Kala Gems Vs. Collector of Customs - Court Judgment

Excerpt:
1. appellant imported 740 kgs. of rough cubic zirconia, iii grade inferior of south korean origin from hong kong and presented bill of entry dated 22-9-1989 and other import documents declaring value as us $ 15.00 per kg. cif. the custom house accepted the value and assessed the consignment and goods were cleared on payment of duty. on receipt of intelligence regarding gross undervaluation of the consignment, appellants' premises were searched on 25-10-1989 and 26-10-1989 by customs officers. during search blank invoice forms of the supplier, m/s.gems and beads, hong kong and blank letterhead papers of several foreign concerns as well as foreign currency of 141 us $, 880 thailand bahts and 30 hong kong dollars were found in the table drawer. 737.4 kgs. of rough cubic zirconia in 25 packages said to have been imported as aforesaid and cleared as per bill of entry dated 22-9-1989 were found. their description with regard to grading did not tally with what was described in the said import documents. accordingly, the goods were seized under section 110 of the customs act, 1962 (for short, the act) under the belief that the imported consignment was grossly under-invoiced and hence liable to confiscation under clauses (d) and (m) of section 111 of the act. foreign currency as also the documents were seized. the goods were got examined by shri khandel-wala, scientist of m/s. diamond and gems development corporation with due notice to appellant and in the presence of appellants' clearing agent.examination showed that the consignment consisted of 10% grade a pieces, 40% grade b pieces and 50% grade c pieces and not of "3rd grade inferior" as declared and the prices were quite big in size, transparent and free from cracks and their shapes and sizes were such that recovery percentage of polished stones will be quite high. letter dated 5-9-1989 of a supplier seized from appellants' premises showed price of grade a as us $ 90/100 per kg. and letter of another supplier of taiwan showed price of grade a and b pieces as us $ 100 and 75 per kg. shri khandelwala reported the prices of grade a, b and c to be us $ 78, 70 and 60 per kg. accordingly notice was issued to appellant proposing to determine the assessable value as us $ 65.8 per kg. cif and to demand differential duty on that basis. notice also proposed confiscation of zirconia and foreign currency seized. appellant resisted the notice but the collector, the adjudicating authority overruled the contentions of the appellant and confirmed the demand and confiscated the goods under section 110(m) and the currency under section 110(d) of the act, allowing redemption of the goods on payment of rs. 1,00,000 as redemption fine. penalty of rs. 2,00,000 was imposed under section 112(a) of the act. this order is being challenged.2. valuation : it is contended on behalf of the appellant as follows : - at the time of the search and seizure, the officers had no belief and no reason to believe that there was gross misdeclaration of value. the goods seized were not from the consignment cleared as per bill of entry dated 22-9-1989. zirconia imported under this bill of entry and on earlier occasions had been sorted out according to quality and kept in small boxes and the boxes were kept in the original boxes in which the subject consignment had been originally packed. appellant had 1240 kg.of stones at the time of search and about 740 kgs. of best available quality stones were seized leaving out the worse quality stones. the stones seized were not entirely from the subject consignment. shri khandel-wala whose expert opinion was accepted is an employee of appellants' business rival and there was ill-feeling between the two business houses and thus objection had been raised before and after the examination. on appellants' objection, the goods had been got examined subsequently by an officer and trader at bombay and the collector erred in ignoring their reports as well as the reports obtained before clearance. appellant has produced before the tribunal a large number of invoices and bills of entry relating to other imports by appellant and others which support the declared value. copies of two bills of entry were produced before the collector which also support appellant but they were ignored. before the sessions judge, customs/officers stated that they do not propose to rely on the report of shri khandelwala . it is not true to say that appellant had blank invoices one of which was converted by showing a very low price : these forms as well as blank letterheads and foreign currency belong to shri kumar, representative of the supplier who left the same at the appellants' premises by oversight as stated by him in his letter. the collector should not have relied on the alleged statements recorded on 25-10-1989 and 26-10-1989 which had been written without reference to the actual statements and which had been retracted on 27-10-1989. goods had been insured for the declared value. there are no standard gradation for rough stones. every trader makes his own gradation. shri khandelwala, the scientist cannot be regarded as an expert on valuation. the documents on the basis of which valuation was made are unreliable.3. the departmental representative rebutted the above contentions and relied on the earliest statements recorded from shri satya narayan kala, a partner of the appellant. he also contended that all the contentions raised were the result of afterthought and do not receive any support from the original version given by the parties. he also contended that the blank signed invoices