2023 (12) TMI 244 - AT - Central Excise

Cash seized from partner's residence liable for confiscation as proceeds from duty-free goods sales

CESTAT Ahmedabad held that cash of Rs. 50,73,710 seized from partner's residence, being sale proceeds of clandestinely removed excisable goods sold ... Confiscation of cash seized by the investigating officer from the house of the partner of the Appellant firm - cash amount seized from the premises of the partner of the Appellant firm was against the sale proceeds of clandestinely removed goods - HELD THAT:- The Learned Commissioner (Appeal) has referred to para 4.2.3 wherein the Adjudicating Authority has clearly found that the cash of Rs. 50,73,710/- seized from the residence of Shri Mahesh Chaodhary, partner of the Appellant is sale proceeds of the excisable goods which has been sold by the noticee without licit documents and without payment of duty - it is found that after giving this clear finding by the Adjudicating Authority, he should have passed an order for confiscation of the cash further no order on proposal of confiscation made in the show caused notice was passed by the Adjudicating Authority. At the same time the cash which was seized was adjudged against the duty, interest and 15% penalty. Therefore, there is an apparent error in the order of the Adjudicating Authority, accordingly the Learned Commissioner (Appeal) instead of straightway confiscating seized cash should have remanded the matter to the Adjudicating Authority. The Appellant also raised the issue on the provision of section 11 AC (1) (d) that after payment of duty, interest and 15% penalty entire proceeding of the show cause notice should have been concluded and no confiscation could have been ordered. In this regard, it is found that since Adjudicating Authority had given clear finding that the cash seized by the investigating officer is liable to confiscation in such case without passing any order on the confiscation of the cash the adjustment of the same towards the duty, interest and penalty is also incorrect. Thus, the matter relates to confiscation of seized cash needs to be reconsidered by the Adjudicating Authority - appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the cash amount seized from the residence of the partner of the firm is liable to confiscation under Section 121 of the Customs Act, 1962 read with Section 12 of the Central Excise Act, 1944. 2. Whether the adjudicating authority's adjustment of seized cash towards duty, interest and penalty (15% penalty) is permissible where the adjudicating authority recorded findings that the cash constituted sale-proceeds of excisable goods liable for confiscation. 3. Whether the evidence on record sufficiently establishes that the seized cash represented sale-proceeds of illicitly removed excisable goods (i.e., burden and sufficiency of proof). 4. Whether payment of duty, interest and 15% penalty by the assessee concludes proceedings under Section 11AC(1)(d) so as to preclude confiscation. 5. Whether, where confiscation is adjudged, the officer is obliged to give the owner an option to pay a fine in lieu of confiscation (interaction with Section 34) and the effect of failure to offer or consider such option. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Confiscation under Section 121 (Customs) read with Section 12 (Central Excise) Legal framework: Section 121 of the Customs Act authorises confiscation of sale-proceeds where smuggled goods are sold by a person knowing or having reason to believe that the goods are smuggled; Notification under Section 12 of the Central Excise Act makes Section 121 applicable to central excise matters. Precedent treatment: Authorities and judicial decisions were cited by the appellant to challenge confiscation, but the Tribunal's decision rests on the adjudicating authority's explicit finding that the amount represented sale-proceeds of excisable goods removed without payment of duty. Interpretation and reasoning: The adjudicating authority recorded admissions in the partner's statement accepting unaccounted removals and undertakings to pay duty; the Commissioner (Appeal) relied on that finding to hold the seized cash liable to confiscation. The Tribunal observed that the adjudicating authority had made categorical findings of liability to confiscation but did not pass a formal confiscation order. Ratio vs. Obiter: Ratio - where adjudicating authority finds seized cash to be sale-proceeds of illicit excisable goods, confiscation is the appropriate legal consequence under the statutory scheme contemplated by Section 121 read with Section 12. Conclusion: The Tribunal accepted the legal proposition that confiscation was called for based on the findings but found an error in the adjudication process because no confiscation order was actually passed despite the finding. The matter required reconsideration by the adjudicating authority. Issue 2 - Adjustment of seized cash towards duty, interest and 15% penalty when confiscation finding exists Legal framework: Statutory scheme distinguishes between confiscation of illicit proceeds and assessment/collection of duty, interest and penalties; the adjudicating authority's orders must address confiscation proposals where raised in the show-cause notice. Precedent treatment: The appellant relied on case law arguing against confiscation and for concluding proceedings upon payment; Tribunal considered those submissions but focused on procedural correctness when confiscation was found yet not ordered. Interpretation and reasoning: Tribunal held that where the adjudicating authority itself has found the seized cash to be liable for confiscation, merely adjusting the cash against duty, interest and penalty without passing an order on confiscation is incorrect and shows an apparent error in the