TaxTMI 
TaxTMI 
2010 (1) TMI 610
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....spondent-LKP along with two pay orders recovered from the two persons and were seized under the provisions of the Act. 3. The respondents are full-fledged money changer operating under the license issued by the Reserve Bank of India ("RBI" for short). The respondents, in the normal course of business claims to have sold foreign currency to another full-fledged money changer duly licensed by the RBI i.e. Hotel Zam Zam against pay orders received from them. The pay orders received were credited into the account of the respondent between 10th July, 1997 to 14th July, 1997 and the amount equivalent to pay orders were seized by the DRI on 28th August, 1997 and 29th August, 1997. The equivalent amounts were later on given by the respondent's Banks to Commissioner of Customs through RBI. A seizure memo was drawn on 28th August, 1997 in respect of an amount of Rs. 42,37,750/- received by pay order which was lying in credit in the account of the respondent-LKP with Karnataka Bank Ltd. Another seizure memo was drawn on 29th August, 1997 with regard to a sum of Rs. 18,79,350/- lying in the credit in the account of respondent-LKP with BMC Bank Ltd. The seized amounts were deposited on 9th Oct....
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....0 of the Act. The said appeal was admitted by an order dated 19th October, 2005 to consider following substantial questions of law : "Whether on the facts and circumstances of the case, the Tribunal was justified in law in quashing the order of confiscation under section 121 of the Customs Act, 1962 and releasing the confiscated Indian Currency of Rs. 42,37,750/- and Rs. 18,79,350/- to the respondent even though (a) the said Indian Currency lying in the Bank account represented the sale proceeds of smuggled foreign currency. (b) the foreign currency obtained from the said Indian Currency is also smuggled. Reframed Question of Law : 8. At the outset, having heard the parties on the above question of law framed at the time of admission, we must observe that the said questions of law do not arise from the order of the Tribunal, since it is pregnant with the assumption that the Indian currency lying in the bank represented the sale proceeds of the smuggled foreign currency. Hence, it needs to be refrained. The correct question of law ought to be : Whether the credit balance lying in the account of respondent-LKP with the Karnataka Bank Ltd. deposited on 28th August, 1997 and with ....
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....oceeds of smuggled goods. The respondent had deposited this amount in their account after selling equivalent foreign exchange, as such, Section 121 of the Act cannot be stretched to apply to the sale proceeds arising out legal transaction. At the most, it can only be applied to the immediate sale proceeds of the smuggled goods. He submits that the factual matrix of the case is that the Indian currency confiscated by the Commissioner is a product of a genuine transaction of foreign currency as such it cannot be called sale proceeds of smuggled foreign exchange. As per the submission made, subject transaction was complete and the proceeds of sale of foreign currency had came into the account of the respondent-LKP The respondent-LKP had a legitimate claim over the said money illegally confiscated from their account. 12. Mr. Doiphode submits that the investigation does not reveal complicity of the respondent-LKP with the nefarious activities of the person concerned with Hotel Zam Zam, Money Changing Division. He reiterates that the respondent-LKP's transaction of sale of foreign exchange to Hotel Zam Zam, Money Changing Division i.e. with other full fledged money changer was bona fide....
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.... is found that foreign currency is smuggled out by Shambu and its associates, then the sale proceeds received from Shambu and its associates i.e. Indian currency received from him would be liable to confiscation under the provisions of Section 121 of the Act. Applying this test to the appellants' case, it is evident that the Indian currency confiscated by the Commissioner is the sale proceeds of FC which are not alleged as smuggled." 15. Mr. Doiphode further submits that, respondent-LKP did not have any knowledge of the smuggled foreign currency. In his submission, once the amounts are deposited in the bank, and the pay orders are arranged for purchase of foreign currency from the respondent-LKP, then such subsequent transaction will not be within the sweep of the provisions of Section 121 of the Act. In support of his submissions, Mr. Doiphode placed reliance on the judgments in the case of B.P. Nayak v. Commissioner of Customs (Prev. 1) Mumbai, 2001 (136) E.L.T. 604 (Tri.-Mum.) Ramchandra v. Collector of Customs - 1992 (60) E.L.T. 227 (Tribunal). Patel Madhavlal Maganlal & Co. v. Commissioner of Customs (Prev.), Mumbai - 2002 (147) E.L.T. 823 (Tri.) Mumbai and prayed for dismiss....