR for respondent CORAM: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 09/07/2012 Date of Decision : 09/07/2012 ORDER NO Per: P.R. Chandrasekharan
1. The appeal is directed against Order-in-Original No.7/2010-11 dated 30-7-2010 passed by the Commissioner of Customs, Pune.
2. The facts relevant for the case are as follows. The appellant, Mr. Mahesh M Bali, is a goldsmith, running a jewellery shop in the name and style of M/s Mahesh Jewellers at Ravivar Peth, Pune and is registered under the Bombay Shop Act, 1948. On intelligence, Pune Rural Police intercepted a Maruti Wagon R vehicle bearing registration No. MH 12 DY 5612 on the Pune-Bangalore Highway at about 21.15 Hrs. on 5-11-2009 and searched the vehicle in the presence of witnesses. The occupants of the said vehicle were the appellant Mr. Mahesh Balasaheb Mali, owner of the vehicle and his driver Mr. Sadashiv Balwant Jangam, who were returning from Kolhapur to Pune. The search resulted in recovery of gold and articles thereof and silver ornaments besides Indian currency of Rs.24 lakhs as detailed below:-
S.No. Description Wt. in grams
1.
Foreign Marked gold bars 1100.960
2. Primary gold 1206.430
3. Gold Lagadi 149.270
4. Gold ornaments 73.530 Total gold 2530.190 Silver ornaments 313.500 2.1 As the occupants could not produce any documents showing the licit possession and ownership of the goods, the same were seized under a panchnama dated 5-11-2009 by the Police. The owner and the driver were arrested under section 41(1)(d) of the Cr.P.C. 1973 and produced before the Judicial Magistrate First Class (JFMC), Pune, for judicial custody who rejected the request of the Police and were released vide order dated 6-11-2009. The Police then informed the Commissioner of Customs, Pune about the arrest of the owner and driver of the vehicle and seizure of the gold and silver. The Asst. Commissioner of Customs, Pune, vide letter dated 6-11-09 requested the Police authorities to hand over the seized goods, cash, vehicle and the same were taken over by the Customs from the Police and were seized under the provisions of the Customs Act. Thereafter, the appellant and his driver were taken over to the Customs Office for interrogation and their statements were recorded on 6/7-11-09 and they were arrested by the Customs Officers on 8-11-09 and produced before the JFMC, Pune, who remanded them to judicial custody. The appellant and his driver moved application for bail and submitted various documents to establish the licit possession of the goods seized and pleaded that they were not guilty of any offence; however, their bail application was rejected by the JFMC. Thereafter, on 9-11-09, another application for bail was moved before the Sessions Court and they were released by the Sessions Court on 18-11-09.
2.2 In his statement dated 6-11-09, the appellant, inter alia, admitted that he did not have any document showing the licit importation and possession of the gold seized and the foreign markings on the gold bars indicated they were of foreign origin and the gold bars and ornaments along with cash was received from various traders from Narayanpet, Dist. Mehboobnagar, Andhra Pradesh and the cash of Rs.24 lakhs seized was the sale proceeds of the ornaments which he had made out of illegally imported gold supplied to the traders and gold bars for making ornaments on job work basis. In his further statement dated 7-11-09, the appellant, inter alia, admitted the following. He ran a gold business in the name of M/s Mahesh Jewellers from his shop at Ravivar Peth, Pune; he takes orders from various traders along with gold and gets gold ornaments made; receipt for the gold was given by the suppliers and such receipts were destroyed when ornaments made out of such gold were returned; he has not kept any record for the receipt of gold of foreign origin received; in the present case, the traders have not given any receipt/vouchers for the gold handed over to him on 2-11-09; the 11 gold bars which were seized bore foreign markings and are of foreign origin; he knows that dealing in smuggled gold is an offence and he has been engaged in the said business for the last 5 to 6 years; he purchased the vehicle Maruti Wagon R of 2007 model for transport of gold from Pune to Narayanpet and back and since he knows that he is dealing in smuggled gold, he uses his own vehicle for transportation.
2.3 As part of the investigation, the premises of 7 traders of Narayanpet, from whom the appellant had procured the gold/ornaments, were searched and no incriminating documents could be recovered. Statements of these traders were also recorded. Sri. Harinarayan Bhaattad of Sri. Balaji Traders in his statement dated 10-11-09 admitted that he had given 4 gold bars weighing 100 gms. each, having foreign markings of purity 99.9 to the appellant which he had procured from M/s Chanda Anjaiah of Secunderabad under proper documents. Similarly Sri. Vinod Kumar Bhattad of Sri. Ganesh Jewellers also admitted to have given five gold bars of 100 gams each of foreign origin to the appellant and also a cash of Rs.2.5 lakhs for purchasing gold for making ornaments and the said gold bars were purchased from traders in Secunderabad. The other traders did not claim to have any transaction with the appellant. The appellant on the other hand submitted on 16-11-2009 documents from 9 traders (by way of letters) of Narayanpet under which he had procured gold bars/ornaments totally weighing 2085.170 gms and cash of Rs.2.5 lakhs.