and letterheads of the supplier were with the appellant and not kept by mistake by shri kumar and it was easy for appellant to manipulate an invoice showing a very low price. according to him there is no reason to reject shri khandelwala's report. he also commented on the air way bill and stated that it did not relate to the subject consignment. the 25 boxes of the subject consignmerit had not been opened and the contents had not been sorted out before the search.4.. the finding of the collector in regard to underinvoicing or mis-declaration of value is based on the following circumstances : (a) 737.4 kgs. of zirconia seized from the appellants' premises came out of the consignment of 740 kgs. cleared as per bill of entry dated 22-9-1989. (b) report of shri khandelwala of diamond and gem development corporation on 3-1-1990. (c) letter dated 5-9-1989 seized from appellants' premises supports the valuation given by shri khandelwala who has reported the average price to be us $ 65.8 per kg. (d) seizure of blank signed invoice forms of suppliers would suggest that appellant concocted invoice for the subject import and explanation of the appellant for possession of blank invoices is unacceptable. (e) there were only 4 grades of rough zirconia, viz. a, b, bc and c and stones of lower grade cannot be useful for polishing.5. value shown in the import documents for the subject consignment was us $ 15 per kg. and the value assessed is us $ 65 per kg. the difference is considerable and if the finding is correct, it would be a clear case of gross under-valuation. the show cause notice proceeded on the basis that 737.4 kgs. of rough cubic zirconia seized from the appellants' premises was the same as 740 kg. covered by bill of entry dated 22-9-1989. appellant in the replies to the show cause notice denied this and asserted that 25 boxes covered by the subject import were taken to the appellants' premises unpacked and along with zirconia imported on earlier occasions was sorted out and separated according to quality. customs officers seized only the best available quality weighing 737.4 kgs. and deliberately refrained from seizing the remaining quantity out of the total available quantity of 1240 kgs. in paragraph 5(b) of the impugned order reference is made to this contention. appellant contended that the stock register also refers to this stock. we find that the collector did not deal with this important contention which would go to the root of the case propounded in the show cause notice. we do not know whether the officers who searched the premises made a record of the existing stock or entries in the stock register. we do not also know whether the collector called for the stock register to verify the correctness of this contention. finding could not have been recorded against the appellant without considering this contention.6. collector recorded that at the time of assessment of the goods on presentation of import documents stones were not properly examined. it is not known if there is any material in support of this conclusion other than the contents of the report of shri khandelwala which was recorded on 3-1-1990. endorsement on the bill of entry made by the departmental officers and others, it is pointed out, show that the valuation was fair. the only material relied on by the collector in regard to the quality of stones and valuation is the report of shri khandelwala. our attention is invited to a letter dated 19-12-1989 of the appellant addressed to collector objecting to the examination and test of the goods through persons connected with diamond and gem development corporation, alleged to be business rival of the appellant.it was also alleged that the persons connected with the corporation had threatened the appellant. shri khandelwala is said to be a scientist of the corporation. the objection was reiterated by another letter dated 30-12-1989 addressed to deputy collector. on 3-1-1990 a letter was addressed protesting against the examination made by shri khandelwala.according to shri khandelwala stones were a mixture of grades a, b and c percentages being 10%, 40% and 50% respectively and the value being us $ 78, us $ 67 and us $ 61 per kg. respectively. he estimated the average price as us $ 65 per kg.7. it is unfortunate that customs officers got the examination and test done by shri khandelwala in spite of serious protest continuously lodged by appellant. our attention is invited to the application for anticipatory bail filed by the appellant's partner before the sessions judge where also objection had been raised to the examination report by shri khandelwala. a copy of the order passed by sessions judge is before us. it is mentioned in the order that shri tej bahadur learned counsel for customs department stated that valuation was being got done by departmental specialist. reports of the specialist and another trader at jaipur are before us. according to the specialist, having regard to the size, inclusion, whiteness, clarity, crackles, cloudiness, etc. average value of the goods should be us $ 20.82 per kg. trade panelist valued them at us $ 18 per kg. curiously the impugned order makes no reference to these materials. the finding based entirely on the report of shri khandelwala and ignoring other materials available cannot stand. collector relied on the prices shown in the letter dated 5-9-1989 seized from the appellant's premises to corroborate the report of shri khandelwala. since in our view report of shri khandelwala cannot be relied on, value to be attached to the letter dated 5-9-1989 has to be re-assessed in the totality of circumstances.8. customs