Miscellaneous Appeal No.197 of 2008 Against judgment and order dated 19.9.2007, passed by the Customs Excise & Service Tax Appellate Tribunal, Eastern Regional Bench, Kolkata, in Custom Appeal No.82 of 2005. Commissioner of Customs , Patna, C R Building, Birchand Patel Path, Patna – 800001 ..... Appellant (Respondent) Versus Ratan Prasad, son of late Jagdish Sah, Resident of Village Mauje, PS Raxaul, District East Champaran .... Respondent (Appellant) with Miscellaneous Appeal No. 190 of 2008 Against judgment and order dated 19.9.2007, passed by the Customs Excise & Service Tax Appellate Tribunal, Eastern Regional Bench, Kolkata, in Custom Appeal No.80 of 2005. Commissioner of Customs, Patna, C R Building, Birchand Patel Path, Patna - 800001 .... Appellant (Respondent) Versus Mohan Kumar @ Mohan Prasad, Son of Late Shivajee Prasad, Sonarpatti, Raxaaul, District East Champaran, Bihar .... .... Respondent(Appellant) with Miscellaneous Appeal No. 196 of 2008 Against judgment and order dated 19.9.2007, passed by the Customs Excise & Service Tax Appellate Tribunal, Eastern Regional Bench, Kolkata, in Custom Appeal No.81 of 2005. Commissioner Of Customs, Patna, C R Building, Birchand Patel Path, Patna - 800001 .... Appellant (Respondent) Versus Shri Lal Prasad, son of late Jagdish Sah, Resident of Village Mauje, PS Raxaul, District East Champaran .... Respondent (appellant) ******* For the Appellant : Ms. Archana Meenakshee, Advocate Ms. Archana Sinha, Advocate For the Respondents: Mr. Birju Prasad ******** P R E S E N T HON’BLE MR. JUSTICE SUDHIR KUMAR KATRIAR and HON’BLE MR. JUSTICE AHSANUDDIN AMANULLAH Ahsanuddin Amanullah, J. These appeals have been preferred against the common order dated 19.9.2007, passed by the Customs 2 Excise & Service Tax Appellate Tribunal (hereinafter referred to as CESTAT), Eastern Regional Bench, Kolkata, in Custom Appeal nos.80-82 of 2005 under section 130 of the Customs Act, 1962 (hereinafter referred to as `the Act’), and are being disposed of by this common judgment. 2. A brief statement of facts essential for the disposal of the present appeals may be indicated hereinbelow. By the order under appeal the order of the original authority which was over- turned by the first appellate authority has been set aside. In substance, the order has gone against the Revenue, i.e. the appellant before this Court. The case of the Revenue is that the preventive team of Customs stationed at Raxaul intercepted a black LML Energy Motorcycle bearing registration no.BR-06D 2450 on 12.6.2003 at 12.00 hrs. at Indo-Nepal border check post, Raxaul, with two persons sitting on it. On specific information received by the Deputy Commissioner, LCS, Raxaul, the said two persons were carrying the sale proceeds of gold earlier smuggled from Nepal to India. The said two persons were Ratan Prasad and Sree Lal Prasad both brothers. Two independent witnesses were called for and in their presence the said two persons sitting on the motorcycle were thoroughly examined. On examination, three bundles wrapped in the newspaper were recovered. On opening the bundles, Nepali currency of different denomination worth Rs.13,50,000 (Thirteen lacs and fifty thousand -Nepali currency) equivalent to Rs.8,43,750/- (Eight lacs, forty-three thousand and seven hundred fifty) -Indian currency was 3 recovered from them. The certificate of registration of the motorcycle and private documents showing transaction of Nepali currency and Indian currency (three sheets) were recovered from their possession. The owner of the motorcycle was one Mohan Kumar @ Mohan Prasad. Ratan Prasad and Sree Lal Prasad in their voluntary statements recorded under section 107 of the Act confessed that the said money was given to them by Mohan Kumar Saraf @ Mohan Prasad Saraf of Sonarpatti, Raxaul, District East Champaran, dealing in gold and silver. Three sheets which were recovered from the possession of Ratan Kumar contained transaction of private amount in Nepali currency as well as Indian currency which was being dealt with by Mohan Kumar Saraf. This led to the presumption that such type of business of sale of smuggled gold was being indulged in by said Mohan Kumar Saraf, and the money so collected was transmitted to Nepal by the two persons arrested on the motorcycle. Thus on this reasonable belief that the amount was liable for confiscation under section 121 of the Act, the currencies along with the motorcycle were ultimately seized under section 110 of the Act after observing all necessary formalities, i.e. after issuing notice to all three concerned and after giving them