2005 (98) ECC 628 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri P.G. Chacko, Member (J) and Shri Jeet Ram Kait, Member (T)

N.S. Chengalvarayan & Ors.

Versus

Commissioner of Customs, Chennai

Appeals No. C/354 to 360/2003

[Arising out of Order-in-Original No. 1190/2003 dated 29.10.2003 passed by Commissioner of Customs, Chennai]

Final Order No. 1034-1040/2004, dt. 10.12.2004, Certified on 13.12.2004

Confiscation (Customs)

Smuggled gold -- Merely because, certain quantity of jewellery manufactured out of imported gold purchased by them and which were meant for export has been kept in the jewellery shop, that by itself cannot be a ground to hold that the jewellery found in the shop was made out of smuggled gold, such finding should be supported by concrete evidence -- Even if same of the gold jewellery meant for export has been displayed in the jewellery, that cannot be reason to order confiscation of the same -- Customs Act, S. 111(d)(2) r/w FTDR Act, 1992.

Appeal allowed

PRESENT :

Shri B. Kumar, Adv. for the appellants

Shri C. Mani, DR for the respondent.

Per : Jeet Ram Kait (Oral)

These seven appeals are against a common Order-in-Original No. 1190/2003 dated 29.10.2003 passed by the Commissioner of Customs (Adjudication Sea Port.), Chennai who has absolutely confiscated gold jewellery weighing 9819.830 gms. of foreign origin under Section 111(d)(2) of the Customs Act, 1962 read with FTDR Act, 1992. He has also released the gold idols totally weighing 1058.896 gms. to M/s. Vignesh Kumar Jewellers and has imposed penalty under Section 112 of the Customs Act, 1962 on the appellants as detailed below:

(i) Chengalvarayan - Rs. 5.00 lakhs

(ii) N.S. Suresh - Rs. 2.00 lakhs

(iii) M.Dhanasekar - Rs. 50,000

(iv) Jitendra Jain - Rs. 50,000

(v) Amanulla - Rs. 25,000

(vi) Lalith Kumar - Rs. 5,000

(vii) Indra Narayanan - Rs. 5,000

2. Brief facts of the case are that on the basis of specific intelligence that huge quantity of gold coins/gold jewellery of foreign origin smuggled into the country were kept concealed in the shop premises of M/s. Sri Vignesh Kumar Jewellers, (VKJ for short) of which NS Chengalvarayan is one of the partners, the DRI officers initiated investigation. As a follow up action statements were recorded from various persons such as Jitendra Jain on 1.11.2000 wherein he has inter alia stated that he had come in contact with one Chengalvarayan in 1997 who was a dealer in gold jewellery. He has stated that the said Chengalvarayan used to purchase gold ornaments and gold coins etc. from passengers who brought the said items without payment of duty and that such gold items were used to be kept in the house of One Kaliya, Sathya and Damodaran who are his employees. He has further stated that on 30.10.2000 he received a bag containing 1850 gold coins each weighing 8 gms and on the next day he had also received another bag containing 8 kgs of gold ornaments and 25 gold biscuits with foreign markings from one Kaka who was known to him and to Chengalvarayan. He stated that the goods were intended for Chengalvarayan and that he had banded over the gold ornaments weighing 8 kgs and 25 gold ornaments to three persons viz. Sathya, Kaliya, and Suresh who is the brother of Chengalvaryana. On 1.11.2000 statement was also recorded from N.S. Suresh, brother of Chengalvarayan who in the statement inter alia stated that his brother is a dealer in gold jewellery etc. and that though some portion of the above jewellery was received on payment of duty, certain portion was smuggled goods. The officers searched the business premises of VKJ on 2.11.2000 in the presence of one Balaji brother of Shri Chengalvarayan and during the search the officers found gold jewellery, gold idols of foreign origin and some documents/registers pertaining to purchase and sale of gold. Shri Balaji could not correlate the gold jewellery and idols found in the shop with the documents and registers. Balaji also stated that he was not aware of any dealings relating to the gold jewellery in VKJ. The gold jewellery and gold idols were got assayed by a market assayer who certified that the items were of 22 carat and were of foreign origin. The officers seized 9819.830 gms of gold jewellery and 1056.896 gms of gold idols approximately valued at Rs. 47.8 Lakhs. Suresh in his further statement dated 2.11.2000 stated that the entries in the Registers were usually made by one Shri Dhanasekar working in the shop.