2.4 The department also got the purity of the gold seized from the appellant tested by M/s Tanishq. The purity of 10 gold bars of 100 gms each and 2 half gold bars of 50 gms each, having foreign markings, varied from 98.7 to 99.9. In respect of primary gold, which were not having any foreign markings, the purity varied from 77.74 to 99.44 and in respect of gold ornaments the purity varied from 81 to 85. The value of the gold under seizure was arrived at Rs.40,47,158.40 and the customs duty liability was determined at Rs.9,88,371/- on the value and rate of duty prevailing on 6-11-09.
2.5 On conclusion of the investigation, a show cause notice dated 3-5-2010 was issued to the appellant, his driver, 9 traders of Narayanpet proposing confiscation of 2455.800gms of gold under section 111(e) and 111(i) read with 119 and 120 of the Customs Act. The notice also proposed confiscation of 74.200 gms of gold ornaments and 313 gms of silver ornaments under section 119 ibid. The Indian currency of Rs.24 lakhs was proposed to be confiscated under section 119 and 121 of the said Customs Act, the Maruti Wagon R vehicle under section 115(2), the blue coloured bag used for keeping the currency and gold under section 118. Customs duty amounting to Rs. 9,88,371/- was demanded under section 28 and penalty was proposed to be imposed on the appellant under section 112(a) &(b) and 117 of the act and fine in lieu of confiscation under section 125. Penalties were also proposed on the driver under the aforesaid provisions. Penalties were proposed to be imposed on the traders under section 117. The case was adjudicated vide the impugned order. The gold bars weighing 1100 gms. and primary gold weighing 1206.700 gms. were confiscated under sections 111(e) and (i), Indian currency of Rs.24 lakhs under sections 119 and 121, vehicle under section 115(2), customs duty demand under section 28 of the Customs Act. Fine in lieu of confiscation was imposed on the gold confiscated at Rs.2,32,091/-, on the Indian currency at Rs.6 lakhs and on the vehicle at Rs. 1 lakh. Gold lagadi and silver ornaments were held as not liable to confiscation and were released. Penalty on the appellant was imposed at Rs.9,28,364/- under section 112(a) & (b). Penalties on all others, that is, the driver and the Traders of Narayanpet were dropped. Hence only the appellant is before us against the impugned order.
3. The ld. Counsel for the appellant makes the following submissions:-
(i) Gold is not notified under section 123 and the said provisions would not apply.
(ii) From the facts of the case, it is evident that the goods were seized by the Police under the presumption that they were stolen property and the goods were not seized by the Customs from the appellant. Therefore, the burden to prove the gold in question is not smuggled is not required to be discharged by the appellant and it is for the department to establish that the goods are smuggled and this onus has not been discharged by the department. He relies on the following judgments in support of his above proposition, namely,-
(a) Gian Chand & Others vs. State of Punjab [1983 (13) ELT 135 (SC)]
(b) State of Maharashtra vs. Prithviraj Pokhraj Jain [2000 (126) ELT 180 BOM]
(c) Nirmala Reddy vs. CC Hyderabad II [2006(196) ELT 410]
(iii) Naved Ahmed Khan vs. CC Bangalore [2005 (182) ELT 494]
(iv) H.Ismail vs. CCE&C, Cochin [ 2001 (133) ELT 191]
4. Mere foreign marking on the gold does not by itself establish the smuggled nature of the goods. It can at best establish the foreign origin of the goods. He relies on the following judgments in support of his contention, namely,-
(i) Naved Ahmed Khan vs. CC Bangalore [2005 (182) ELT 494]
(ii) Jitendra Pawar v. CC Raipur [2003 (156) ELT 622]
(iii) CC (Prev) Kolkatta vs. Manoranjan Banik [ 2004 (165) ELT 237]
5. Merely because the appellant could not produce the documents to establish the licit nature of the goods is not sufficient to establish the smuggled nature of the goods/. Appellant had, in fact produced the challan/certificates to establish the licit possession of the gold at the first available opportunity before JMFC. The ld. Adjudicating authority conveniently ignored these documents by merely saying that the said documents do not match with the gold seized from the possession of the appellant. He relies on the following judgments in support of his above contention, namely,-
(i) Krishnakumar Dhandania [ 2007 (219) ELT 736 (Tri-Kol)]
(ii) CC vs. Golak Chandra Kamila [2006 (205) ELT 665 ]
(iii) S.K.Chains vs. CC, Mumbai [2001 (127) ELT 415] In the light of these submissions, he prays for setting aside the impugned order and release of the goods seized without any fine or penalty.