an opportunity to put up their defence before the authority concerned. Interrogatory statement under section 108 of the Act was also recorded in which the two persons travelling on the motorcycle confessed that they used to receive amounts of Rs.3-4 lacs to Rs.13-14 lacs after every 3-4 days from Mohan Kumar Saraf to deal in gold and silver at Raxaul and deliver the amount to one Nandu Babu at Birganj, 4 Nepal, who in turn also deals with gold and silver, through Mahalaxmi Exchanger. The private account showed transaction of Nepali currency and Indian currency to the tune of Rs.10-25 lacs. Since there was no satisfactory explanation of carrying the huge amount, on the basis of the information received it was believed that the amounts were from the sale proceeds of gold earlier smuggled from Nepal to India. During the course of interrogation, Ratan Prasad had also revealed that Mohan Kumar Saraf was using some other person not known to Ratan Prasad for bringing gold from Nepal. This also corroborated the fact that the amount recovered was the sale proceeds for such smuggled gold. Both the persons travelling on the motorcycle were arrested under section 104 of the Act on 13.6.2003. Upon search at the shop premises of Mohan Kumar Saraf and the residential premises of Ratan Prasad and Sree Lal Prasad nothing incriminating was found. Though Mohan Kumar Saraf was summoned under section 108 of the Act before the Superintendent (Prevention) to appear on a particular date, the elder brother Dhruv Prasad who had also received summons, prayed for time. Time was also given till 25.6.2003, but still Mohan Kumar Saraf did not appear. In the meantime, Mohan Kumar Saraf through his Advocate submitted a request letter dt. 19.6.2003 for provisional release of the LML motorcycle in which he denied all the allegations to the effect that the Nepali currency was sale proceeds of the gold smuggled from Nepal. The request letter also mentioned the Government of India Notification No. CSR 389(F), dated 3.5.2000, 5 issued under the Foreign Exchange Management Act (FEMA in short), bearing regulation No.8(iii) which states, “notwithstanding anything contained in these Regulations, a person may take out of India to Nepal or Bhutan, or bring into India from Nepal or Bhutan, currency notes being the currency of Nepal or Bhutan”. A copy of the same was also enclosed. Taking into consideration all these facts, the Joint Commissioner, Customs, Patna, by his order dated 29.9.2003 provisionally released the motorcycle on deposition of cash security of Rs.8000/- and on execution of a bond for the full seizure value of Rs.30,000/- before the Deputy Commissioner, LCS, Raxaul. In his defence reply Ratan Prasad on 10.3.2004, inter alia, submitted that he had been working in M/s Shivam Infotech, a school for teaching computer at Raxaul on a monthly salary of Rs.1500/-. The proprietor of the firm was Mohan Kumar Saraf, and on his instruction on 12.62.2003 he was going to Birganj with the Nepali currency worth Rs.13,50,000/- for changing them into Indian currency from M/s Mahalaxmi Money Changers at Birganj, and for this purpose he was also provided one motorcycle by Mohan Kumar. He explained that there was no prohibition of taking Nepali currency to Nepal and denied all other allegations as enumerated in the show cause notice. Similar reply to the show cause notice was also received from Sree Lal Prasad. In his defence reply on 11.3.2004, Mohan Kumar stated that he was engaged in the business of readymade silver ornaments and has a shop in the name of his father Late Shivjee, located at Sonarpatti, Raxaul. He was looking 6 after the activities of the said shop and was also running business under the proprietorship named M/s Shivam Infotech, for teaching computer. Regarding the amount of Nepali currency, he had stated that it was received from his uncle Mahabir Sah, resident of Ward no.3, Chakahlia, Birganj, Nepal. The money was taken as loan from his uncle for the purpose of extension of his computer school. He could not deposit the Nepali currency in bank in Raxaul and, therefore, sent Ratan Prasad to the money exchanger at Birganj to get it exchanged into Indian currency so that he could deposit the same in the bank. He also alleged that the statement recorded from Ratan Prasad and Sree Lal Prasad was after severe assault, compulsion and threat for making out a false case. He denied rest of the allegations and also referred to the Govt. of India Notification dt. 3.5.2000. After hearing the concerned parties, the Joint Commissioner, Customs, Patna, by order dt. 