Dhanasekar in his statement dated 2.11.2000 inter alia stated that he is an employee of VKJ and that no receipts were made for sale but were written in small chits which were kept in his house or in the house of Damu. The search of residential premises of Kaliya another employee of VKJ did not result in recovery of any incriminating documents or material. Searches made in the residence of One Damodaran @ Damu resulted in recovery of certain chits and papers, but the said Damodaran could not be contacted nor examined. Jitendra Jain in his further statement stated that most of the gold jewellery in the shop were smuggled ones and some were procured through legal sources. None of the persons involved in the transaction was able to furnish anything to support the licit import of gold coins or jewellery etc. It was in these circumstances that show cause notice was issued which culminated in the order of adjudication passed by the adjudicating authority as noted above.

3. Ld. Counsel for the appellants Shri B. Kumar submitted that VKJ had meticulously maintained accounts and the documents show import of 916 purity gold jewellery fully and they have explained as to the lawful nature of the acquisition of the gold jewellery found in the shop. The adjudicating authority has overlooked these vital facts. As regards the chits that were seized from the house of one Damodaran alias Dhamu, he has submitted that mere recovery of some photo copies of chits from the house of one Damu cannot be connected with the transactions done by VKJ. Further the said Damu was also not contacted by the Department nor any statement recorded from him. No evidence has been shown that Damu was an employee of VKJ. Further, the so called chits did not contain any name of the shop nor the wordings written therein showed that they relate to any dealing relating to the goods under seizure. He, therefore, submitted that the such chits cannot be taken as evidence.

The Counsel also referred to the documents such as sale bills, registers and pointed out that all the entries are supported by documents. He has also submitted that the adjudicating authority in paragraph 36 had come to the conclusion that none of the three items viz. 1850 gold coins, 8 kg. of gold jewelleries of foreign origin and 25 gold biscuits was seized and he has dropped the proceedings on the above three items which were not seized. The adjudicating authority therefore proceeded to examine the liability to confiscation of the total gold jewellery weighing 9819.830 gms and gold idols weighing 1058.896 gms and released the gold idols weighing 1058.896 gms. to M/s. VKJ on finding that they were lawfully acquired. The learned Counsel also submitted that the seizure of gold jewelleries from the shop of Vignesh Kumar Jewelleries was illegal as there was absence of any material whatsoever for effecting seizure. He submitted that there was absence of any circumstances to entertain any reasonable doubt in regard to any illegal transaction in gold. He has further submitted that in the present case the question of invocation of Section 123 does not arise as no evidence has been brought in by the department that the goods were smuggled ones. He submitted that the whole case is made out based on recovery of certain chits from one Damodaran who is not in any way connected with the appellants' business and who has not been examined. He has also invited our attention to the Circular issued by the Board vide Circular No. 91/2000-Cus dated 20.11.2000 whereby seizure of gold jewellery from the shop which is also exporting gold jewellery should not be effected. He has also submitted that with the repeal of the Gold (Control) Act, the appellants are not required to show any accounts to the officers, regarding their transaction in gold. He, therefore, submitted that the seizure and confiscation and imposition of penalty is without the authority of law and he prayed for setting aside the order and allowing the appeals.

4. Heard Ld. DR Shri C. Mani who defended the impugned order.

5. We have carefully considered the rival submissions and gone through the case records. In the present appeals, we are concerned with the legality or otherwise of the absolute confiscation of the gold jewellery weighing 9819.830 gms ordered by the adjudicating authority under Section 111(d) (2) of the Customs Act, 1962 read with FTDR Act, 1992, and the imposition of penalties on the appellants. The adjudicating authority has not cited, which particular Section of the FTDR Act, 1992 has been violated by the appellants. We have perused Section 111(d) (there is No sub-section (2) to Section 111(d) of the Customs Act, invoked by the adjudicating authority). In terms of Section 111(d), any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported, contrary to any prohibition imposed by or under the said Act or any other law for the time being in force shall be liable for confiscation. On going through the entire evidence on record, we find that the case has been made out merely on the strength of statements recorded from co-accused which are not corroborated and on the basis of recovery of certain chits from one Damodaram's residence. The statements of the co-accused does not support the case of the department that the gold jewellery under seizure has been made out of smuggled gold. The so-called chits relied upon by the Department also does not disclose that the chits relate to the dealings done by M/s. VKJ. Therefore, the chits do not have evidentiary value. No material has been brought in, to show that the Jewellery under confiscation has been smuggled into the country. Therefore, Section 123 shall not have any application in the present case. Merely holding that