6. The ld. AR appearing for the Revenue re-iterates the findings given by the adjudicating authority.
7. We have carefully considered the rival submissions.
7.1 The first issue for consideration is whether Section 123 of the Customs Act, 1962 is applicable to gold or not. The Ld. Counsel for the appellant has argued, the gold is not included under Section 123. This argument is wrong for the reason that subsequent to sub-section (2) of Section 123 clearly provides that the section applies to gold and the manufacturer thereof. The next issue for consideration is inasmuch as the gold has not been seized from the possession of the appellant but was handed over by the Police to the Customs authorities, whether onus to prove that the gold in question is not smuggled is on the appellant or not. The Constitution Bench of the Hoble Apex Court in the case of Gian Chand & Others Vs. State of Punjab, reported in 1983 (13) ELT 1365 (SC) held that if the goods are seized by the police and delivered to the Customs authorities under Section 180 of the Sea Customs Act, 1878, it is not seizure by the Customs within the meaning of Section 178A of the Sea Customs Act, 1878. This is because when the police officer seized the goods under some other law, such as, Code of Criminal Procedure, the accused lost possession of the goods which then vested in the police and when that possession was transferred to Customs authorities under Section 180 ibid, there was no fresh seizure under the Sea Customs Act, 1878. The provisions of Sea Customs Act and the Customs Act, 1962 are identical with respect to the seizure and the onus of proof in the instant case. From the records it is evident that it is the police who seized the goods on 06/11/2009 and thereafter they were handed over to the Customs authorities by the police on the request of the Customs authorities. In other words, the Customs authorities did not seize the goods from the appellants; therefore, the provisions of Section 123 which casts the onus on the appellants to prove that the goods are not smuggled is not applicable, inasmuch as no seizure has been made from the appellant by the Customs. The same view has held by the Honble High Court of Bombay in the case of Prithviraj Pokhraj Jain (cited supra) and by this Tribunal in a number of cases such as Nirmala Mitra, E. Eshwara Reddy, Naveed Ahmed Khan, etc. Therefore, the burden and onus of proof to establish the fact that the goods are smuggled lies on the Revenue and not on the appellants, in terms of the judgement cited above and we hold accordingly.
7.2 Further, we observe that in the case under consideration only in respect of gold bars weighting 1100 grams, the same bore foreign markings. In respect of gold bars weighting 206 grams it was marked as Laxman Rao in marathi and in respect of six small gold pieces it bore the markings of J. Laxman, Swastik symbol and Shantaram. These markings clearly show that the goods were of Indian origin and not of foreign origin. Therefore, in respect of these gold articles weighting 1206 grams in total, there is no evidence whatsoever in record to show that they are of foreign origin. With respect to the 12 gold bars/biscuits bearing foreign origin, the appellant has produced letters from Sri Ganesh Jewelers of Narayanpet, Sri Balaji Jewellers of Narayanpet and Bangaru Balappa Jewellers of Narayanpet to the effect that they have supplied these materials to the appellant for manufacturing gold ornaments vide letters and bills dated 02/11/2009. In respect of other gold articles, the appellant has produced letters from M/s.Haji Mohammed Tejuddin Chand, Shree Jewellers, Nizam Jewellers, Vinayakrao Vaikuntha Jewellers, B.R.Jwellers Alias A.R.Chand of Narayanpet showing that they have supplied these goods to the appellant. Further, Hari Narayan Bhattad of M/s.Sri Balaji Jewellers and Shri Vinod Kumar Bhattad of M/s.Sri Ganesh Jewellers, in their statements recorded under Section 108 of the Customs Act, have clearly admitted to handing over of four gold biscuits weighting 100 grams each of foreign origin and purity 99.9 and five gold biscuits each weighting 100 grams of foreign origin of purity 99.9 to the appellants for making gold ornaments. From the records, we find that it has been the consistent stand of the appellant right from the beginning when the statement was recorded on 06/11/2009 that he had procured the gold under seizure from various traders in Narayanpet and he had produced documentary evidence by way of letters before the Session Court on 16/11/2009 when he applied for bail after the arrest by the Customs. There is no effective rebuttal of these evidences produced by the appellant by the Customs except for stating that these letters do not give details of the gold bars, which have been supplied from which it could be corroborated that the goods under seizure and the goods supplied by them were one and the same. In other words, the Customs have not discharged the onus of proving that the goods under seizure were smuggled into the country and, therefore, are liable to confiscation under the provisions of Customs Act. The decision of this Tribunal in the cases of Naved Ahmed Khan, Jitendra Pawar and Manoranjan Banik support the case of the appellant.
