Full Judgment
2. Mohan Shet and his wife run a shop in the name of Dhanalaxmi Jewellers at Matunga, Mumbai. The proprietor on record is Sujatha Mohan Shet, his wife. The customs officers searched her house and the shop on 30th May, 1997. They found Rs. 75 lakhs in the house which they seized on the belief that it was sale proceeds of smuggled gold. They also found some documents stated to be incriminating. In the course of their investigation they recorded statements of Mohan Shet, Uday Ravankar and Naresh Thakkar who worked for him in his flat; Sujatha Shet, Kamalesh Bakashi Sharma, an accountant who maintains the accounts of Dhanalaxmi Jewellers. The Commissioner has cited in his order in support of his finding seven statements of Mohan Shet, and the statements of Ravankar and Thakkar. In his first statement recorded on 31-5-1997 Mohan Shet said that this money of Rs. 75 lakhs was the sale proceeds of gold. The gold was supplied to him by Abdullah, whom he met at Kumta, his home town around three months earlier. Abdullah said that he could arrange supply of gold brought by 'NRI passengers', evidently a reference to passengers residing abroad who are permitted to import gold, if they satisfy the conditions specified in the Import Policy; Shet claimed that he told Abdullah that having suffered preventive detention earlier, he was only interested in buying gold that was legitimately imported. There being no objection from Abdullah he agreed to purchase 135 bars (of 10 tolas each) of the gold. He did this four days prior to the seizure. He made arrangements for delivery of the gold to be taken and also found buyers for it. The money was the sale proceeds of this gold. He gave names, addresses and telephone numbers of the buyers of the gold and said that no bill was issued to them. In his later statements on 1st and 2nd June, Shet made some minor corrections and additions to his earlier statement. He agreed that the total quantity of the gold sold by him, was 130 bars and speculated that the other 5 bars had been sold by Babu Mane, his employee. He gave details about Abdullah and agreed that no duty receipts were provided by Abdullah. He said that details of the transactions were not entered into his account books. He could not produce the account books of Dhanalaxmi Jewellers for 1996-97 or later. He said that they could be with his accountant Sharma, whose address he did not know. In his statement on 4th and 5th June he confirmed what he said earlier and added that the accounts book could not be located nor K.B. Sharma or Babu Mane. He also said that he did not know where his wife was; she was not living with him. He agreed that the gold sold to him by Abdullah might be smuggled. In his statement on 3-7-1997 he said that Sharma given him the accounts books on 27th June. He referred to an entry in his account book showing purchase of 123 bars of gold from Abdullah on 27-5-1997. Another entry of the same day purchased from Azhgar Khatri for 12 bars of gold. He now said that in his earlier statement of 31st May, he had mistakenly said that he got the 137 bars from Abdullah. He was asked whether the customs duty receipts which he produced for support of gold were genuine and did not reopened. He was asked how he would explain the difference in the Azghar Khatri's address stated by him and as appeared in the customs receipt. He said that the address in the account book was erroneous. Further statements were recorded on 16-10-1997 and 3-11-1997. In these statements he said that Abdullah's present address was not known to him and Babu Mane remained absconding from the date of search. He submitted a copy of an affidavit signed by Mohammed Ibrahim at Dubai, saying that it was delivered at his home by ordinary post. He did not have the Dubai address and telephone number of Mohammed Ibrahim. He had entered into a deal to import 123 bars of gold. He never met Mohammed Ibrahim or seen him. He gave further details of this purported agreement. Uday Ravankar and Naresh Thakkar as we have seen who were the employees of Mohan Shet, each of them in their statement has said that they accepted whatever was given to them by persons coming to the firm, according to the instructions of Mohan Shet.
3. Sujatha Shet said that she could not explain the currency. Kamalesh Bakashi Sharma, the accountant said that he was looking after the accounts of Dhanalaxmi Jewellers by a part time. He took the account book from them on 28-10-1997 to finalise them. His telephone number was not known to the jewellers. Mohan Shet gave him a copy of Mohammed Ibrahim's passport with duty receipt on 25-6-1997.
4. It is on the basis of these statements that the Commissioner has concluded that the currency was sale proceeds of smuggled goods, confiscated and imposed penalty on Mohan Shet and on his wife for dealing with smuggled gold.5. The contention of the common counsel for these two appellants is this : The show cause notice wrongly invoked Section 123 of the Act.
