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TMI Blog2021 (5) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. Confiscation of Jewellery - HELD THAT:- The case of the Revenue is NOT that it is smuggled but that it is made from smuggled gold. Therefore, notwithstanding this change of form (from primary gold to ornaments), jewellery would be liable to confiscation under section 120. If the jewellery was allegedly smuggled and was seized under such a reasonable belief, section 123 would apply. Since jewellery is not even alleged to be smuggled, section 123 does not apply unless it can be shown that it has been made out of smuggled gold. Whether the officers had a reasonable belief, as required under Section 123, that the seized goods were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section states that Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation . This section does not shift the burden of proof to the person(s) from whom the cash is seized. It is for the Revenue to establish that the cash which was seized was (a) the sale proceeds; (b) the goods sold were smuggled goods; and (c) the person who has so sold the goods had either the knowledge or the reason to believe that the goods were smuggled. Merely because some unaccounted for cash is lying, it cannot be confiscated unless the three conditions in Section 121 are fulfilled - From the records of this case, it is not found 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. Penalty of 50,00,000 imposed on Deepak Handa under Section 112 - HELD THAT:- 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orroborated 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 ₹ 4.6 crores was seized under the Customs Act as Deepak did not have any bills for the gold nor any documents to show that the foreign marked gold was legally imported into India. 6. During investigation, Deepak said that the gold bars were purchased from Kashi Kumar Aggarwal [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 he could not produce any evidence to support these claims. 7. 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 owns the shop and runs it with his two sons and his staff. He purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vi 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 ₹ 4,60,02,337, seized vide panchnama dated 23/24-8-2017 under section 111(d), 111 (i) and 111(p) read with section 120 of the Customs Act, 1962. ii. I confiscate the seized gold weighing 2776.94 grams (recovered from Kashi Kumar Aggarwal) valued at ₹ 72,21,040/- seized vide panchnama dated 24.8.2017 under section 111(d), 111(i) and 111(p) read with section 120 of the Customs Act, 1962 iii. I confiscate the seized gold weighing 1,118.24 grams (recovered from M/s. Baibhav Ornaments) valued at ₹ 46,83,820/- seized vide panchnama dated 24.8.2017 under sections 11(d), 111(i) and 111(p) read with section 120 of the Customs Act, 1962. iv. I confiscate Indian currency amounting to ₹ 8,86,500 seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 unloading must be understood in the context of sections 31, 32, 33, 34 and 36 which deal with unloading of the imported goods only at the authorized places in the Customs station It has nothing to do with unloading of domestic railway passenger or his baggage containing locally bought goods which were neither dutiable nor prohibited. e) Section 111(p) applies to internal trade of goods of foreign origin which are notified under Section 11B (Chapter IVA) of the Customs Act. Gold is not notified under this section. Therefore, section 111(p) does not apply. f) Thus, all the three sections of 111 do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 upon the department to prove that the seized goods are smuggled goods and they have not proved so. He relied on the decision in Union of Indai vs Imtiaz Iqbal Pothiwala [2019 (365) ELT 167 (Bom)] in support of this argument. m) As held in RVE Venkatachala Gounder vs Arulmigu Visveswaraswami & VP Temple [ 2003 (8) SCC J752], the onus of proof, as opposed to the burden of proof, keeps shifting in certain circumstances and had, in the appellant's case, indeed shifted back to the DRI. The DRI failed to validate the legality or otherwise of the import of the gold bars seized from the appellant, even when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 24 carat purity, the biscuits were found concealed and stitched into the folds of the jacket prepared for the purpose and after the seizure the accused absconded from justice. Gold could be imported only with the permission of RBI at that time which the accused did not have. Considering all these factors, the Supreme Court reversed the acquittal of the accused by the High Court. e) During the period relevant to this case, import of gold in any form was restricted as per DGFT Notification No. 36/2015-202 dated 17 January 2017 and import was permitted only by nominated agencies. It was not a fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 having purchased the gold bars from M/s. Uma Strips. i) Similarly, the other supposed vendors of the jewellery and coins have also not supported the claim of Deepak of having purchased the seized goods from them. Neither the documents nor the statements of any of the vendors supported the claim of the appellants to have procured the goods. j) Deepak also claimed that some of the gold bars seized from him were meant for Sheru of Kashmir. Sheru said that he purchases gold from Delhi and pays through bank but he had nothing to do with the gold bars seized from Deepak. k) To sum up, gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-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) Considering all the above, is the confiscation of the gold under section 111(d),(i) and (p) correct ? g) Is the confiscation of the gold jewellery under section 111(d), 111(i) and 111(p) read with section 120 correct? h) Is the confiscation of the cash as sale proceeds of smuggled goods under section 121 correct? i) Was the penalty correctly imposed under section 112 of the Customs Act on the appellants? 19. Section 123 of the Customs Act shifts the burden of proof in certain cases. It reads as follows: "SECTION 123. Burden of proof in certain cases. (1) Where any goods to which this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfiscation 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 gold. Therefore, notwithstanding this change of form (from primary gold to ornaments), jewellery would be liable to confiscation under section 120. If the jewellery was allegedly smuggled and was seized under such a reasonable belief, section 123 would apply. Since jewellery is not even alleged to be smuggled, section 123 does not apply unless it can be shown that it has been made out of smuggled gold. 24. The next question is whether the officers had a reasonable belief, as required under Section 123, that the seized goods were smuggled goods. We find that the officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 had produced any documents to substantiate their claim of their legal import or purchase from someone who legally imported the gold. We, therefore, find that the appellant had not discharged his burden of proving that these goods were not smuggled as is contemplated under Section 123. 29. The next question is whether these goods are liable to confiscation under Section 111 (d), 111(p) and 111(i) of the Customs Act as held in the Order in Original and upheld in the impugned orders. Under section 111 (d) any goods which are imported or attempted to be imported or are brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported 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 been found concealed in the shoes of Deepak and in the secret pockets of his back pack, Section 111(i) applies. 32. As far as section 111(p) is concerned, it provides for confiscation of "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". It is undisputed that gold was NOT notified under Chapter IVA during the relevant period and therefore, it cannot be confiscated under section 111(p). Learned Authorised Representative argued that the goods must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying 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 jewellery. However, there is no such evidence on record. In our considered view, therefore, the jewellery is not liable to confiscation in the absence of any evidence that it is smuggled or it has been made by converting smuggled gold. The mere fact that the jewellery was found along with the smuggled gold bars and gold coins makes no difference. B. Foreign origin gold coins weighing 1118.24 grams in all seized from the business premises of M/s. Radhika Jewellers and M/s. Baibhav Ornaments, Jammu seized on 24.8. 2017 (S.No. (iii) of the operative part of the order in original) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals. Penalty of ₹ 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 ₹ 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 ₹ 20,00,000/-. Penalty of ₹ 10,00,000 imposed on Ravi Handa under Section 112 (S.No. (viii) of the operative part of the Order in Original) 41. Ravi Handa, brother of Deepak Handa was managing the Baibhav ornaments in Jammu where 1118 grams of the confiscated foreign marked gold coins recovered. Indian currency recovered from him was also confiscated which we have set aside. Considering these factors, we find that Ravi Handa has rendered himself liable to penalty under Section 112 but the penalty needs to be reduced. Accordingly, we reduce the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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