TaxTMI 
TaxTMI 
2009 (4) TMI 76
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....d, on 21/3/1991, the business premises of M/s. M. Ambalal & Co. at S.V. Road, Bombay, and apprehended one Rajendra @ Raju, who was standing outside the premises with a cloth bag in his hand, which, on subsequent examination was found to contain 7390.82 carats of diamonds valued at Rs.79,40,506.25. They were claimed by the firm, but no accounts were found to have been maintained for the same. Inside the premises, one Dayabhai Patel, partner in the firm as also, Ukabhai Patel and Himatbhai Thedi were present, and while search was in progress, Dharmendra Shah, Shailesh Jogani i.e. petitioner 1 and Pankaj Jogani i.e. petitioner 2 entered the premises. The search of the premises resulted in recovery of 410.18 carats of diamonds valued at Rs.4,20,324.50 not duly accounted for and also of some loose papers, suspected to be the accounts of diamonds not recorded in the account registers of the firm. Personal search of the other persons in the premises resulted in recovery of 127.17 carats of diamonds valued at Rs.61,854/from Ukabhai J. Patel, 66.64 carats of diamonds valued at Rs.1,53,272/from Himatbhai Thedi, 27.87 carats of diamonds valued at Rs.97,545/from Dharmendra Shah, 2.57 car....
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....diamonds. He ordered payment of appropriate duty on the said diamonds. So far as petitioner 1 is concerned, he ordered confiscation of 223.75 carats of diamonds valued at Rs.4,50,618/. He gave option for redemption of the said diamonds on payment of fine of Rs.3 lakhs. He ordered confiscation of 2.57 carats of diamonds valued at Rs.4,955/from petitioner 2. He gave him an option to redeem the said diamonds on payment of Rs.2,500/. He imposed penalty under Section 112 (b)(i) of the Customs Act, 1962 on petitioner 1 and ordered him to pay Rs.40,000/. He also imposed penalty on petitioner 2 under the same provision and ordered him to pay Rs.1,000/. 6. The said order was challenged by the petitioners along with M/s. M. Ambalal & Co. before the CEGAT. The CEGAT by order dated 29/12/1995 allowed the appeal filed by Rajendra Bhamra and Dharmendra Shah. The CEGAT partly allowed the appeal filed by Himatbhai Thedi so far as the personal penalty is concerned. The CEGAT, however, rejected the appeals of the petitioners and confirmed the order of the Collector of Customs (Preventive) Bombay. Being aggrieved by the said orders, the petitioners have preferred this appeal. 7. We have....
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....d Mayank Diamonds Private Limited and others. He addressed several letters to the Customs praying for release of the diamonds. d) The finding of the CEGAT that only after issuance of show cause notice, names of the parties were specifically furnished for part quantity of diamonds and no details were furnished for the balance quantity is wrong. Letters dated 2/4/1991 and 24/4/1991 establish this. Besides the petitioners made personal visits seeking opportunity to produce documents. Letter dated 3/9/1991 was addressed to the Department expressing readiness to show all original documents. The petitioners addressed letters forwarding documents and ledger accounts showing that polished and cut diamonds are not of foreign origin. The Department did not verify the documents. The Department did not obtain any expert's opinion. The finding recorded by the Collector of Customs that incorrect and improper details claimed by the petitioners have not been specified in the letter and that the petitioners have not denied that the diamonds were of illicit nature is wrong because in letter dated 2/4/1991 and in subsequent letters the petitioners have specifically stated that the diamonds are not ....
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....ns 106 and 114 of the Evidence Act that the gold in his possession was smuggled and imported without permission. d) Judgment of the Supreme Court in Bhoormall's case (supra) supports the respondents. In that case, it is held that on the principles underlying Section 106 of the Evidence Act, the burden to establish facts relating to smuggling which remain in the special knowledge of the person concerned in smuggling, is on him and if he fails to explain those facts, adverse inference of fact may arise against him. e) The judgment of the Supreme Court in Vinod Solanki's case (supra) has no application to this case because there the Supreme Court was dealing with FERA. That judgment must be restricted to it's peculiar facts. f) Apart from the judgment in Bhoormall's case, the respondents are relying on the following judgments : i) State of Maharashtra v. Natwarlal Damodar Soni, AIR 1980 SC 593. ii) Union of India v. Harshad Doshi, 2006 206 ELT 04. iii) KTMS Mohammad & Another v. Union of India, (1992) 3 SCC 178. iv) K. Pavunny v. Asstt. Collector of Central Excise, (1997) 3 SCC 721. g) In view of the above, the concurrent view of the authorities below does not deserve to be di....
