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TMI Blog1987 (5) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... lector s order. Since these appeals arise out of the common order of the Collector, they were heard together at the request of the appellants and the respondents and are being disposed of under this common order. 2. The brief facts of the case are that the residential premises of Shri Radhakrishan Kejriwal at Flat No. 15, on 4th Floor, Laxmi Bhavan, D. Road, Churchgate, Bombay were searched under a warrant issued under Section 132(3) of the Income-Tax Act, 1961 by the Income-Tax Officers on 9-11-1983. Inter alia, they found 3 and 4 paper packets of diamonds placed respectively in one brown and one white envelope. These envelopes were kept in the steel cupboard and sealed by the Income-Tax Officers on 9-11-1983. On telephonic message from the Income-Tax Officers, the Customs Officers visited the residential premises on the next day on 10-11-1983 along with some Income-Tax Officers and the Customs Officers seized the brown and the white envelopes containing the three and four packets of diamonds respectively. The three packets of diamonds from the brown envelopes were found to weight 49.75 cts. valued at Rs. 1,31,975/- and the four packets of diamonds from the white envelope were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... answer to Question No. 8 of his Statement dated 5-11-1983. Shri Parikh further submitted that the Income-Tax Officer made immediate enquiries with M/s. P.C. Jain Co. to verify Shri Radhakrishan s statement. The Company confirmed the statement of Shri Radhakrishan and produced the challans under which the diamonds were sent to Shri Radhakrishan on approval. These were stamped by the Income-Tax Officer in token of his verification and the learned Advocate drew our attention to the copies of the challans in the paper book filed with the appeal of Shri Radhakrishan Kejriwal. He also submitted the original copies of the acknowledgement memos for our inspection during the course of the hearing. Shri Parikh continued his submissions and added that the four packets of diamonds in the white envelope were received from Shri Prem Kumar Agarwal who was doing business in two names, one was M/s. Premier Gems and the other was M/s. Premier Diamonds. There were two parties in this firm, namely, Shri Prem Kumar and his brother Shri Surendra Kumar. When the Income-Tax Officer visited the premises of M/s. Premier Gems on 9-11-1983 at about 4 p.m. for the purpose of verification of Shri Radhakrisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidence between 8 p.m. to 10 p.m. on 9-11-1983 in his Statement dated 18-11-1983. At that time he had found some 8 to 10 Income-Tax Officers in the house. This visit was for the purpose of taking back the diamonds given to Shri Radhakrishan on approval. 4. Shri Parikh contended that in the aforesaid circumstances the diamonds had been actually seized by the Income Tax Officers and the Customs Officers took charge of the diamonds from the Income-Tax Officers on the following day on 10-11-1983. The Advocate drew our attention to the Panchnama dated 10-11-1983 which recorded the fact that the cupboard in the residence of Shri Radhakrishan was opened after breaking open the seal of the Income-Tax Officers and the two paper envelopes were recovered which contained the diamonds which were seized by the Customs Officers. Shri Parikh added that the diamonds were examined by Shri C.M. Zaveri, a Government approved valuer who gave the weight and the value of the diamonds. Along with these two envelopes, the two weighment slips of Dharamkanta were also recovered from the residence of Shri Radhakrishan. The Advocate emphasised the fact that the Customs Officers did not search any other cupb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of the diamonds issued to Shri Radhakrishan Kejriwal and returned by him. The Advocate referred us to the salient points of the statements of Shri Surendra Kumar and Shri Prem Kumar. He stated that in the Statement dated 11-11-1983 the details of the diamonds and the weights and prices in each packet were given by Shri Prem Kumar. Shri Prem Kumar further explained his earlier Statement dated 9-11-1983 and the letter of the same date to the Income-Tax Officer in which he had deposed that no diamonds had been given to Shri Radhakrishan Kejriwal by his firm. The main reason for the previous statement was clarified by Shri Prem Kumar on 11-11-1983 on account of the fact that the transaction between his firm and Shri Radhakrishan was known to his brother and not to him. However, the Collector had drawn an adverse inference from Shri Surendra Kumar s statement that they had not sold any cut and polished diamonds to any individual. The Collector had also observed that there were no jangad slips for the issue of diamonds to Shri Radha Krishan by Shri Surendra Kumar. But these were seized by the Income-Tax Officer on 