That section could only apply where there was a seizure of any goods and would not apply to cases of seizure of currency. The receipts showing payment of duty on the gold have been ignored by the adjudicating authority only on the ground that they were not produced at the time of the seizure. Mere late production of bills cannot be a ground. The judgment of the Bombay High Court in Dhirajlal Amritlal Mehta v. Union of India -1982 (10) E.L.T. 273 is cited in support.
There must be legal evidence with regard to currency seized is the sale proceeds of the contraband for which Tribunal's decision in C.C. v.Shri Bharat Kumar - 1998 (25) RLT 299 is cited. The mere admission by Shet that the gold might be smuggled does not prove that it is sale proceeds of smuggled goods. The late entry in the business accounts is not sufficient for doubting their veracity. Suspicion cannot be taken place of the proof. Tribunal's decisions are cited in support. An option for the redemption currency ought to have been given. The Supreme Court judgment in Hargovind Das K. Joshi v. C.C. -1992 (61) E.L.T. 172 was cited. The fact that buyers of the gold denied purchase does not necessarily mean that it was smuggled, without the identity of the buyers being known the confiscation of the currency could not be ordered. The Tribunal's decision in Ramchandra v. C.C. -1992 (60) E.L.T. 277 (T) is cited in support. It is further contended that there is no material to show that Mohan Shet knew or had reason to believe that the gold that he sold was smuggled. That the provisions of Section 112 of the Act would only apply in a case where the smuggled goods shown to have been sold by the seller who knows or has reason to believe that the goods was smuggled. Mere fact that Mohan Shet said that the gold might be smuggled does not lead to the conclusion that he had reason to believe that it was smuggled. The judgment of the Supreme Court in Sheo Nath Singh v. The Appellate Assistant Commissioner - AIR 1971 SC 2451 is cited in support.
6. It is contended on behalf of Sujatha Shet that there is nothing to show that she had any opportunity in the transaction. The only reason that the Commissioner has furnished for the penalty on her is that she is the proprietor of the firm.
7. The departmental representative relies upon the Commissioner's order. He emphasises that Mohan Shet has not retracted his statements in which he said that the gold might be smuggled. He also points to the failure of Mohan Shet to produce relevant documents in support.
8. The Commissioner has summed up the evidence upon which he relies in the eight paragraph of his order. He relies upon the statement of Mohan Shet, the fact that no account was produced for the money and what he finds to be a subsequent attempt to regularise by making entries in the account book and the statement of Ravankar and Thakkar.
9. The presence of a large amount of money by itself is no evidence that it was obtained as a result of sale of smuggled goods. The Tribunal in its decision has.analysed the provisions of Section 121 and found therein following ingredients which must be satisfied. (1) There must be a sale; (2) The sale must be of smuggled goods; and (3) The sale must be by a person having knowledge or reason to believe that the goods was smuggled; and (4) The seller and purchaser and the quantity of gold must be established.
10. A reading of the section makes clear the existence of the first three ingredients. There is, however, nothing in it which stipulates that the identity of the seller and purchaser and the quantity of goods sold must be established. Normally, establishing the fact of sale would require identification of what was sold and how much and to whom.
However, fact of sale can be established without a specific quantity or the specific identity of the goods being determined with a great degree of precision. For example, a man sell his entire library without precisely knowing the titles of the books and the value of each of them, or of the furniture in his house without knowing the identity of each item of furniture or the value of it. Yet the fact of sale would be established. Similarly a fact of sale can be established without the identity of the buyer or of the seller being established. Watching a street vendor selling goods to various persons passing by, one has established the fact that in each case there is a purchase and a sale.
Yet the bystander watching the transactions may not know the identity of the buyer and the seller; the vendor himself would conclude his sale without knowing the identity of his buyers. Where valuable commodity is sold normally the identity of the buyer would be known. The seller would take the precaution in order to ensure that the sale is genuine and that he receives the proceeds of the sale. Therefore the condition (4) which the Bench found to exist in the section did not exist specifically. It appears to us to be more an emphasis by the Bench to say that the fact of sale must be established beyond doubt; and in establishing that fact, the identity of the seller and buyer and the quantity of the goods sold are significant factors.
11. What we now have to see is whether the other ingredients have been satisfied. It is the contention of the counsel for the appellant that it has not been shown that the gold in question was smuggled. The burden of proving that the gold was smuggled, he says, is upon the department. The provisions of Section 123 of the Act which shifts this burden in the case of goods to be notified under that Section to the department could not be available.
