Customs, Excise and Gold Tribunal - Mumbai
Weizmann Ltd. And Cox And Kings Travels ... vs Cc (P) on 12 August, 2005
Equivalent citations: 2005(188)ELT278(TRI-MUMBAI)
ORDER C. Satapathy, Member (T)
1. We have heard the matter at length. We find from the referral order dated 29.12.2004 that the referral Bench has come to a decision that the appellants have no locus standi to claim the impugned currency seized from the Bank following the earlier decisions of the Tribunal listed below:-
(i) Wall Street Finance Ltd. v. CCE (Prev.), Mumbai - 2002(147)ELT 112
(ii) R.R.Sen & Brothers v. CC, Mumbai - 2001(128)ELT 187 These two decisions were rendered respectively on 3.2.2000 and 20.11.2000. The matter has been referred for decision by a Larger Bench as the referral Bench noticed a contrary decision rendered subsequently on 2.2.2001 in the case off B.P. Nayak v. CC(Prev.), Mumbai - 2001(136)ELT 604.
2. The facts are not in dispute. Sale proceeds of foreign currency smuggled out of India were deposited by M/s Tiruchi Enterprises in their Bank account. Against such deposits, they obtained pay orders and bought more foreign currency from the appellants for the purpose of smuggling out. The appellants had no knowledge of the smuggling activities of M/s Tiruchi. Before the appellants were able to encash the pay orders, the Directorate of Revenue Intelligence officials seized the pay orders and directed the Banks to deposit the corresponding amounts with Revenue, which the Banks have done.
3. It is claimed on behalf of the appellants that the money taken over from the Bank represents sale proceeds of the foreign currency sold by them to M/s Tiruchi and hence it no longer represents the sale proceeds of foreign currency initially smuggled out and hence the same cannot be confiscated under section 121 of the Customs Act, 1962. They have also relied on the decision of the Apex Court in the case of Sohan Singh v. Sarwan Singh and Ors. - to plead that pay orders are as good as cash and since pay orders were given to them for bonafide sale of foreign currencies, the same cannot be confiscated.
4. It is argued by revenue that sale proceeds of foreign currency smuggled out were still lying in the Bank and the Bank has made over the amounts to Customs, hence the same is liable to confiscation. Revenue also avers that the pay orders were not encashed and hence the sale proceeds lying with the Bank had not changed its character. It is further averred that neither M/s Tiruchi nor the Bank have challenged the confiscation of the sale proceeds.
5. After hearing arguments from both sides, we find that the cited Apex Court decision was rendered in a totally different context. It was held therein that payment by way of bank draft is as good a payment as cash. The Apex Court held in that case that the demand for payment of cash would have been honoured by the Bank on behalf of the purchaser and hence refusal to accept the bank draft amounted to a breach of contract.
6. In the present case, the amounts have been seized from the bank before the appellants have been able to encash the pay orders. Having handed over the cash to Revenue which was deposited by M/s Tiruchi out of sale proceeds of smuggled out foreign currency, the Bank cannot obviously honour the pay orders. Applying the Apex Court decision cited above, it is clear in this case that since the Bank cannot honour the demand from the appellants for payment of cash, the appellants can take available legal remedies against M/s Tiruchi for breach of contract.
7. The question before us is whether the appellants can claim the amount confiscated from the Bank by Revenue under Section 121 of the Customs Act, 1962. The said Section reads as under :-
Section 121. Confiscation of sale-proceeds of smuggled goods. - Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation."
This provision is of 1962 vintage and is clearly intended to deal with `proceeds of crime'. It is a precursor to similar provisions in modern anti-money laundering laws intended to seize and confiscate `proceeds of crime' as a deferent to criminal activities. The section needs to be interpreted in a way its implementation is effective in serving its purpose. The purpose of the section will be totally defeated if the proceeds of crime after being deposited in a bank are merely transferred from one kind of account to another kind. It has been argued before us that the sale proceeds have gone from M/s Tiruchi's account to the pay order account within the Bank and hence it has lost its character as sale proceeds. We are not convinced by this argument. The money was still with the Bank notwithstanding some internal accounting done within the Bank in its records and that is how the Bank was able to handover the money to the Revenue which has been subsequently confiscated by Revenue.
8. Hence, we are of the view that notwithstanding issue of the pay orders, the money available in the Bank represented sale proceeds of smuggled out foreign currency and its confiscation is justified. Consequently, we endorse the views expressed in both Wall Street Finance (supra) and R.R. Sen (supra) as well as by the referral Bench, that the appellants have no locus standi to claim the impugned currency seized from the Bank and confiscated by Revenue. We are of the view that the contrary decision taken in B.P. Nayak (supra) is not correct.
9. The appeals are referred to the referral Bench for decision in the light of our views above.