10-11-1983. However, in his further statement recorded on 18-11-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and polished diamonds. The mode of diamond cutting in brilliant fashion is universal. Hence it is not possible to state the origin of the goods. Shri Parikh drew our attention to this extract. He contended that the Jewellery Appraiser was not sure about the origin of the diamonds. The diamonds were being exported out of India instead of being smuggled into India and there was no question of holding that the seized diamonds were smuggled. The diamonds were recovered from the cupboard which was affixed with the seals of the Income-Tax Officer, and these seals were found intact when the Customs Officers visited Shri Radhakrishan s house. The recovery of the diamonds by the Customs Officers was a unilateral act and the Customs Officers also seized the key of the cupboard. Shri Parikh further submitted that the appellant had produced a Certificate dated 30-10-1984 from the Bombay Diamonds Merchants Association which had been filed with the appeal and this certificate was relevant to show the trade practice that the janged memos are not generally issued to intending buyers and brokers who are well known to the dealers. In view of these circumstances, Shri Parikh prayed that the Collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether he had given the diamonds in question to Shri Kejriwal on approval. Otherwise he would have confirmed this fact. All the same it was seen that the quantity seized from Kejriwal s house and received by him from Shri Surendra Kumar was the same as the quantity shown in the books of account of Shri Surendra Kumar s firm as having been issued to Shri Kejriwal. This established the fact that the diamonds received by Shri Kejriwal from Shri Surendra Kumar were from his official stock. Shri Karmali further contened that though the Collector relied on the expert Appraiser s opinion he was not cross-examined by the appellants. If therefore Section 123 was excluded from the purview of the proceeding there was no evidence to show that the diamonds were smuggled. The Collector disbelieved the explanation regarding the receipt of diamonds from Shri Surendra Kumar only because the janged memos were not given. On the other hand, the Collector decided the case taking into account the practice of issue of jangad but no evidence had been furnished to the appellant in support of the so-called trade practice. The two circumstances which weighed with the Collector in arriving at the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor under Section 105 of the Customs Act. The diamonds were seized because Shri Radhakrishan Kejriwal failed to submit any documentary evidence in support of his acquisition. As regards the statement of Shri Surendra Kumar and Shri Prem Kumar, there were contradictions in their evidence. The Collector considered the fact that they did not issue the jangad memo for the dispatch of diamonds on approval. Shri Pattekar referred to Page 12 of the adjudication order. The Collector had accordingly held that the appellant had not discharged the onus of proof under Section 123 of the Customs Act. Accordingly, the Collector s order of confiscation and levy of penalties was correct. 7. In reply, Advocate Shri Karmali drew our attention to the panchnama dated 9-11-1983 drawn by the Income-Tax Officer. He stated that this format contained inter-alia two statements, one showing what was seized and the other showing what was found but not seized. Shri Karmali contended that the diamond packets were covered by the first category as it was shown that the cupboard containing the diamond envelopes was sealed and the key to the cupboard was taken over by the Income-Tax Officer. Shri Karmali therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in those circumstances in which it is not practicable to seize the goods. Therefore, these provisions leave no scope for doubt that they relate to seizer of goods under both the laws. It is, therefore, difficult to hold that there could be no seizure of the diamonds in question in terms of Section 132(3) of the Income-Tax Act. It is quite a different thing to say that it was practicable for the Income-Tax authorities to seize the diamonds and to take away the same. The reason as to why they did not do so would be best known to the Income-Tax authorities themselves. But the fact emerges clearly that the diamonds in the cupboard were seized in terms of Section 132 of the Income-Tax Act. This fact appears very clearly when it is seen that Serial No. 5 of the Panchnama dated 9-11-1983 also provides for goods which were found but not seized. It is, therefore, reasonable to come to the conclusion that the diamonds in question were seized by the Income-Tax Officers on 9-3-1983 from the possession of Shri Radhakrishan Kejriwal. Apart from the panchnama, the learned Advocate Shri Parikh has drawn our attention to the order under Section 132(3) of the Income-Tax Act passed by the Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Customs Officers from the appellant s possession. In these circumstances, the provisions of Section 123 would not be available, to the Collector of Customs (Prev) in throwing the burden of proof on the appellant on the basis of the Supreme Court s decision in the case of Gianchand - A.I.R. 1962 S.C. 496. 