The Commissioner Of Central ... vs Mr. R. Kailash
2022 Latest Caselaw 834 Tel

      THE HONOURABLE SRI JUSTICE UJJAL BHUYAN
                                 AND
     THE HONOURABLE SMT. JUSTICE P. MADHAVI DEVI


         CENTRAL EXCISE APPEAL NO.115 OF 2006
                                AND
         CENTRAL EXCISE APPEAL NO.133 OF 2006

                     COMMON JUDGMENT
                     (Per Justice P. Madhavi Devi)

      C.E.A.No.115 of 2006 is filed against the Final Order

No.2156/2005, dt.07.12.2005 in Appeal No.C/43/1998 on the file of

the Customs, Excise and Service Tax Appellate Tribunal, South Zonal

Bench, Bangalore and Appeal No.C/43/1998, while C.E.A.No.133 of

2006 is filed against the Final Order No.2157 of 2005 dt.07.12.2005

in Appeal No.C/132/1998 on the file of the Customs, Excise and

Service Tax Appellate Tribunal, South Zonal Bench, Bangalore. Both

the Appeals are filed by the Department.


2.    Brief facts leading to the filing of these Appeals are that on

07.05.1995, the officers of the Customs Preventive (Headquarters) got

prior information that some gold biscuits of foreign origin were

secretly kept at a shop in Secunderabad. Therefore, they searched the

shop and found that one person by name Mr. C.Srinivas was in

possession of 10 numbers of foreign marking gold biscuits and

another person by name Mr. R. Kailash was in possession of 13

numbers of foreign marking gold biscuits and 2 numbers of gold

ingots. Since both of them could not produce any evidence evidencing
                                                  C.E.A.Nos.115 & 113 of 2006
                                   2


the legal import of gold worth Rs.14,00,000/-, the same was seized

and the statements of both the persons were recorded under Section

108 of the Customs Act, 1962. Both persons admitted that they do not

have any duty paid receipts for the gold found in their possession and

that the said gold was given by one Maggesh of Chennai to sell the

same and no payment was made to Maggesh for the said gold. After a

detailed investigation, show-cause notices were issued on 06.11.1995

calling for the explanations from Mr. C.Srinivas and R.Kailash and

one Sri Poppat, who is alleged to have aided and abetted the two

accused, as to why the foreign marking gold biscuits and the gold

ingots should not be confiscated and penalty should not be imposed

on them for violation of Foreign Trade (Dev & Reg) Act, 1992 read

with Section 111(d) & 112(b) of the Customs Act, 1962. Mr. Kailash

submitted a reply stating that the statement given under Section 108 of

the Customs Act was under threat and that he had baggage receipts for

the import of gold which they obtained from one Maggesh of Chennai

proving its licit import and therefore requested for return of gold. The

other accused C. Srinivas, in his reply, also stated that the statement

was obtained from him under threat and that the gold seized was of

Indian origin as per the purity certified by the Mint, Bombay and that

the gold was obtained from 5 persons and foreign markings were

embossed to make it saleable and therefore disputed the seizure.


3.    The case was adjudicated by the Commissioner vide OIO. 4/97

dt.31.10.1997 observing that Sri Kailash, being in jewellery business
                                                  C.E.A.Nos.115 & 113 of 2006
                                   3


would not obtain foreign marking gold biscuits from Sri Maggesh

without any exchange of sale proceeds and without being

accompanied by customs duty paid receipts and since no receipts were

submitted at the time of seizure, the arguments put forth subsequent to

seizure, were only an after-thought and are liable to be rejected. In so

far as Sri C.Srinivas's explanation was concerned, the Commissioner

held that the story that the gold was obtained from locals and purified

is farfetched and does not merit consideration. He therefore imposed

the penalty of Rs.5,00,000/- on Mr. Kailash, Rs.1,00,000/- on Mr.

Srinivas and Rs.10,000/- on Mr. Poppat for abetting the above

offence.


4.    Apart from the above order, a case for launching prosecution

was filed in C.C.No.29 of 1999 before the Economic Offences Court,

Hyderabad. However, the Economic Offences Court vide order

dt.15.02.2001 acquitted all the accused stating that the goods were

duty paid and also were not of foreign origin and that the department

failed to establish a positive case against the three accused. Against

the same, the department also filed Appeal before the High Court vide

Crl.A. No.982 of 2001 on the ground that the statements given by the

accused are in compliance with summons under Section 108 of

Customs Act, 1962 and hence were admissible in evidence as held by

the Apex Court in the case of K.I.Pavunny Vs. Asst. Collector,
                                                             C.E.A.Nos.115 & 113 of 2006
                                          4


Central Excise, Cochin1. Meanwhile in the Appeals filed by the

accused before the Tribunal, CESTAT, in its final order Nos.2156 &

2157 of 2005 dt.07.12.2005 set aside the Order-in-Original and the

department is in Appeal before this Court.


