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1. This appeal arises out of order-in-original No. CC(P)/ SSS/ADJN/32/98 dated 21.8.1998 passed by the Commissioner of Customs (Preventive), Mumbai.

2. The appellants are a full-fledged money changer licensed by Reserve Bank of India. The appellants sold foreign currency to another FFMC called Hotel Zam Zam Money Changing Division. The latter is also licensed by RBI to deal in foreign currency, buy and sell.

3. There have been regular transactions between the two FFMCs during the relevant period. The procedure followed by the appellants, for that matter, all FFMCs is, FC is sold to another FFMC against Indian currency when a pay order issued by a bank is tendered across the counter. After verifying the authenticity of the pay order, genuineness of the FFMC (whether licensed by RBI), who tendered it, FC is sold. Hotel Zam Zam Money Changing Dn. through their representatives presented five pay orders to the appellants totally amounting to Rs. 42,37,750/-, the latter deposited these Five pay orders in their current account maintained by them in Karnataka Bank Ltd. on 10.7.1997. The appellants also deposited pay orders amounting to Rs. 18,79,350/- in their current account maintained with Bombay Mercantile Co-operative Bank were also received from Hotel Zam Zam Money Changing Dn. As it could be seen that against the pay orders favouring the appellants, the latter sold the foreign currency to Hotel Zam Zam Money Changing Dn.

4. Investigations into the activities of Hotel Zam Zam Money Changing Dn. FFMC revealed that persons connected with the said FFMC were smuggling out foreign currency and were depositing the sale proceeds of foreign currency in the accounts maintained by Hotel Zam Zam Money Changing Dn. The said persons thereupon obtain pay orders, from the banks in which the sale proceeds are deposited, in favour of another FFMC, such as the appellant, present those pay orders to the FFMC, obtain FC against the pay orders, smuggle it out, deposit the sale proceeds again in Hotel Zam Zam Money Changing Dn. Account and repeat the cycle all over again. The persons who actually did this type of operation against whom penalties are imposed are not the appellants before us. The Commissioner in the impugned order confiscated Rs. 42,32,750/- and Rs. 18,79,350/- lying in the appellants' account under Section 121 of the Customs Act which renders sale proceeds of smuggled goods liable to confiscation. It is not disputed that the above said amounts represented the sale proceeds of foreign currency sold by the appellants. The foreign currency sold by the appellants is not tainted in any way as it has been regularly obtained from RBI Another important aspect is that the Indian currency confiscated by the Commissioner was lying in the appellants bank account. It appeared that during the course of investigation the officers of DRI instructed the Banks (Bombay Mercantile Co-op. Dank and Karnataka Bank) to deposit the said amounts with the Commissioner of Customs in favour of Government of India as the said amounts represented sale proceeds of smuggled FC and is therefore liable to confiscation under Section 121 of the Customs Act.