officers found certain signed blank invoices of the supplier and letterheads of various foreigrt firm and some foreign currency from the premises of the appellant. collector placed reliance on the possession by the appellant of blank signed invoices of supplier to come to the conclusion that the appellant must have utilised one of the signed blank invoice to be presented for clearance of subject consignment. this finding is assailed by appellant by referring to the stand taken by the appellant in the reply to the show cause notice and even in some earlier letters to the effect that they were left behind by shri kumar, representative of the supplier when he visited appellant's premises in august, 1989. reliance is also placed on a letter dated 4-11-1989 of shri kumar addressed to the assistant collector stating that he had left invoices, printed letterheads and some currency in a cover by mistake when he visited appellants premises on 1-9-1989 and requesting the assistant collector to send the same to him. appellant's partner shri satyanarayan kala had been questioned on 25-9-1989 and 26-9-1989 on which dates search was conducted. appellant has no case that the partner gave this explanation when he was questioned at the earliest possible opportunity. on the other hand, in his statement dated 25-10-1989 he admitted that he had visited hong kong and bangkok in september, 1989 and received foreign currency through reserve bank of india, that at the time he returned he had some foreign currency with him and the same had been duly entered in the passport. in order to verify the correctness of the statement he was repeatedly asked to produce passport which he failed to do. even according to the appellant shri kumar visited appellant's premises on 1-9-1989 as seen from letter dated 4-11-1989 of shri kumar. that being so, if the subsequent story put forward is true, certainly shri satyanarayan kala would have delivered the currency and papers to shri kumar when the former went to hong kong. for all these reasons we are inclined to agree with the view taken by the collector that the blank invoices and currency were not left at the appellant's premises by mistake by shri kumar and the blank invoices were there in the possession of the appellant for some illegitimate purpose and the foreign currency belonged to appellant. the fact that appellant has in its custody blank signed invoice would only raise a suspicion about the nature of its activities and this circumstance may have to be taken with other items of evidence but not in isolation.9. from very earlier time appellant has been asserting before the customs officers that there is no regular grading available in the trade and each trader has his own system of grading. without examining the correctness of this contention the collector in the impugned order makes a bald assertion that there are three recognised gradings. show cause notice asserts that there are only 4 grades suggesting thereby that there are 4 recognised grades. according to appellant if only customs officers had taken the trouble of looking into various bills of entry relating to other imports they would have realised that there is a large number of gradings and not that suppliers used the same grading. copies of large number of invoices and bills of entry have been placed before us. we find reference to quality 7, grade 14, remnant, scrap etc. in some of these invoices. the report of shri khandelwala proceeds on the basis of three gradings. the matter deserves more serious scrutiny at the hands of the collector.10. for the reasons indicated above, we are not satisfied that the collector has considered all the available evidence in a proper manner.he has committed serious error in relying on the report of shri khandelwala and in not considering certain important contentions raised by appellant. therefore, finding regarding misdeclaration of value and under-invoicing and the quality of stones in the subject consignment cannot stand and the question requires fresh consideration.11. foreign currency : there is no dispute of 141 us $, 880 thailand bahts and 30 hk $ being found in the drawer of table in the appellant's premises. we have already referred to the statement given by partner satyanarayan kala on 25-10-1989 and 26-10-1989 admitting ownership of the foreign currency and the subsequent story to the effect that the currency belonged to shri kumar, representative of the supplier. we have indicated that was an afterthought and the earliest statement of the partner must be true. we therefore agree with the finding that there was violation of section 13 of f.e.r. act, 1973 read with section 11 of the customs act, 1962 and the foreign currency is liable to confiscation under section 111(d) of the customs act, 1962. penalty has been imposed in connection with the goods as well as foreign exchange.since we are remanding the case in regard to the aspect of mis-declaration of value the quantification of penalty has to be done afresh. we have no doubt that unlawful possession of foreign currency deserves to be met with imposition of appropriate amount of penalty. (1) the finding that there was misdeclaration of value and consequent confiscation of the goods and fixation of redemption fine are set aside : the case is remanded to the jurisdictional commissioner of customs for fresh decision on these aspects. (2) confiscation of foreign exchange is confirmed and it is found that the offence justifies imposition of appropriate penalty. imposition of penalty of rs.2,00,000 is set aside. this aspect will be decided afresh by the jurisdictional commissioner of customs.