5.        The following substantial questions of law were raised by the

department:


      (1) Whether the CESTAT is right in allowing the appeal filed by
          the respondent basing on judgment dt.15.12.2001 of the

Economic Offences Court at Hyderabad in C.C.No.20 of 1999 wherein the EOC has not considered the statements given under Section 108 of the Customs Act, 1962 by the respondents?

(2) Whether the CESTAT is right in setting aside the Commissioner's Order-in-Original No.04/97-Cus dt.31.10.1997 while holding that "the impugned order is required to be set aside for the simple reason that the Revenue has not established that the seized goods were smuggled ones and illicitly imported into India" is contrary to the spirit of Section 123 of the Customs Act, 1962, that the burden of proof lies on the respondent that the gold seized from him is not smuggled gold?

(3) Whether the CESTAT is justified in setting aside the Order-in-

Original dt.31.10.1997 passed by the Commissioner by observing that seizure was made by Police without any evidence to that effect and relying on judgments which are not relevant in the present case?

1997(90) E.L.T. 241 (SC) C.E.A.Nos.115 & 113 of 2006

6. Learned counsel for the appellant Department submitted that

the statements of the accused were recorded under Section 108 of the

Customs Act and therefore, the said statements cannot be said to have

been obtained under threat and cannot be ignored while passing the

order in Appeal. He submitted that under Section 123 of the Customs

Act, the burden of proof that the gold seized from the possession of

any person is that they are not smuggled goods, shall be on the person

from whose possession the goods were seized and therefore, the

finding of the Tribunal that the appellants have not proved that the

smuggled goods were of the petitioner, is totally unsustainable. He

further submitted that Mr. R. Kailash was himself running a jewellery

shop under the name of M/s. Laxmi Venkateswara Jewellers and he is

stated to have purchased gold from Mr. Maggesh alias Magga without

any prior acquaintance and that too without exchange of any sale

consideration. Further, the said Maggesh has never appeared in person

nor has submitted any explanation in writing about the bonafides of

the sale of gold to Sri R. Kailash or to Sri C. Srinivas. Therefore,

according to the learned counsel, the judgment of the Tribunal is not

in accordance with law and it has to be set aside.

7. As regards the case of Mr. C. Srinivas, his contention is that he

had been given ornamental jewellery which is converted into 993

grade purity, is not proved because such a purity of gold cannot be

obtained by any local refinery under any stretch of imagination and

particularly embossing the same with foreign marking is also not C.E.A.Nos.115 & 113 of 2006

possible. Therefore, according to him, the Tribunal has erred in

allowing the Appeals of the accused.

8. Having regard to the rival contentions and the material on

record, this Court finds that as regards Mr. R. Kailash, though he has

given a statement under Section 108 of the Customs Act, admitting

that he has no duty paid receipts for the gold biscuits found in his

possession, he rebutted the same by producing baggage receipts to

prove that the gold biscuits and ingots seized from him have been

brought into the country by paying respective charges. Though under

Section 123 of the Customs Act the initial burden to prove that the

gold seized from the possession of the accused was not smuggled

goods lies on the person in whose possession the gold was seized, but

once the accused produces the receipts for the import of gold, then the

burden shifts to the Department and the Department will have to

prove that the baggage receipts do not pertain to the gold which was

found in possession of the accused. Since no such evidence has been

produced before the Tribunal or before this Court, this Court does not

deem it fit and proper to interfere with the findings of the CESTAT in

the case of Mr. R. Kailash in giving him relief and setting aside the

order of penalty confirmed by the Commissioner.

9. As regards Sri C. Srinivas, he had filed letters dt.01.06.1995

and 05.06.1995 submitting that he had given statement at the time of

seizure on 07.05.1995 under threat and that the gold seized from him C.E.A.Nos.115 & 113 of 2006

was of Indian origin which can be verified by the Department for

scientific analysis by Mint Master, Bombay. It is also stated that the

respective samples have been sent to Bombay for assessment and the

result is 993 and 993.7 purity respectively as per the letter

dt.11.11.1995 of the Chief Assayer, Mint as against the purity of

foreign marking gold at 999. This Court finds that the Tribunal has

accepted this contention of the accused. The Special Court has gone

into the evidence produced by the petitioners and has acquitted them

by holding that they were not holding illicit gold in their hands. Since

the gold found in possession of Mr. C. Srinivas was not found to be

not of Indian origin, it cannot be said that he has committed any

offence. Therefore, the decision given by the Tribunal setting aside

the penalty order against Mr. C. Srinivas is upheld.

10. The Appeals filed by the Department are accordingly

dismissed. No order as to costs.

11. Pending miscellaneous petitions, if any, in these Appeals shall

also stand dismissed.

________________________ JUSTICE UJJAL BHUYAN

___________________________ JUSTICE P. MADHAVI DEVI

Date: 22.02.2022 Svv