7.3 It is also pertinent to note that show-cause notices were issued to all the nine traders of Narayanpet proposing penalty under Section 117 of the Customs Act, alleging connivance with the appellant in the smuggling of gold. The proceedings against them were dropped by the adjudicating authority without citing any reasons. In other words, the adjudicating authority has given the benefit of doubts to all the nine traders; if that be so, it is incomprehensible why the appellant who procured the gold from these nine traders was not given the same benefit of doubt. The only evidence which the department has, against the appellant is the statement which he had given on 06-07/11/2009 wherein the appellant had admitted that the goods under seizure are smuggled. However, the appellant has subsequently produced evidence, by way of letters/bills, to show that he had procured these from traders in Narayanpet licitly.
7.4 The Honble apex Court in the case of Francis Stanly @ Stalin Vs. Intelligence Officer, Narcotic Control Bureau, Thiruvananthapuram (MANU/SC/8783/2006) and Assistant Collector of Central Excise, Rajamundry Vs. Duncan Agro Industries Ltd., (MSNU/SC/0486/2000) held that Courts must seek corroboration of the purported confession from independent sources . In state (NCT of Delhi) Vs. Navjot Sandhu @ Afasan Guru (2005 (11) SCC 600, the apex Court held that a Court shall not base a conviction on a confession without corroboration. It is not a rule of law, but is only a rule of prudence that under no circumstances can a conviction be made without corroboration. In the facts of the case before us, inasmuch as the appellant has led evidence about the sources of procurement of gold by him which have also been confirmed by the suppliers of the gold, the appellant must be given the benefit of doubt.
7.5 In the instant case the goods have been confiscated under Section 111 (e) and 111 (i) of the Customs Act. The said provisions deals with the goods brought from a place outside India if found concealed in any manner in any conveyance or in any package either before or after unloading thereof. The conveyance and packages referred to in these provisions deal with a situation in respect of conveyance coming from outside India or in respect of a package imported from outside India. The provisions do not apply to conveyances plying on the roads in India. In the instant case, the vehicle carrying the gold and cash was plying from Kolhapur to Pune and they were placed in the compartment below the seat. The compartment was not specially constructed at the instance of the appellant but was available in all Maruti WagonR vehicle and, therefore, it cannot be stated that the gold was concealed in the compartment. This concealment would imply a special effort on the part of the appellant which is not there in the instant case. Secondly, concealment can be for different purposes; it is not necessary that such concealment is always a violation of law. It could also be for security purposes. In the absence of any special efforts made by the appellant in the concealment of the impugned goods, the provisions of Section 111 (e) or 111 (i) are not attracted especially when he was traveling within India. Further, the Customs have not and could not have noticed any concealment. The Customs were handed over the goods by the police. Therefore, in the facts and circumstances of the case, we do not find any infringement of the provisions of Customs Act so as to attract confiscation under Section 111 (e) and (i) of the said Act and accordingly, we set aside the same.
7.6 The next issue for consideration is whether the appellants are liable to pay Customs duty of Rs.9,88,371/- demanded under Section 28 of the Customs Act. Invoking the provisions of Section 28 applies to imported goods on which duty has been levied or paid or have been short levied or short paid or erroneously refunded. Imported goods means goods brought into India from a place outside India but does not include goods which have been cleared for home consumption. Smuggled goods are not imported goods as held by the honble Apex Court in the case of Commissioner of Customs Vs. Ambalal & Co. (2010 (260) ELT 487 (SC). Therefore, the provisions of Section 28 are not attracted in the case of smuggled goods. Duty on smuggled goods can be demanded when the smuggled goods are confiscated and thereafter, released on payment of a redemption fine under Section 125 (1) of the Customs Act. Sub-section (2) of the Section 125 states that where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods. Therefore, the demand of duty under Section 28 in the instant case is wrong and bad in law. In the instant case, duty has been demanded on the basis of its value and rate of duty prevailing on the date of seizure namely, 06/11/2009 which is wrong. In the case of goods which are confiscated and released on payment of fine, as per the provisions of Section 15 of the Customs Act, the date for determination of rate of duty and value shall be the date on which the payment of duty is made. Thus, the determination of duty and the demand of duty in the instant case is not in accordance with law and, therefore, the same has to be set aside.
8. In the light of the foregoing discussion, we allow the appeal filed by the appellant with consequential relief, if any.
(Operative part of the order pronounced in Court) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 16