Evidentiary burden in confiscation and licensing compliance defeats currency seizure and gold control penalties where proof is lacking

Penal confiscation of currency under the Customs Act requires acceptable legal evidence, direct or circumstantial, that the money represents sale proceeds of contraband goods; a mere doubt about source is insufficient, and an inference based on surmise cannot sustain confiscation. The note also states that where a licensed gold dealer was acting under an operative interim court order permitting business through travelling salesmen, the licensing restriction could not be applied to treat the transactions as a contravention of the Gold (Control) Act. On that reasoning, both the currency confiscation and the associated fine and penalty were set aside.

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Issues: (i) Whether the absolute confiscation of Indian currency under Section 121 of the Customs Act, 1962 was sustainable in the absence of acceptable legal evidence that it represented sale proceeds of contraband gold. (ii) Whether the fine and penalty imposed under the Gold (Control) Act, 1968 were sustainable in view of the interim order permitting the licensed dealer to transact business through travelling salesmen.

Issue (i): Whether the absolute confiscation of Indian currency under Section 121 of the Customs Act, 1962 was sustainable in the absence of acceptable legal evidence that it represented sale proceeds of contraband gold.

Analysis: Confiscation under Section 121 required acceptable legal evidence, direct or circumstantial, showing that the currency was sale proceeds of contraband gold. A mere discrepancy about the source or origin of the money was insufficient to raise that inference. The reasoning in the adjudication rested on surmise rather than evidence, and the penal nature of the proceedings required the benefit of doubt where the evidentiary basis was lacking.

Conclusion: The confiscation of the Indian currency was unsustainable and was set aside in favour of the appellants.

Issue (ii): Whether the fine and penalty imposed under the Gold (Control) Act, 1968 were sustainable in view of the interim order permitting the licensed dealer to transact business through travelling salesmen.

Analysis: Section 27(7)(b) of the Gold (Control) Act, 1968 ordinarily confined a licensed dealer to the premises specified in the licence. However, the licensed dealer was acting under an interim order of the High Court permitting business through travelling salesmen, and that order was operative on the date of the transactions and seizure. In those circumstances, the appellants could not be held guilty of contravention of the Act.

Conclusion: The fine and penalty under the Gold (Control) Act, 1968 were unsustainable and were set aside in favour of the appellants.

Final Conclusion: The appellants succeeded on both the confiscation and penalty issues, and the impugned order was wholly displaced in respect of the currency, fine, and penalties.

Ratio Decidendi: In penal confiscation proceedings, the department must establish by acceptable legal evidence that the seized currency represents contraband sale proceeds, and where a transaction is covered by an operative court order permitting the conduct in question, contravention of the licensing restriction cannot be found.

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