Customs, Excise and Gold Tribunal - Mumbai
Pukhraj Nihalchand Jain vs Commissioner Of Customs on 6 March, 2003
Equivalent citations: 2003(154)ELT715(TRI-MUMBAI)
ORDER J.H. Joglekar, Member (T)
1. On 10th March, 1996 the Appellant Pukhraj Nihalchand Jain was apprehended by the officers of the Directorate of Revenue Intelligence (DRI) in the act of placing of some packages in the dickey of a scooter. The Panchnama revealed that the packages contained foreign exchange equal to Indian Rupees 42,85,095/-. His statements were recorded on 10-3-96 and 11-3-96. He deposed, that he had purchased foreign marked gold biscuits on 9-3-96 from one Rajesh and that he owned a sum of Rs. 1.8 crores as payment therefor. He had already paid Rs. 1.3 crores in the morning and was possession of the remainder currency when he was intercepted. 2 Telephone numbers were given by him on which he would contact Rajesh. The numbers belonged to some shops where the persons did not know the person called Rajesh. The scooter was found registered in the name of one Mohamed Hanif Qureshi who was also not found. The scooter was claimed to have been purchased by the Appellant through one Mukesh who was also not located.
2. Show Cause Notice was issued alleging that import of foreign exchange was permissible only with the permission of the RBI. Since the Appellant had not produced any permission the currency was liable for confiscation under Section 111(d) of the Customs Act, 1962. The currency was also allegedly liable to confiscation under Section 121 of the Customs Act being sale proceeds of smuggled gold. The scooter was alleged to be liable for confiscation under Section 115(2) of the Act. Allegation was made that the Appellant was liable to penalty under Section 112 of the Act.
3. The Commissioner in adjudication confiscated the currency absolutely. He confiscated the scooter but allowed the same to be redeemed on a redemption fine of Rs. 15,000/-. He also imposed a penalty of Rs. 10 lakhs on the Appellant which is challenged in this Appeal.
4. Shri V.S. Nankani submitted that the statements of the Appellant recorded on 10-3-96 and 11-3-96 were retracted by the Appellant before the Magistrate on 11-3-96. At a later date one more statement got recorded on 24-3-96 stating that his earlier statement was correct which statement was also retracted on 26-3-96. He submitted that uncorroborated retracted statements were not admissible as evidence and cited Tribunal Judgment in the case of Sunil Gulati v. Commissioner reported in 2003 (54) RLT 663. He submitted that foreign currency was freely allowed to be brought by the passengers and therefore the Appellant could not be asked to produce permission from the RBI. As regards the absolute confiscation of the currency under Section 121 of the Act, he stated that for such confiscation to be adjudged at first it has to be established that some goods were smuggled, that those very smuggled goods had been sold and that the sale has been made with conscious knowledge that the goods are smuggled goods liable to confiscation. He relied upon Tribunal Judgment in the case of R. Ramachandra v. Collector reported in 1992 (60) E.L.T. 277 which was followed by the Tribunal in the earlier cited Judgment. He stated that there was no evidence that any gold has been smuggled and that the smuggled gold had been sold. Since the Appellant has retracted his statements there was no evidence establishing the allegation that the currency was sale proceeds of smuggled goods. He stated that the currency was not liable for confiscation and therefore the Appellant was not liable to penalty.
5. Shri S.V. Parulkar, D.R. supported the Commissioner's Order.
6. We have considered the rival submissions.
7. In terms of the Foreign Exchange Regulations as they existed at the material time, Indian residents were permitted to obtain foreign exchange not exceeding the equivalent of US $ 5000/- during one calendar year. Incoming passengers were permitted to import foreign exchange without any limits, although there was a condition that they should declare the cash currency in excess of US $ 5000/- and Traveller's cheques in excess of US $ 10000/-. Thus a very substantial volume of foreign exchange was available in Mumbai at any given time. In this situation it would be excessive use of power to seize foreign exchange from a person under the Customs Act, 1962 because he could not produce a general or special authorization from the Reserve Bank of India.
8. A similar situation was considered by the Tribunal judgment in the case of S.K. Chains v. Commissioner [2001 (127) E.L.T. 415 (T)]. In the said case foreign marked gold was seized and the burden of proving that the gold was licitly imported had been shifted to the offender in terms of Section 123 of the Act. The Tribunal noted that from 1992 onwards the Government had permitted import of foreign marked gold up to 5 kgs. per passenger provided that the duty should be paid in foreign exchange. It was also noted that there was no restriction on resale of such gold in India after the importation. In this situation the Tribunal held that where the Government had relaxed the prohibition on import of gold and had allowed free its resale, it was unreasonable for a holder in due course to be asked to prove the legal importation thereof.
9. The ratio of this judgment would apply to the present case in two ways.
10. Firstly in the face of the availability of very substantial foreign exchange in the country if a particular time, it would be unreasonable to impose a stipulation that any holder thereof should prove the licit of currency with specific authorization from the RBI. In the present case since provisions of Section 123 have not been invoked, the burden of proof is entirely on the Customs. Since there is nothing in the evidence, the liability to confiscation under Section 111(d) is not established.
11. In fact as far as the Foreign Exchange is concerned, unless the seizure is made at the Customs barrier the provisions of Section 111 (d) of the Customs Act would not come into play. The Foreign Exchange Regulation Act had adequate provisions to be invoked, as regards the possession of significant amount of Foreign Exchange by an individual in the city, but those have not been invoked in the present case.
12. The second aspect is that foreign marked gold in very substantial quantities was also available at the material time in the city (see S.K. Chains supra). Sale of the lawfully imported gold was allowed without any prohibition. Therefore unlike during the earlier period, when such import was prohibited, no presumption could arise even if the gold had foreign markings that it was smuggled gold. As has been laid down in the judgment in the case of R. Ramchandra (supra), the first necessary ingredient is that the goods sold must be smuggled goods. Except for the statement of the Appellant which was on both occasions retracted between the shortest possible time, there is nothing on record to suggest that any gold was smuggled; that any gold smuggled was sold; and the currency under seizure was the sale proceeds thereof.
13. The law is that the retracted statement must be supported with corroborative evidence. But there is no such evidence in this case. The Commissioner has made a very peculiar observation in his order which reads as below: -
"Clandestine activity like smuggling are carried out under a cloak of anonymity, false names, without the aid of records or accounts and normally no evidence of proof would be left behind by the experienced operators for the Customs Deptt. to uncover and prove the charge condusively. Who are the clients of Shri Jain, from whom he purchased the gold and to whom he sold the gold etc., are exclusive privileged information which are solely in the knowledge of Shri Jain. Unless he choses to open up and disclose the facts, the Customs or D.R.I, cannot uncover. After withholding all the privileged information within his exclusive knowledge, it will be idle to contend that D.R.I, has not proved the charges against his client.
In the given circumstances an investigation agency can only prove the pre-deposit-ponderance of probability. From the fact that Shri P.N. Jain possessed substantial amount of foreign currency it would be fair enough to draw an inference that he has acquired it from unexplained sources connected with some illegal activity."
14. Where the law places a specific burden on a person he is required to discharge that. Where allegations are made as to smuggling it is necessary for the Customs to lead evidence to support such charges. No amount of lame rationalisation as made by the Commissioner can substitute discharge of that burden.
15. Therefore the orders of confiscation of the currency in the present case under Section 121 of the Act also do not survive.
16. Since the smuggled nature of the currency has not been established the orders of confiscation of the scooter are also set aside.
17. For the same reasons penalty imposed upon the Appellant is set aside.
18. The Appeal is allowed with consequential reliefs.