9. However, to complete the examination of the arguments advanced in this behalf, it is necessary to refer to the learned Departmental Representative s contention regarding the detention and seizure being two different aspects. The analysis of the arguments and the sequence of events as mentioned above, would indicate that there was no detonator of the diamonds by the Income-Tax Officers but that it was a seizure. This still leaves the other argument of the learned Departmental Representative in which he places reliance on the Allahabad High Court s decision in the case of Lav Kush Kumar - 1986 (26) E.L.T. 922. In this case, the Allahabad High Court drew distinction between seizure and the detention, and held that the absence of the seizure list would indicate detention and not seizure. If the ratio of the Allahabad High Court is applied to the present appeal, it will be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of the facts narrated above. 11. A further factor which has been urged by the learned Advocate of Shri Kejriwal is the opinion of the Customs Jewellery Appraiser which has been incorporated in the Collector s adjudication order. On this basis, the learned Advocate has contended that the origin of the diamonds was not foreign and hence Section 123 of the Customs Act is not attracted. However, the appellant s argument in this behalf is not quite correct as this opinion was expressed by the Jewellery Appraiser long after the seizure of the diamonds and not before seizure and hence at the time of seizure it cannot be said that the diamonds could not be seized as they were not of foreign origin. On the other hand, the Departmental Representative has contended that the seizure was made after a search warrant issued by the Assistant Collector of Customs in terms of Section 105 of the Customs Act. But this argument of the appellant does not affect the merits of the case as it is seen above that the seizure was not effected from the possession of the appellant and hence the provisions of Section 123 would not be available to the Collector of Customs. 12. We now proceed to dispos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain the individual s signature. Therefore, the absence of Shri Radhakrishan s signature on the janged slips would not vitiate the documentary evidence adduced by the appellants to show that the diamonds were sent on approval by M/s. P.C. Jain Co. to Shri Radhakrishan. Therefore, in respect of this lot of diamonds the burden is discharged by the appellants. 13. As regards the second lot of diamonds received from Shri Prem Kumar Agarwal there are discrepancies in Shri Kejriwal statement which possibly weighed with the Collector in rejecting the evidence. These are Shri Prem Kumar s Letter dated 9-11-1983 to the Income-Tax Officer that he did not give any diamonds to Shri Radhakrishan, Shri Radhakrishan s Statement dated 9-11-1983 that he received the diamonds from Shri Prem Kumar Agarwal, and the immediate failure of Shri Radhakrishan Agarwal to produce documentary evidence on 10-11-1983 when the Customs Officers visited his residence and took away the diamonds. As against these discrepancies, it is contended by the appellant that Shri Surendra Kumar had visited the residence of Shri Radhakrishan at about 9 p.m. on 9-11-1983 to take back the diamonds given by him on approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms authorities in the seizure of diamonds that they are smuggled. Accordingly, we set aside the Collector s order of confiscation of diamonds and direct them to be released to Shri Radhakishan from whom they were seized. Since we hold that the diamonds are not smuggled there is no case for levy of penalty of Rs. 10,000/- under Section 112 of the Customs Act on each of the appellants. Accordingly, the Collector s orders of penalty are also set aside and the amounts are ordered to be refunded to each of the four appellants. In the end, all these four appeals succeed and are allowed. Nos. CD(BOM) 20, 21, 35 and 36/85 : 15. [Order per : K. Gopal Hegde, Member (J)]. - I agree with brother Dilipsinhji that all the four appeals are required to be allowed and the penalty imposed on the appellants are required to be set aside and that there should be refund of the penalty, if paid. But then not for the reasons stated by brother Dilipsinhji but for the reasons recorded hereunder. 16. The Assistant Director of Inspection (Investigation), Unit III(1), Bombay, along with other officers searched the premises of the appellant Shri Radhakishan Kejriwal on 9-11-1983 in the presence of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining diamonds. 