Judgment:
1. Appellant imported 740 kgs. of Rough Cubic Zirconia, III grade inferior of South Korean origin from Hong Kong and presented Bill of Entry dated 22-9-1989 and other import documents declaring value as US $ 15.00 per kg. CIF. The Custom House accepted the value and assessed the consignment and goods were cleared on payment of duty. On receipt of intelligence regarding gross undervaluation of the consignment, appellants' premises were searched on 25-10-1989 and 26-10-1989 by Customs officers. During search blank invoice forms of the supplier, M/s.Gems and Beads, Hong Kong and blank letterhead papers of several foreign concerns as well as foreign currency of 141 US $, 880 Thailand Bahts and 30 Hong Kong Dollars were found in the table drawer. 737.4 kgs. of rough cubic zirconia in 25 packages said to have been imported as aforesaid and cleared as per Bill of Entry dated 22-9-1989 were found. Their description with regard to grading did not tally with what was described in the said import documents. Accordingly, the goods were seized under Section 110 of the Customs Act, 1962 (for short, the Act) under the belief that the imported consignment was grossly under-invoiced and hence liable to confiscation under Clauses (d) and (m) of Section 111 of the Act. Foreign currency as also the documents were seized. The goods were got examined by Shri Khandel-wala, Scientist of M/s. Diamond and Gems Development Corporation with due notice to appellant and in the presence of appellants' clearing agent.