adjudication order. The Commissioner (Appeal) should have remanded or directed appropriate confiscation proceedings rather than simply sustaining the adjustment. Ratio vs. Obiter: Ratio - adjustment of seized cash against dues is improper where the material finding on confiscation has been recorded but not acted upon by a formal confiscation order. Conclusion: Adjustment was legally incorrect in light of the adjudicating authority's finding; remand for fresh adjudication on confiscation (and related orders) was required. Issue 3 - Sufficiency of evidence that seized cash constituted sale-proceeds of illicit removals Legal framework: Confiscation requires proof that the cash is proceeds of sale of excisable goods removed without payment of duty; admissions in statements and corroborating documentary evidence are material to establish provenance. Precedent treatment: Appellant advanced authorities to challenge sufficiency of evidence; the Tribunal noted those submissions but analysed the specific factual record, including recorded admissions and alleged documentary verifications. Interpretation and reasoning: The partner's statement included admissions that part of the cash represented amounts realized from unaccounted sales and that unaccounted purchases and unrecorded removals existed. However, the partner also stated that a portion of the cash represented cash-on-hand and borrowed amounts and could not provide precise details. The Tribunal found lack of clarity because neither investigating agency nor the appellant furnished precise tracing of the cash composition; this factual uncertainty supported remand for proper investigation/adjudication. Ratio vs. Obiter: Ratio - where admissions point towards sale-proceeds but provenance is not precisely traced and corroborated, the adjudicating authority must re-examine and decide confiscation only after a proper determination of the evidence. Conclusion: Record contained admissions pointing to unaccounted sales but also ambiguous statements; absence of further probing or documentary clarity warranted remand for fresh consideration of evidence and determination whether confiscation is justified. Issue 4 - Effect of payment of duty, interest and 15% penalty under Section 11AC(1)(d) on confiscation proceedings Legal framework: Section 11AC(1)(d) (as raised by appellant) and related circulars were cited to argue that payment of assessed dues and statutory penalty may conclude show-cause proceedings and preclude further action by revenue. Precedent treatment: Appellant relied on statutory provision and board circular; Tribunal noted the contention but applied it to the facts where a confiscation finding had been recorded by the adjudicating authority. Interpretation and reasoning: Tribunal held that where the adjudicating authority has found seizure to be liable for confiscation, the mere adjustment of seized cash against duty, interest and penalty (even if paid) is not a substitute for passing orders on the confiscation proposal. Thus, payment or adjustment does not automatically extinguish the need to adjudicate confiscation where the authority has recorded a contrary finding - procedural correctness requires express determination. Ratio vs. Obiter: Ratio - payment of dues under Section 11AC(1)(d) does not obviate the requirement for an adjudicating authority to decide proposals for confiscation where the material finding supports confiscation; the authority must pass orders addressing the confiscation proposal. Conclusion: The contention that payment concluded proceedings did not absolve the adjudicating authority of the duty to adjudicate on confiscation; failure to do so rendered the order flawed and necessitated remand. Issue 5 - Obligation to offer option to pay fine in lieu of confiscation (Section 34) and consequences of non-consideration Legal framework: Section 34 (as invoked) provides that where confiscation is adjudged under the Act or rules, the adjudicating officer shall give the owner an option to pay a fine in lieu of confiscation as the officer thinks fit. Precedent treatment: Appellant relied on Section 34 to contend that even if confiscation were ordered, the cash could have been redeemed by payment of fine; Tribunal considered the contention as part of appellant's submissions. Interpretation and reasoning: Tribunal observed that because the adjudicating authority recorded a finding of liability to confiscation but did not pass a confiscation order, the procedural step of offering an option under Section 34 (if confiscation were to be imposed) was not taken. This procedural lacuna further supports remand so that the adjudicating authority can properly decide confiscation and, if applicable, grant or refuse an option to pay fine in lieu of confiscation. Ratio vs. Obiter: Ratio - where confiscation is adjudged, the statutory obligation to offer an option to pay fine arises and must be considered by the authority; failure to consider Section 34 consequences in the adjudication process is a procedural error. Conclusion: The absence of any consideration of the Section 34 option (because no confiscation order was actually passed) is a further ground necessitating remand for fresh adjudication. Remedial Conclusion and Direction The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for passing a fresh, reasoned order addressing (a) whether the seized cash is liable to confiscation in view of the recorded admissions and evidence, (b) the correctness of any adjustment against duty/interest/penalty in light of a confiscation determination, (c) precise scrutiny and proof of the provenance of the cash, and (d) consideration of the option under Section 34 if confiscation is adjudged. The Tribunal's direction constitutes the operative remedy rather than an express substitution of confiscation or release.