TaxTMI 
TaxTMI 
2021 (5) TMI 837
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....nda [Deepak], (the appellant in appeal No. 52922) s/o Vijay Kumar and Surinder Singh, s/o Bansi Singh. When asked, they denied that they were carrying any gold in any form. Officers searched them and their baggage under Section 102 of the Customs Act, 1962 [Customs Act] and recovered 9 gold bars of foreign origin weighing 1000 grams each and gold jewellery weighing 5.429 kg and 120 gold coins suspected to be of foreign origin totally weighing 0.96 kg. 3. Surinder Singh, in his statement dated 24.8.2017, stated that he works as a casual labourer in the shop of Deepak on a salary of Rs. 7,500 per month and the statement of Deepak on 24.8.2017 corroborated that Surinder Singh was only his employee. 4. While the jewellery was recovered from their bags, four of the foreign marked gold bars were recovered from the shoes of Deepak in which they were concealed. The remaining five gold bars and the gold coins were wrapped in brown colour tape and concealed in the specially designed secret pockets in the back pack. 5. The total gold weighing 15.389 kg estimated to be worth about Rs. 4.6 crores was seized under the Customs Act as Deepak did not have any bills for the gold nor any documents....
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.... carried without any invoice or proper documents. Deepak could not produce any valid document to support their legal possession. 12. In the follow up operations, gold and cash were seized from the shop of Kashi in Delhi (which is not subject matter of this appeal or the impugned orders). Further, from the Jammu based business premises of Deepak, viz., Baibhav Ornaments and Radhika Jewellers (being managed by his brother), DRI seized foreign origin gold coins weighing 1,118 grams (valued at Rs. 46,83,820), Indian currency and National Savings Certificates and Kisan Vikas Patras. They recorded the statements of the brother of Deepak, Ravi Handa [Ravi] who was managing the businesses in Jammu. Some of the Indian currency seized and the National Savings Certificates and Kisan Vikas Patras seized were returned during investigations. 13. Investigations were completed and a Show Cause Notice was issued. The learned Additional Commissioner of Customs passed an order, the operative part of which is as follows: " i. I confiscate the seized gold weighing 15.3890 kg (recovered from Deepak Handa) valued at Rs. 4,60,02,337, seized vide panchnama dated 23/24-8-2017 under section 111(d), 111 (....
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....d goods, etc. - The following goods brought from a place outside India shall be liable to confiscation: - (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; (i) any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof; (p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened." c) Section 111(d) applies to goods which are imported or are attempted to be imported or are brought into the Indian Customs waters in violation of any prohibition imposed on their import under the Customs Act. In this case, the gold was procured locally and was being transported from Delhi to Jammu in a train where it was seized. Therefore, section 111(d) does not apply. d) Section 111(i) gets attracted only when any dutiable or prohibited goods are found concealed in any package either before or after unloading thereof. The term....
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.... goods, the burden of proving that they are not smuggled goods shall be - (a) in a case where such seizure is made from the possession of any person, - (i) on the person from whose possession the goods were seized; and (ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person; (b) in any other case, on the person, if any, who claims to be the owner of the goods so seized. (2) This section shall apply to gold, and manufactures thereof, watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify." l) This section applies and the burden of proof shifts to the person from whom the goods are seized, provided the seizure was under a reasonable belief that they are smuggled goods. In this case, there was no such reasonable belief. The goods were seized in a train in which Deepak and Surinder Singh were about to travel to Jammu from Delhi. Subsequent seizures were also from the shops in Delhi and Jammu. Nothing was seized either at the port or airport. Therefore, the officers had no reasonable belief that the gold was smuggled. Therefore, it is....
