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TMI Blog2006 (9) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... and Cargo (hereinafter referred to as TTC), on 21-3-1997 appointing them as their sub agent for stocking and selling TCs of VISA brand. The said M/s. TTC is duly licensed to operate as FFMC by RBI. In terms of the said agreement blank stock of TCs were to be issued by the appellants to TTC at any given time within the overall limit agreed. The TCs so received by TTC were to be sold by them as per the terms and conditions of the licence granted to them as FFMC by RBI and as per the guidelines and instructions given in the memorandum of instructions issued by RBI from time to time. The appellants also informed the RBI about appointing of TTC as their sub-agent and claimed that if the facilities by other FFMCs are mis-used by them, the appellants is not responsible for the same, inasmuch as the RBI is the only authority to monitor such use or mis-use of the TCs. Various clauses in the agreement entered by the appellants with TTC also elaborated that TTC would sell such TCs to genuine passengers only against the purchase agreement forms (hereinafter referred to as PAF). The agreement also contained a clause containing caution about money laundering. The settlement between the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qbal Kapadia and Salim Bail, who were further selling the said TCs so obtained by them from TTC to one Shri Zahoor. In terms of the statements of Kapadia, Zahoor used to give him the cash, which cash he would pay on to Riyaz Retiwala and would obtain TCs from TTC, in the name of non-existent and unidentified passenger. Shri Zahoor was further reported to have sent the said TCs to Dubai, through carriers. It was revealed by these persons that they purchased TCs from Riyaz Retiwala on 23, 24, 26-5-1997, which were being sent to Dubai, on board the vessel, which was intercepted by the DRI on 29-5-1997. It was also revealed during such investigations that TTC had paid Rs. 68 lakhs to WSFL, as a consideration of the TCs obtained by the TTC on the said date, which stands recovered and seized by the DRI, the said payment was made by two pay orders drawn on two banks viz., Union Bank of India and Syndicate Bank. The said pay orders stands deposited by the appellants in their account for encashment. On entertaining a bona fide belief that the said currency in the shape of two pay orders amounting to Rs. 68 lakhs was the sale proceeds of the smuggled goods, DRI approached the Bank and issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings against the present appellants, the details of the orders passed against other appellants are being avoided. 7. Being aggrieved with the above order of the Commissioner, the appellant s challenge the same before the CESTAT. It is seen that vide order dated 3-2-2000, the appeal was rejected by the Division Bench. However, Member (Judicial) rejected the appeal on the ground that the appellants has no locus standi to file the same. This view was not agreed upon by Member (Technical), who discussed the merits of the case but did not find favour with the same and rejected the appeal on merits. As such, the net result, though on different grounds, was rejection of the appeal filed by the appellants. 8. The said order of the Tribunal was challenged by the appellants before the Hon ble High Court of Mumbai by way of Writ Petition No. 493/00 [2006 (202) E.L.T. 776 (Bom.)] and stands disposed of by the Hon ble High Court vide its order dated 25-4-2006. After taking into account the overall facts and circumstances, the Hon ble High Court observed that - in so far as the present case is concerned, we have no hesitation in holding, for the reasons that we have indicated above, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confiscation in the hands of the person, who has sold the smuggled goods. Inasmuch as admittedly in the present case, the paying and selling of TCs was a bona fide business and proceeded the subsequent smuggling out of the said bought TCs, consideration of the sale by the appellants to TTC cannot be held to be tainted being sale proceeds of the smuggled goods. The act of smuggling must precede the sale of the goods. Drawing our attention to the statements of various persons, ld. Advocate submits that appreciation of the same leads to inevitable conclusion that the amount of Rs. 68 lakhs and 23 lakhs were sale proceeds of the local transaction, which happened in India and for which the payments were made in advance. Sale proceeds of the TCs would be the amount received by the holder of the TCs when he encashes the same and inasmuch as admittedly the TCs were encashed abroad, the amounts in dispute cannot be held to be sale proceeds of the smuggled goods. In any case, since the amounts were given in advance, they cannot require the characteristic of sale proceeds of the smuggled goods. The same had already been deposited in the company bank account and was the property of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Pramod Kumar, ld. JDR appearing for the revenue submitted that the pay order dated 25-9-1997 for an amount of Rs. 58 lakhs and for Rs. 10 lakhs was issued by M/s. Time Travels from their bank i.e. Union Bank of India, Versova Branch, Mumbai. investigations made by the DRI have disclosed that such pay order was obtained by M/s. Time Travels from payment received through smuggling of foreign exchange. Inasmuch as the said amount was still lying in the hands of the bank account of TTC, before the same was credited to Wall Street and represented the sale proceeds of the smuggled