"Also the seized goods being covered under Section 123 of the Customs Act, casting the onus of proving the licit nature of the same lying on the noticee and the noticee having not discharged this onus with plausible evidence, the same are liable for confiscation under the Customs Act, 1962".

This observation made by the adjudicating authority, in our opinion, is totally unwarranted, to say the least. In the present case, the adjudicating authority in para 37.1 of the impugned order has clearly found that M/s. VKJ gave an account of purchase of 24 carat gold from SBI, MMTC and the conversion and other details of the same. He has also held that they have accounted for 21477.380 gms as converted and they have accounted for the whole quantity. It goes without saying that the 24 carat gold purchased by them from SBI and MMTC was foreign gold and the same were duly accounted for. Therefore, under no stretch of imagination it can be held that gold was smuggled into the country. It was foreign gold, but purchased from SBI & MMTC. Appellants have explained that the gold jewellery in question have been made by using the said foreign gold. Import of gold is restricted and not prohibited. In terms of Section 111(d), confiscation can only be ordered in a case where the gold has been imported contrary to any prohibition imposed under the Customs Act, 1962. The department has utterly failed to let in any evidence whatsoever that the gold jewellery weighing 9819.830 gms were of foreign origin which were smuggled into the country, so as to warrant their, confiscation, leave alone absolute confiscation. The adjudicating authority in para 31.7 has observed as under:

"The actual quantity imported through SBI & MMTC was meant for export and therefore there is no question of their being used for counter sales. Therefore, VKJ have accounted for 21477.380 gms as converted and they have accounted for the whole quantity. It includes counter sales also. If the goods were meant for export and if the jewellery was the one which is converted from imported gold as claimed, the question of keeping them in VKJ shop does not arise"

It appears from the above observation of the adjudicating authority that he was more concerned about the availability of gold jewellery in the shop which were meant for export, rather than going into the evidence to support his finding that the smuggled gold was used for making ornaments. Merely because, certain quantity of jewellery manufactured out of imported gold purchased by them and which were meant for export has been kept in the jewellery shop, that by itself cannot be a ground to hold that the jewellery found in the shop was made out of smuggled gold. Such finding should be supported by concrete evidence which is totally absent in the present case. Even if some of the gold jewellery meant for export has been displayed in the jewellery, that cannot be reason to order confiscation of the same. We are aghast at the way in which search has been made in the jewellery shop as in the present case. It is reminiscent of a situation when Gold (Control) Act was in existence. It seems that the DRI Officers were ignorant of the fact that Gold (Control) Act, has been repealed as far back as in 1990. Even if there was reasonable belief that smuggled gold has been kept, the basis for entertaining such reasonable belief should have been shown. There should have been some prima facie reasonable belief, which is absent in the present case, more particularly, in the face of the admitted position by the department itself that the foreign gold purchased by the appellants have been accounted for fully. There was, therefore, no cause for entertaining reasonable belief that the gold ornaments were made out of smuggled gold, as has been sought to be made out in this case. We also take note of the fact that Central Board of Excise & Customs have issued Circular No. 91/2000-Cus dated 20th November 2000 whereby it has been emphasised that seizure of gem and jewellery stock of the exporter shall not be effected for technical reasons.

Needless to say that this Circular was binding on the authorities. Despite that, this Circular has been given a go-by, by the officers as the seizure has been effected based on no material. We, therefore, come to the inevitable conclusion that the department has utterly failed to bring home the charge against the appellants. The impugned order therefore, has to be set aside and we do so and all the appeals are allowed with consequential relief, if any.

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