2010 (2) TMI 1043 - AT - Central Excise

Clandestine removal - undervaluation - seizure of the currency has been effected on the ground that the amount is sale proceeds of Camphor and Isoborneol - burden to prove.

Issues Involved:
1. Admission of sale proceeds by the appellant.
2. Evidence of sale proceeds being from offending goods.
3. Application of Section 121 of the Customs Act, 1962.
4. Validity of the Commissioner's findings on the amount seized.
5. Confiscation and redemption of the seized amount.
6. Appropriateness of the penalty imposed on the appellant.

Issue-wise Detailed Analysis:

1. Admission of Sale Proceeds by the Appellant:
The appellant, Shri Bhagwan R. Daswani, was implicated in the clandestine removal and undervaluation of goods manufactured by TOPL and DDIL. The appellant's premises were searched, and Rs. 84,28,765/- was seized. The appellant denied any admission by TOPL and DDIL that sale proceeds were with him and argued that no documentary evidence supported the claim that the seized currency represented the sale proceeds of offending goods. The appellant's statements suggested visits to Bombay and Madras to hand over sale proceeds, but no corroborative buyer was identified.

2. Evidence of Sale Proceeds Being from Offending Goods:
The appellant contested the Commissioner's finding that the seized amount was the sale proceeds of offending goods, arguing that no manufacturer would allow such large sums to be retained by a dealer for long periods. The appellant also highlighted the absence of any incriminating notebooks or diaries and questioned the feasibility of earning significant premiums on the sale of Camphor and Isoborneol due to market competition.

3. Application of Section 121 of the Customs Act, 1962:
The appellant argued that the requirements for violation of Section 121, as established in Ramchandra's case and other precedents, were not met. These requirements include proving the sale of smuggled goods by a person aware of their nature and establishing the identity of the seller, purchaser, and quantity of goods. The appellant maintained that the department failed to pinpoint the identity of purchasers and the quantity of goods, and thus, the confiscation under Section 121 was unfounded.

4. Validity of the Commissioner's Findings on the Amount Seized:
The tribunal noted that the total quantity of goods consigned without duty payment was significant, but the appellant's last trip to hand over cash was on 1-12-1989, with the seizure occurring on 23-1-1990. The tribunal found it implausible for the appellant to retain Rs. 84 Lakhs from sales over a brief period and criticized the incomplete investigation by the department. The tribunal concluded that the entire seized amount could not be considered sale proceeds of unaccounted goods.

5. Confiscation and Redemption of the Seized Amount:
The tribunal held that only Rs. 25 Lakhs of the seized amount could be treated as sale proceeds of unaccounted goods, based on the appellant's admission and corroborative evidence. The tribunal found the absolute confiscation of the entire amount by the Commissioner to be incorrect and ruled that the appellant should be allowed to redeem the seized amount by paying a fine. The tribunal emphasized the need for an option to pay a fine in lieu of confiscation, as mandated by Section 34 of the Customs Act.

6. Appropriateness of the Penalty Imposed on the Appellant:
Considering the long period the seized amount had been with the department and the partial confiscation, the tribunal deemed the penalty imposed on the appellant to be harsh. The tribunal reduced the fine to Rs. 4,00,000/- and the penalty to Rs. 1,00,000/-, taking a lenient view in light of the circumstances.

Conclusion:
The tribunal concluded that the department failed to prove that the entire seized amount was the sale proceeds of offending goods. Only Rs. 25 Lakhs was held liable for confiscation, with the appellant allowed to redeem the amount by paying a fine. The penalty on the appellant was also reduced, reflecting the tribunal's consideration of the incomplete investigation and the appellant's admissions.

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