TC, the same has been rightly seized and confiscated. It was also contested that Wall Street has no locus standi to maintain the appeal and question the confiscation. If they are aggrieved with the seizure and confiscation, they are at liberty to take action either against the bank or against the TTC. The only aggrieved persons could be the bank from whose custody the money has been seized or TTC from whose accounts the money has been used for preparation of bank draft. Reference in this regard has been made to the Larger Bench s decision of the Tribunal in the case of Weizmann Ltd. v. Commissioner of Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that there is no challenge to the confiscation of the TCs seized from the vessel or of the vessel or the other part of the impugned order vide which penalties have been imposed upon various persons. The challenge in the present appeal is only by M/s. Wall Street Finance Ltd., against the confiscation of an amount of Rs. 68 lakhs received by them in the shape of two bank drafts from M/s. TTC as consideration towards the sale of TCs, in the normal course of their business as also to an amount of Rs. 23 lakhs encashed by the said appellants out of the security deposit given by M/s. TTC. It has been strongly contended before us that money in the hands of the appellants in the shape of bank drafts issued by TTC cannot be considered as sale proceeds of smuggled goods, inasmuch the Travellers Cheques, in question, even according to the evidence produced by the revenue were yet to be smuggled out of the country. It is seen that the said Indian Currency has been confiscated in terms of the provisions of Section 121 of the Customs Act, which reads as under :- Section 121 - Confiscation of sale proceeds of smuggled goods :- Where any smuggled goods are sold by a person having knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selling of the TCs to TTC cannot be held to be the sale proceeds of smuggled TCs. Similarly, encashment of an amount of Rs. 23 lakhs by the appellants from the security deposit given by TTC at the time of entering into an agreement cannot be said to be the sale proceeds of smuggled goods, so as to attract the provisions of Section 121 of the Act. As such, we are of the view that the said Indian currency received by the appellants as a consideration of sale of TCs to another FFMC, in accordance with the provisions of law, cannot be held to be the sale proceeds of smuggled TCs. 13. Though, we have already held, that the said Indian Currency was not the sale proceeds of smuggled TCs, having been received by the appellants for sale in India and for the TCs, which were yet to be smuggled out, we would also like to deal with the other aspects of the currency being presumably the sale proceeds of smuggled gold and the confiscability of the same under Section 121, only for the academic reasons. The question, which are arises is that even if the said currency was the sale proceeds of the TCs, which might have travelled back to the appellants, can it be confiscated under Section 121 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h might be in the process of being smuggled out and caught and seized by the enforcement agencies. 14. We find that an identical issue was dealt by the Tribunal in the case of B.P.Nayak v. Commissioner of Customs (Prev.), Mumbai [2001 (136) E.L.T. 604 (Tri.-Mumbai)], while dealing with the issue of confiscability of the sale proceeds of smuggled gold, in the hands of the money changer. The Tribunal filed that when the pay order issued to the appellant s money changer was presented to the bank, pending payments against pay order, it kept the money in a separate account. The money also acquired the character of the proceeds of sale of foreign exchange. That foreign exchange, as noted, was not smuggled goods, when it was issued by the money changer. It acquired this character only later when it was smuggled out. The money changer therefore could not obviously have any knowledge that the foreign exchange was going to be smuggled out. Therefore, as proceeds of sale of that foreign exchange, the money is not liable to confiscation under Section 121. The relevant paragraphs 27 and 28 of the said judgment, which dealt with the crux of the issue are being re-produced by us, for better app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of any specific provision as for example that contemplated in the provision relating to money laundering we are of the view confiscation of the sale proceeds cannot be made once the goods lose their character or identity as sale proceeds of smuggled goods . At this stage, we also take note of the another decision of the Tribunal in the case of LKP Merchant Financing Ltd. v. Commissioner of Customs (P), Mumbai [2005 (180) E.L.T. 233 (Tri.-Mumbai)], wherein by following B.P. Nayak judgment, the Tribunal held that consideration received for sale of foreign currency, in accordance with the RBI Regulations and lying in the bank account of FFMC, cannot be held to be the sale proceeds of smuggled foreign currency and cannot be made liable to confiscation under Section 121 of the Customs Act. The said section cannot be stretched to be applied to the sale proceeds when changed in form and the same can only be applied to the immediate sale proceeds for the goods smuggled. 15. The above two decisions of the Tribunal have not been reported to be either appealed against by the revenue or upset by any higher appellate forum. The revenue has also not shown us any other decision con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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