12. That Section 123 will not apply has to be accepted. That section shifts the burden of proving that the goods are not smuggled in cases where they are seized in the reasonable belief that they are smuggled.
Gold is one of the commodities specified in that section. When gold or any other commodity specified in that section is seized in the reasonable belief that it is smuggled, the burden of proving that it is not smuggled would be upon the person from whom it is seized.
13. However, for that section to apply it is that commodity so specified which would have to be seized. There was no seizure of gold in the case before us. What was seized was currency. The provisions of Section 123 will not apply to the facts before us. The show cause notice in fact sovight to invoke this section and the Commissioner has rightly not relied upon it. The burden thus, would be upon the department to prove that the gold was smuggled. The Commissioner seeks to discharge that burden by relying upon the statements of Mohan Shet, Revankar and Tiwari, his employees. The statements of the last two are- of not any help. They only say that they accepted large amounts of money on instructions of Mohan Shet and could not say for what consideration this money was given. From this alone it is not possible to conclude even that there was sale of any goods at all. The money might be the proceeds of the crime or could equally be the proceeds of legal transactions.
14. That leaves us with the statement of Mohan Shet. The Commissioner says that he has in his statement "clearly admitted" that he bought the foreign marked gold from Abdullah without receipt which he knew was smuggled and also contacted prospective buyers. He has admitted that "Rs. 75 lakhs Indian currency was the sale proceeds of the gold." 15. In point of fact we are unable to find any clear admission by Mohan Shet that he knew that the gold was smuggled. He says in his statement (on 4-6-1997) in reply to the charge put by the officer questioning him that he has not produced any document to corroborate his claim that the gold was bought into India legally, "that the gold given to me by Abdullah could be smuggled". We are unable to find anything else in the English translations of the statements furnished to us in this regard.
16. We agree that the conduct of Mohan Shet itself does cast doubts as to the true nature of the transactions. It would not be possible to say with any degree of certainty that Mohan Shet acted entirely innocently, in buying gold which he fully believed to be legally imported. If past conduct was against him. Despite his statement that he told Abdullah that he would deal only in gold which was established to be legally imported by means of duty receipts he has accepted gold without any such duty receipts. Whether the gold was sold to Abdullah itself is a matter doubt. Initially he had said that he got the gold from Abdullah.
Subsequently he says that he got 12 bars of gold from Azhgar Khatri and two lots of 81 and 142 bars from Abdullah. He could initially not produce the receipts for the gold. He subsequently produced the two customs duty receipts, one for 81 biscuits, which was issued to Mohammed Ibrahim and another for 48 biscuits issued to Azhgar Khatri.
He said that he did not met Mohammed Ibrahim but spoke to him over telephone. The Commissioner refers to an affidavit affirmed by Mohammed Ibrahim although that affidavit was not submitted to us. He said that this affidavit was received by ordinary post from Mohammed Ibrahim whose address and telephone number at Dubai he does not know. When he was confronted with this he said that the gold "might be smuggled".
That fact that there was belated production of the entries in the books of accounts relating to purchase of the gold also has to be taken note of.
17. It is not possible, however, for us to say, solely from the conduct of Mohan Shet that the department has discharged its burden that the gold was smuggled. All that we can say on the evidence before us is that Mohan Shet's conduct suggests that the gold might be smuggled.
However, for the provisions of Section 121 to apply it has to be shown that it is the sale proceeds of the smuggled goods. It has to be shown by acceptable evidence that the gold was smuggled. At the relevant time import of gold was not prohibited. Gold was permitted to be imported by individuals subject to fulfilment of certain conditions, and also by certain other classes of persons such as jewellers. Considerable quantities of gold were in fact imported at the relevant time under these provisions and had been so imported earlier. In that situation, to say, that Mohan Shet's statement establishes that the gold was smuggled is to beg the question. There is difference between saying that Mohan Shet's suspicious conduct suggests the possibility that the gold could be smuggled and saying that it has been established by acceptable evidence that it has been smuggled. The facts before us would justify the former, but not to the latter conclusion.
18. Consequently the confiscation of the currency is not sustainable or the penalty imposed either on Mohan Shet or on his wife. There is in any case nothing to connect his wife to these transactions. Penalty has apparently been imposed upon her only because she was the proprietor of the firm.