Confiscation of seized currency fails where the department cannot prove it was sale proceeds of smuggled goods.

Seized Indian currency could be confiscated under Section 121 of the Customs Act, 1962 only if the department proved a completed sale of smuggled goods and a reliable nexus between that sale and the cash. Because the alleged diversion of imported goods and related Cenvat credit proceedings were still pending, the allegations had not attained finality and could not be treated as proof. In the absence of independent evidence showing that the currency represented sale proceeds of smuggled or diverted goods, the statutory burden was not discharged. The confiscation and connected penalties were therefore set aside.

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Issues: Whether the seized Indian currency was liable to confiscation and penalties on the footing that it represented sale proceeds of diverted imported goods, where the alleged diversion and related credit proceedings were still pending and no independent evidence of sale was adduced.

Analysis: The confiscation could be sustained only if the ingredients of Section 121 of the Customs Act, 1962 were established, namely a proved sale of smuggled goods and a reliable nexus between the currency and such sale. The pending nature of the diversion and Cenvat credit proceedings meant that the alleged diversion had not attained finality. The authorities relied on assumptions drawn from those pending allegations, while the evidence claimed by the person asserting ownership of the currency was not properly examined. In the absence of independent proof that the cash was sale proceeds of smuggled or diverted goods, the statutory burden on the department was not discharged.

Conclusion: The confiscation of the currency and the consequential penalties were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeals succeeded, and the confiscation order and connected penal consequences were annulled for want of proof under the governing confiscation provision.

Ratio Decidendi: Currency can be confiscated as sale proceeds only when the department proves the statutory ingredients linking it to a completed sale of smuggled goods; mere pending allegations or assumptions are insufficient.

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