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....: "123. Burden of proof in certain cases. (1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled 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." 12. The Supreme Court observed that Section 178A applies to goods specified in subsection 2. With regard to those goods, if they are seized in the reasonable belief that they are smuggled goods, the burden of proof that they are not such goods shall be on the person from whose possession they were seized; but with regard to any other goods the rule in subsection (1) of Section ....
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....st will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden, to discharge which, very slight evidence may suffice." 13. Thus the Supreme Court accepted that in respect of goods which are not specified in subsection 2 of Section 178A and in respect of which no notification is issued by the Central Government the burden of proving that they are not smuggled goods lies on the Department. Referring to Section 106 of the Indian Evidence Act, which states that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him, the Supreme Court observed that failure to establish facts by a person which are within his special knowledge will lead to an adverse inference being drawn against him which coupled with the presumptive evidence adduced by the Department would rebut the initial presumption of innocence in favour of that person. But the Supreme Court clarified that the special or peculiar knowledge of the person proceeded against will not relieve the Department altogether of the burden of producing some evidence in respect of that f....
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....ld be on the Department. In the context of Section 106 of the Indian Evidence Act, the Supreme Court restated what it had stated in Bhoormall's case that the special and peculiar knowledge of the person proceeded against would not relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of the fact in issue. It may only alleviate the burden to discharge and very slight evidence may suffice. The Supreme Court further observed that to arrive at a finding as to whether the retracted confessional statement is voluntary or not, the court must bear in mind the attending circumstances which would include the time of retraction, the nature thereof, the manner in which such retraction has been made and other relevant features. The Supreme Court further went on to say that mere retraction of a confessional statement may not be sufficient to make the confessional statement irrelevant, but the court is obligated to take into consideration the pros and cons of the confession and retraction made by the accused. 15. The principles which can be deduced from the above judgments for the purpose of deciding the present case can be summarised as under: ....
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....ct nor are they notified under Section 125 thereof. Therefore, onus of proving that the diamonds are of foreign origin and are smuggled into India is on the Department. However, the Department has not to prove the impossible. It has to establish it's case with such a degree of probability that a prudent man may on it's basis believe in the existence of the fact in issue (Bhoormall's case). 17. None of the persons present at the office premises could satisfactorily explain from whom the diamonds were purchased. They did not give particulars of the sellers from whom the diamonds were purchased. These facts were within their special or peculiar knowledge, which the Department cannot prove and is not expected to prove. In view of the nondisclosure of facts which were within the special knowledge of the persons from whom the diamonds were seized, the burden to prove that the diamonds were smuggled which undoubtedly rested on the Department is alleviated. Very slight evidence is, therefore, sufficient to discharge it. The circumstances which the Department is relying on to discharge this burden need to be now examined. There are certain glaring circumstances which discharge ....
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.... Collector of Customs, it is apparent that he has considered the confessions as well as the retractions. After going through the confessional statements of Maganbhai Patel and Ambalal Patel and their retractors, he has observed that there was no denial of the fact that Rajesh Bhamre alias Raju, the employee of the firm who was standing outside the premises with a bag of diamonds had instructions to run away in case he finds the Custom Officers approaching. It has also not been denied that the diamonds valued at Rs.79,40,506.25 were recovered from him and no document regarding their illicit acquisition was produced. Ownership of these diamonds was claimed by Maganbhai Patel. 20. So far as the retraction of the appellant Shailesh is concerned, the Collector of Customs has rightly observed that he has stated that "Therefore the veracity of the statements are disputed and the said statements with regard to incorrect/improper details are duly retracted". This is a very vague retraction. The incorrect / improper details claimed by him have not been specified by him in the letter. He has also not specifically denied the illicit nature of the diamonds. In the facts and circumstances....
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..... Kanuga's case that the petitioners have nothing to do with M/s. Ambalal & Co. can never stand the scrutiny of the court in view of the fact that they entered the premises of M/s. Ambalal & Co. with diamonds which could not be accounted for. 24. So far as M/s. Aakash Enterprises case (supra), is concerned in that case this court has reiterated what the Supreme Court has said in Bhoormall's case that in case of nonnotified goods even if a person who is to be proceeded against, has a special or peculiar knowledge of facts, the Department is not relieved of its burden to establish that the goods have entered into the country illegally and that the said goods were smuggled. The Supreme Court has clarified that special knowledge only alleviates that burden, to discharge which very slight evidence will suffice. We have examined the present case in the light of this observation and come to a conclusion that the Department has discharged the burden. M/s. Aakash Enterprises case, therefore, does not help the petitioners. For the same reasons, judgment of this court in Shri Ganesh Enterprises' case (supra) also does not help the petitioners. 25. In the ultimate analysis we are....