18. On behalf of the appellants in Appeal Nos. 20 and 21 of 1985, Shri Parikh, their learned advocate had contended that the diamonds in question were seized by the Income Tax Officers and there was no seizure of diamonds by the Customs Officer under Section 110 of the Customs Act. Therefore, it cannot be said that there was seizure of the diamonds under the Customs Act. On behalf of the appellants in Appeal Nos. 35 and 36 of 1985, their learned advocate Shri M.G. Karmali had contended that firstly, there was no seizure under the Customs Act and secondly, the seizure was not effected in the reasonable belief that the seized diamonds were smuggled goods and as such Section 123 of the Customs Act will not be attracted and there is no burden cast on the appellants to establish that the seized diamonds are not smuggled goods. In support of his contention that the diamonds in question were seized by the Income Tax authorities, Shri Karmali placed reliance on the panchnama drawn up by the Income Tax authorities. He particularly referred to printed Para 5(a)(iv) which was to the effect in the course of the search, jewellery, ornaments, etc., which have not been inventor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to say that it was practicable for the Income Tax authorities to seize the diamonds and to take away the same. The reason as to why they did not do so would be best known to the Income Tax authorities themselves. But the fact emerges clearly that the diamonds in the cupboard were seized in terms of Section 132 of the Income Tax Act. This fact appears very clearly when it is seen that Sr. No. 5 of the Panchnama dated 9-11-1983 also provides for goods which were found but not seized. It is, therefore, reasonable to come to the conclusion that the diamonds in question were seized by the Income Tax Officers on 9-11-1983 from the possession of Shri Radhakishan Kejriwal. Apart from the panchnama, the learned advocate Shri Parikh has drawn our attention to the order under Section 132(3) of the Income Tax Act passed by the Assistant Director of Inspection on 9-11-1983 in respect of the articles lying in the sealed cupboard of the late mother-in-law of Smt. Usha Kejriwal. This order also confirms the fact of the seizure of the diamonds by the Assistant Director of Inspection, Income Tax. This order further bears the endorsement of the Assistant Director dated 10-11-1983 that the prohibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e diamonds. If the Income Tax officers had actually seized the diamonds having regard to the quantity, the manner in which they were found, there was no need for the Income Tax Officers to keep them inside the almirah and to issue a prohibitory order. 23. Section 132(1) authorises search and seizure of account books, money, bullion, jewellery or other valuable articles by the officers of the Income Tax specified therein. Sub-section 3 of that section reads the authorised officer may, where it is not practicable to seize any books of accounts, other documents, money, bullion, jewellery or other valuable articles or things, serve an order on the owner or the person who is in the immediate possession or control thereof that he shall not remove, part with or otherwise deal with, except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section. 24. It is clear from the above sub-section that the issue of prohibitory order against the person in immediate possession or control arises only when the authorised officer found it not practicable to seize the things. In the instant case, admittedly th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e useful and relevant to enquiry proceedings in the case. Section 110 authorises seizure of the goods which are liable to confiscation under the Customs Act. From the panchnama it is clear that the seizure was effected not because the seized diamonds were liable to confiscation. There was hardly any ground existed for the seizing officers to believe that the seized diamonds were smuggled goods. Admittedly, the seized diamonds are cut and polished diamonds. It is not the case of the department that the cut and polished diamonds are imported into India. Cut and polished diamonds are obtained from the rough diamonds imported into India. From the provisions of Sections 110 and 123, it is abundantly clear that the reasonable belief of the believer should be that the goods are smuggled goods. At the time of seizure no ground existed for the seizing officer to believe that the seized diamonds were smuggled goods. In the circumstances the seizure effected cannot be considered as having been done in the reasonable belief that the seized diamonds are smuggled goods. If the seizure was not in the reasonable belief that the seized diamonds are smuggled goods, then the burden would not shift to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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