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.... (Deepak and Surinder) were carrying any gold in any form. They denied. No genuine businessman lies like this when they had nothing to fear if they were legitimately dealing in gold or gold jewellery. b) DRI officers conducted a search of Deepak, Surinder and their luggage and the gold was seized from the bags including the secret pockets of a back pack and from the shoes of Deepak. c) The nine gold bars had foreign markings on them and so did the cut pieces of the gold. The gold coins also had the same purity. d) The totality of these facts gave the officers of DRI a reasonable belief to seize the gold and gold articles as contempleted under section 123. Thus, the burden of proof shifted to Deepak (Surinder being just an employee). He relied on the judgment of the Supreme Court in State of Maharashtra vs Natwarlal Damodardas Soni reported in [1983 (13) ELT 1620 (SC)] to assert that the circumstances of the seizure and the totality of the circumstances must be considered to determine if there was a reasonable belief that the gold was smuggled. In the case before the Supreme Court, the gold biscuits bore foreign markings which proclaimed their foreign origin, the gold was of 2....
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....Customs Act, the prohibition flows from the statue i.e section 123 of the Customs Act. Also, in Sheikh Mohd Omer vs. Collector of Customs, Calcutta 1983(13) ELT 1439 (SC) the Supreme Court had held that any prohibition referred in section 111 applies to every type of prohibition and that may be partial or complete. Any restriction to import or export is to an extent a prohibition g) The appellants are not a notified agency. Deepak claimed in his statements that the gold bars were purchased from Kashi, agent of M/s. Pinki Chains, gold ornaments and coins were purchased from Hardesh Kumar of M/s. T C Ornaments and gold chains were purchased from M/s. Tridev Jewellers but could not produce any evidence for the same. h) Kashi, in turn, said that he had sold nine gold bars to Deepak after procuring them from M/s. Uma Strips. The owner of M/s. Uma Strips, Bishan Chand Gupta said that he purchases imported gold from agencies such as MMTC, PAMP, STC, Axis Bank and sells it to others. He sells these goods only payments through RTGS and after issuing an invoice with the signature of his staff. He submitted copies of his sales ledgers which did not support the claim of Deepak and Kashi of....
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....also a circumstantial evidence and self admission of carrying foreign marked gold items. o) He concedes that gold was NOT notified under Section 11B (Chapter IVA of the Customs Act) and therefore, section 111(p) does not apply to this case. However, the gold is still liable to confiscation under sections 111(d) and 111(i) of the Customs Act. 17. We have considered the arguments made on behalf of both the sides. 18. The following issues have to be decided in this case. a) Was the gold confiscated in the case covered by Section 123 of the Customs Act shifting the burden of proving the non-smuggled nature of the seized goods to the appellants? b) Was the gold jewellery confiscated covered by section 123 of the Customs Act? c) Was the cash seized as sale proceeds of smuggled goods confiscated under section 121 covered by Section 123 of the Customs Act? d) Did the officers have reasonable belief that the goods/cash seized were smuggled so as to shift the burden under section 123 upon the appellants? e) If section 123 applies to (a), (b) or (c) above, have the appellants discharged their responsibility of proving non-smuggled nature of the seized goods/cash? f) Considerin....
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....es to gold and manufactures thereof and watches and any other goods notified by the government. There is nothing on the record to show that Indian currency is notified under section 123. Therefore, while the gold (in the form of bars, coins or pieces) and manufactures thereof (in the form of jewelllery) are covered by section 123, seized currency is not so covered. There is also no allegation that the currency is smuggled. It has been confiscated as sale proceeds of smuggled goods, and not as smuggled goods. Such currency (being fruit of a poisonous tree), is liable to confiscation under section 121. A plain reading of section 123, which shifts the burden of proof, does not show it covers sale proceeds of smuggled goods. Therefore, while gold and manufactures thereof (jewellery in this case) are covered by section 123, currency is not covered at all. Thus, as far as currency is concerned, the burden of proof is on the department and not on the person from whom it is seized. 23. As far as the gold is concerned, there is no dispute that it is covered by section 123. As far as jewellery is concerned, the case of the Revenue is NOT that it is smuggled but that it is made from smuggled....