Examination showed that the consignment consisted of 10% Grade A pieces, 40% Grade B pieces and 50% Grade C pieces and not of "3rd Grade inferior" as declared and the prices were quite big in size, transparent and free from cracks and their shapes and sizes were such that recovery percentage of polished stones will be quite high. Letter dated 5-9-1989 of a supplier seized from appellants' premises showed price of Grade A as US $ 90/100 per kg. and letter of another supplier of Taiwan showed price of Grade A and B pieces as US $ 100 and 75 per kg. Shri Khandelwala reported the prices of Grade A, B and C to be US $ 78, 70 and 60 per kg. Accordingly notice was issued to appellant proposing to determine the assessable value as US $ 65.8 per kg. CIF and to demand differential duty on that basis. Notice also proposed confiscation of zirconia and foreign currency seized. Appellant resisted the notice but the Collector, the adjudicating authority overruled the contentions of the appellant and confirmed the demand and confiscated the goods under Section 110(m) and the currency under Section 110(d) of the Act, allowing redemption of the goods on payment of Rs. 1,00,000 as redemption fine. Penalty of Rs. 2,00,000 was imposed under Section 112(a) of the Act. This order is being challenged.

2. Valuation : It is contended on behalf of the appellant as follows : - At the time of the search and seizure, the officers had no belief and no reason to believe that there was gross misdeclaration of value. The goods seized were not from the consignment cleared as per Bill of Entry dated 22-9-1989. Zirconia imported under this Bill of Entry and on earlier occasions had been sorted out according to quality and kept in small boxes and the boxes were kept in the original boxes in which the subject consignment had been originally packed. Appellant had 1240 kg.

of stones at the time of search and about 740 kgs. of best available quality stones were seized leaving out the worse quality stones. The stones seized were not entirely from the subject consignment. Shri Khandel-wala whose expert opinion was accepted is an employee of appellants' business rival and there was ill-feeling between the two business houses and thus objection had been raised before and after the examination. On appellants' objection, the goods had been got examined subsequently by an officer and trader at Bombay and the Collector erred in ignoring their reports as well as the reports obtained before clearance. Appellant has produced before the Tribunal a large number of invoices and Bills of Entry relating to other imports by appellant and others which support the declared value. Copies of two Bills of Entry were produced before the Collector which also support appellant but they were ignored. Before the Sessions Judge, Customs/officers stated that they do not propose to rely on the report of Shri Khandelwala . It is not true to say that appellant had blank invoices one of which was converted by showing a very low price : these forms as well as blank letterheads and foreign currency belong to Shri Kumar, representative of the supplier who left the same at the appellants' premises by oversight as stated by him in his letter. The Collector should not have relied on the alleged statements recorded on 25-10-1989 and 26-10-1989 which had been written without reference to the actual statements and which had been retracted on 27-10-1989. Goods had been insured for the declared value. There are no standard gradation for rough stones. Every trader makes his own gradation. Shri Khandelwala, the Scientist cannot be regarded as an expert on valuation. The documents on the basis of which valuation was made are unreliable.

3. The Departmental Representative rebutted the above contentions and relied on the earliest statements recorded from Shri Satya Narayan Kala, a partner of the appellant. He also contended that all the contentions raised were the result of afterthought and do not receive any support from the original version given by the parties. He also contended that the blank signed invoices and letterheads of the supplier were with the appellant and not kept by mistake by Shri Kumar and it was easy for appellant to manipulate an invoice showing a very low price. According to him there is no reason to reject Shri Khandelwala's report. He also commented on the Air Way Bill and stated that it did not relate to the subject consignment. The 25 boxes of the subject consignmerit had not been opened and the contents had not been sorted out before the search.

4.. The finding of the Collector in regard to underinvoicing or mis-declaration of value is based on the following circumstances : (a) 737.4 kgs. of zirconia seized from the appellants' premises came out of the consignment of 740 kgs. cleared as per Bill of Entry dated 22-9-1989.

(b) Report of Shri Khandelwala of Diamond and Gem Development Corporation on 3-1-1990.

(c) Letter dated 5-9-1989 seized from appellants' premises supports the valuation given by Shri Khandelwala who has reported the average price to be US $ 65.8 per kg.

(d) Seizure of blank signed invoice forms of suppliers would suggest that appellant concocted invoice for the subject import and explanation of the appellant for possession of blank invoices is unacceptable.

(e) There were only 4 grades of rough zirconia, viz. A, B, BC and C and stones of lower grade cannot be useful for polishing.