17.6.2004 passed the following order:- “Taking into consideration all the facts as discussed above and in exercise of the powers conferred upon me under section 122 of the Customs Act, 1962 (i) I hereby order for release of the seized Nepalese currency amounting to Rs.13,50,000/- equivalent to Rs.8,43,750/-(IC) to the owner of the goods. (ii) I also order for release of the seized LML Energy motorcycle bearing registration no.BR-06D-2450 for the reason discussed supra. As the same has been released provisionally on deposition of cash security of Rs.8000/- and execution of bond for the full value of the vehicle. The cash security is hereby returned to the party and bond stand discharged accordingly. (iii) I drop penal proceedings against the noticees.” 7 Pursuant to passing of the above order in favour of the respondent, the Commissioner of Customs, Patna, by order dated 26.10.2004 in Review No.59 under section 129D(2) of the Act, found that the order in original was not legal, proper and correct, and accordingly directed the Joint Commissioner, Customs, i.e. the adjudicating authority to apply to the Commissioner (Appeal) Customs and Central Excise, Patna, for determination of the following points arising out of the said order:- “(i) Whether the said order of the J.C., Customs, Patna for release of the seized Nepalese currency amounting to Rs.13,50,000 (Rs. Thirteen lakhs fifty thousand) only to Rs.8,43,750/- (Rs. Eight lakhs forty three thousand seven hundred and fifty) only (IC) to the owner of the goods is legal, proper and correct and whether noticees deserved penalty under provisions of Customs Act, 1962. (ii) The Commissioner(Appeal), Customs and Central Excise, Patna may pass any such order as may deem fit in fact and circumstances of the case and which is according to law.” This led to filing of appeal by the appellant against Ratan Prasad, Sree Lal Prasad, and Mohan Kumar @ Mohan Prasad, and by order dated 25.2.2005 in Appeal No. 101/PAT/CUS/APPEAL/05, the Commissioner (Appeals), Customs and Central Excise, Patna, held that there was sufficient material available on record to indicate that the Nepalese currency were the sale proceeds of smuggled gold and the same were liable to confiscation under the provisions of section 121 of the Act, and further that the concerned persons and the conveyance are liable to penal action /confiscation. The adjudicating authority was directed to pass appropriate order accordingly. 8 The respondents being aggrieved by the same moved before the CESTAT, East Regional Bench, Kolkata, which by order dated 19.9.2007 in Order No.A-1809-1811/KOL/07, in Customs Appeal no.80-82/2005, set aside the order of the Commissioner (Appeals), Customs and Central Excise, Patna. The appellant (Revenue) being aggrieved by the said order passed by the CESTAT has preferred the present appeals. 3. Learned counsel appearing for the appellant has reiterated the facts as noticed above and has drawn our attention to section 121 of the Act which provides for confiscation of sale proceeds of smuggled goods. She submits that in view of the statements under section 107 followed by statement under section 108 of the Act which were not retracted and also the fact that the defence as set up by Mohan Prasad was found to be unsustainable, the order of Commissioner (Appeals) was perfectly justified, and thus the order under challenge cannot be sustained either on facts or in law. She further submits that the adjudicating authority as well as the Tribunal erroneously shifted the burden on the Revenue with regard to corroboration which was neither under the scheme of the Act nor required under law. In her submission, from the statement of the respondent itself it was clear that there was no justifiable defence available to them which could be independently proved by them. She submits that such a huge amount of Nepalese currency found from the possession of the persons concerned, without any clearance from the Reserve Bank of India which was required for possessing or dealing with the currency beyond a 9 certain limit, was liable to be confiscated. 