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.... and had foreign markings. They were being carried surreptitiously in a train. When asked by the officers of DRI, Deepak and Surinder denied that they were carrying any gold in any form. On search, the goods were recovered from the shoes and bags including specially made pockets in the backpack. The officers had a reasonable belief that they were smuggled goods and accordingly, seized them. The burden of proof is on the person from who they are seized (Deepak) to prove that they were not smuggled. 28. Deepak said in his statements that the gold bars were purchased from Kashi, agent of M/s. Pinki Chains, gold ornaments and coins were purchased from Hardesh Kumar of M/s. T C Ornaments. Kashi, in turn, said that he had sold nine gold bars to Deepak after procuring them from M/s. Uma Strips. The owner of M/s. Uma Strips, Bishan Chand Gupta said that he purchases imported gold from agencies such as MMTC, PAMP, STC, Axis Bank and sells it to others. He only sells it on invoices duly signed by his staff and receives payment through banking channels. He also produced copies of his sales ledgers for the period. These did not reflect the nine gold bars in question. Neither Kashi nor Deepak ....
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....goods. Thereafter, one is free to carry them wherever, in any manner whatsoever they please. For instance, if any goods were imported and the duty has been paid on them, whether one carries them thereafter openly or concealed, section 111(i) does not apply. Until the duty is paid, they cannot be kept concealed. In case of prohibited goods, if the conditions subject to which the goods can be imported are fulfilled, they cease to be prohibited goods and they can be carried openly or concealed as one pleases. In case of gold during the period in question, if gold had been imported by a designated authority, it would not have been a prohibited good (since the condition of import was fulfilled) and if duty has also been paid, it would not have been a dutiable good. Thereafter, if the designated authority, in turn, sold the gold to anyone and such person carried them, concealed in a secret jacket or false bottom of a suitcase or shoes, section 111(i) would not apply. However, in this case, there is no evidence that the goods in question were imported by the designated organizations who alone could have imported the gold. Therefore, the confiscated gold is prohibited good and since it has....
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....oreign marking given by me, I get jewellery totally containing 777 grams of Gold. If stones are fixed in the jewellery, I have to pay for the cost of stones additionally in cash. I have to purchase imported gold as Indian gold is not available and jewellery made by Indian gold lacks finishing and is brittle and of poor quality." The statements made by Deepak could not be substantiated by the documents and records. Thus, it is not in dispute that the gold jewellery was not smuggled but made in India. 36. In his statement, Deepak, said that he got the jewellery made by supplying imported foreign marked, gold to the jewelers. Even if this statement is taken on face value, it does not say that smuggled gold was supplied to make the jewellery. It only says the jewellery was made from imported gold which could be (a) legitimately imported gold sold by traders; or (b) smuggled gold. If it was established with some evidence (including statements) that the jewellery was manufactured out of smuggled gold, then such smuggled gold would have been covered under Section 123 and by virtue of section 120, would have been liable for confiscation notwithstanding the change in its form into jeweller....
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....e conditions in Section 121 are fulfilled. From the records of this case, we do not find that the Revenue has established any of these factors or even identified which were the smuggled goods which were sold by the person from whom the cash is seized. Confiscation of this cash, is therefore, liable to be set aside and we do so. 39. We note that some confiscations were made at S.No. (ii) and (iv) of the operative part of the Order in Original of goods seized from Kashi Kumar Aggarwal and a penalty was imposed at S.No. (vii) but these are not the subject of these appeals. Penalty of Rs. 50,00,000 imposed on Deepak Handa under Section 112 (S.No. (vi) of the operative part of the Order in Original) 40. It is not in doubt that Deepak was in possession of and was found carrying smuggled gold bars and gold coins which we have held were correctly confiscated under Section 111(d) and 111(p) of the Customs Act. Therefore, Deepak had rendered himself liable to penalty under section 112. A penalty of Rs. 50,00,000/- was imposed upon him. Considering that we had set aside some of the confiscations (jewellery and currency) as not sustainable, we reduce the penalty on Deepak Handa to Rs. 20,00....