5. Value shown in the import documents for the subject consignment was US $ 15 per kg. and the value assessed is US $ 65 per kg. The difference is considerable and if the finding is correct, it would be a clear case of gross under-valuation. The show cause notice proceeded on the basis that 737.4 kgs. of rough cubic zirconia seized from the appellants' premises was the same as 740 kg. covered by Bill of Entry dated 22-9-1989. Appellant in the replies to the show cause notice denied this and asserted that 25 boxes covered by the subject import were taken to the appellants' premises unpacked and along with zirconia imported on earlier occasions was sorted out and separated according to quality. Customs officers seized only the best available quality weighing 737.4 kgs. and deliberately refrained from seizing the remaining quantity out of the total available quantity of 1240 kgs. In paragraph 5(b) of the impugned order reference is made to this contention. Appellant contended that the stock register also refers to this stock. We find that the Collector did not deal with this important contention which would go to the root of the case propounded in the show cause notice. We do not know whether the officers who searched the premises made a record of the existing stock or entries in the stock register. We do not also know whether the Collector called for the stock register to verify the correctness of this contention. Finding could not have been recorded against the appellant without considering this contention.

6. Collector recorded that at the time of assessment of the goods on presentation of import documents stones were not properly examined. It is not known if there is any material in support of this conclusion other than the contents of the report of Shri Khandelwala which was recorded on 3-1-1990. Endorsement on the Bill of Entry made by the departmental officers and others, it is pointed out, show that the valuation was fair. The only material relied on by the Collector in regard to the quality of stones and valuation is the report of Shri Khandelwala. Our attention is invited to a letter dated 19-12-1989 of the appellant addressed to Collector objecting to the examination and test of the goods through persons connected with Diamond and Gem Development Corporation, alleged to be business rival of the appellant.

It was also alleged that the persons connected with the Corporation had threatened the appellant. Shri Khandelwala is said to be a Scientist of the Corporation. The objection was reiterated by another letter dated 30-12-1989 addressed to Deputy Collector. On 3-1-1990 a letter was addressed protesting against the examination made by Shri Khandelwala.

According to Shri Khandelwala stones were a mixture of Grades A, B and C percentages being 10%, 40% and 50% respectively and the value being US $ 78, US $ 67 and US $ 61 per kg. respectively. He estimated the average price as US $ 65 per kg.

7. It is unfortunate that Customs officers got the examination and test done by Shri Khandelwala in spite of serious protest continuously lodged by appellant. Our attention is invited to the application for anticipatory bail filed by the appellant's partner before the Sessions Judge where also objection had been raised to the examination report by Shri Khandelwala. A copy of the order passed by Sessions Judge is before us. It is mentioned in the order that Shri Tej Bahadur learned counsel for Customs Department stated that valuation was being got done by departmental specialist. Reports of the specialist and another trader at Jaipur are before us. According to the specialist, having regard to the size, inclusion, whiteness, clarity, crackles, cloudiness, etc. average value of the goods should be US $ 20.82 per kg. Trade panelist valued them at US $ 18 per kg. Curiously the impugned order makes no reference to these materials. The finding based entirely on the report of Shri Khandelwala and ignoring other materials available cannot stand. Collector relied on the prices shown in the letter dated 5-9-1989 seized from the appellant's premises to corroborate the report of Shri Khandelwala. Since in our view report of Shri Khandelwala cannot be relied on, value to be attached to the letter dated 5-9-1989 has to be re-assessed in the totality of circumstances.