4. Learned counsel for the respondents in all the three appeals on the other hand submits that the order of the original authority as well as the CESTAT is sound in law as well as on fact. He submits that carrying of Nepalese currency is not prohibited under the existing law, specially in view of the Govt. Notification, dt. 3.5.2000, and thus no liability much less that of confiscation can be fastened on them for possessing Nepalese currency within the border of India. He submits that the allegation of the money being the sale proceeds of smuggled gold is also untenable since the appellant has not been able to establish the said fact by any direct or corroborated evidence. He submits that such stringent penal action is not contemplated under the Act and also cannot be permitted in view of their rights under various other laws which make the possession of the Nepalese currency not illegal and certainly not liable to confiscation under the Act in the circumstances of the present case. He further submits that even if the allegation of the appellant that carrying of the said amount was without clearance from the R.B.I. as required for such transaction, the Act did not empower the Customs authorities either to seize or confiscate the said currency. He further submits that the defence set out by the respondents was genuine and was in conformity with the day-to-day affairs of their business and thus there was no infirmity with their explanation. He lastly submits that in any view of the matter, the appellant could not relate the currency to any transaction resulting from sale of smuggled gold from Nepal. 10 Explaining the same, he stated that section 121 deals with confiscation of sale-proceeds of smuggled goods. For this the first requirement is that the sale-proceeds of the goods which have been smuggled, that is, brought into Indian territory from foreign country without the authority of law and without following the provisions of the Act. In the present case, neither there was any seizure of gold nor any incriminating document or material was recovered from the search conducted against the respondent. He submits that the second requirement is that the proceeds should relate to the sale on this account. The appellant has absolutely not brought any evidence to show that the money was the result of the sale of such smuggled gold. In that view of the matter, he submits that the proceeding against the respondents was untenable in view of the provisions of the Act, and the original authority as well as the CESTAT were justified in passing the order in favour of the respondent. He wrapped up his arguments by submitting that, even if for argument’s sake it is presumed that the amount of currency recovered was not in accordance with the RBI guidelines, it can at best be a case for the Income Tax Department or other authorities to take any action against the respondent, if any, but certainly not for the Customs Department under the provisions of the Act. 5. These appeals are under section 130 of the Act which is in para materia with section 260A of the Income Tax Act. A Division Bench of this Court to which one of us (S.K. Katriar, J.) was a party, had the occasion to deal with section 260A of the Income Tax Act which was compared with section 100 of the Code of Civil 11 Procedure, in Deputy Commissioner of Income Tax vs. Sulabh International Social Service Organization [2011(3) BBCJ 117]. It has been held therein that appeals under the three provisions of the three enactments lie only if the High Court is satisfied that the case involves substantial question of law. In view of the discussions in the reported judgment, we are of the view that no question of law, much less a substantial question of law, arise for consideration in these appeals. The issues are concluded by finding of facts. 6. We have considered the submissions of the learned counsel for the parties and also perused the materials on record. We are unable to accept the submission made by learned counsel for the appellant in view of the factual matrix of the present case as discussed above. There is only allegation based on statements of the persons from whom the money has been recovered stating that they used to carry the money from the person to whom it belonged, who in turn, deals in the business of gold. This statement, in our view, in no way can be sufficient proof of the fact that the said amount was result of sale of gold, much less of smuggled gold, as required under section 121 of the Act. There is no other ground by the appellant justifying the confiscation under section 121 of the Act. This being the sole ground, which we have held to be untenable and unacceptable, we are constrained to observe and hold that the appellant has not been able to justify the order of confiscation and penalty against the respondents under the provisions of the Act. 12 There is no merit in these appeals and the same are accordingly dismissed. ( Ahsanuddin Amanullah, J.) S K Katriar, J. I agree. ( S K Katriar, J.) Patna High Court, Patna The 28th of September 2011 NAFR/mrl