8. Customs officers found certain signed blank invoices of the supplier and letterheads of various foreigrt firm and some foreign currency from the premises of the appellant. Collector placed reliance on the possession by the appellant of blank signed invoices of supplier to come to the conclusion that the appellant must have utilised one of the signed blank invoice to be presented for clearance of subject consignment. This finding is assailed by appellant by referring to the stand taken by the appellant in the reply to the show cause notice and even in some earlier letters to the effect that they were left behind by Shri Kumar, representative of the supplier when he visited appellant's premises in August, 1989. Reliance is also placed on a letter dated 4-11-1989 of Shri Kumar addressed to the Assistant Collector stating that he had left invoices, printed letterheads and some currency in a cover by mistake when he visited appellants premises on 1-9-1989 and requesting the Assistant Collector to send the same to him. Appellant's partner Shri Satyanarayan Kala had been questioned on 25-9-1989 and 26-9-1989 on which dates search was conducted. Appellant has no case that the partner gave this explanation when he was questioned at the earliest possible opportunity. On the other hand, in his statement dated 25-10-1989 he admitted that he had visited Hong Kong and Bangkok in September, 1989 and received foreign currency through Reserve Bank of India, that at the time he returned he had some foreign currency with him and the same had been duly entered in the Passport. In order to verify the correctness of the statement he was repeatedly asked to produce Passport which he failed to do. Even according to the appellant Shri Kumar visited appellant's premises on 1-9-1989 as seen from letter dated 4-11-1989 of Shri Kumar. That being so, if the subsequent story put forward is true, certainly Shri Satyanarayan Kala would have delivered the currency and papers to Shri Kumar when the former went to Hong Kong. For all these reasons we are inclined to agree with the view taken by the Collector that the blank invoices and currency were not left at the appellant's premises by mistake by Shri Kumar and the blank invoices were there in the possession of the appellant for some illegitimate purpose and the foreign currency belonged to appellant. The fact that appellant has in its custody blank signed invoice would only raise a suspicion about the nature of its activities and this circumstance may have to be taken with other items of evidence but not in isolation.

9. From very earlier time appellant has been asserting before the Customs officers that there is no regular grading available in the trade and each trader has his own system of grading. Without examining the correctness of this contention the Collector in the impugned order makes a bald assertion that there are three recognised gradings. Show cause notice asserts that there are only 4 grades suggesting thereby that there are 4 recognised grades. According to appellant if only Customs officers had taken the trouble of looking into various Bills of Entry relating to other imports they would have realised that there is a large number of gradings and not that suppliers used the same grading. Copies of large number of invoices and Bills of Entry have been placed before us. We find reference to quality 7, Grade 14, Remnant, Scrap etc. in some of these invoices. The report of Shri Khandelwala proceeds on the basis of three gradings. The matter deserves more serious scrutiny at the hands of the Collector.

10. For the reasons indicated above, we are not satisfied that the Collector has considered all the available evidence in a proper manner.

He has committed serious error in relying on the report of Shri Khandelwala and in not considering certain important contentions raised by appellant. Therefore, finding regarding misdeclaration of value and under-invoicing and the quality of stones in the subject consignment cannot stand and the question requires fresh consideration.

11. Foreign Currency : There is no dispute of 141 US $, 880 Thailand Bahts and 30 HK $ being found in the drawer of table in the appellant's premises. We have already referred to the statement given by partner Satyanarayan Kala on 25-10-1989 and 26-10-1989 admitting ownership of the foreign currency and the subsequent story to the effect that the currency belonged to Shri Kumar, representative of the supplier. We have indicated that was an afterthought and the earliest statement of the partner must be true. We therefore agree with the finding that there was violation of Section 13 of F.E.R. Act, 1973 read with Section 11 of the Customs Act, 1962 and the foreign currency is liable to confiscation under Section 111(d) of the Customs Act, 1962. Penalty has been imposed in connection with the goods as well as foreign exchange.

Since we are remanding the case in regard to the aspect of mis-declaration of value the quantification of penalty has to be done afresh. We have no doubt that unlawful possession of foreign currency deserves to be met with imposition of appropriate amount of penalty.

(1) The finding that there was misdeclaration of value and consequent confiscation of the goods and fixation of redemption fine are set aside : The case is remanded to the jurisdictional Commissioner of Customs for fresh decision on these aspects.

(2) Confiscation of foreign exchange is confirmed and it is found that the offence justifies imposition of appropriate penalty.

Imposition of penalty of Rs.2,00,000 is set aside. This aspect will be decided afresh by the jurisdictional Commissioner of Customs.