Commissioner Of Central Excise Customs vs C. Srinivas

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.

Brief facts leading to the filing of these Appeals are that on 7. 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 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.

The case was adjudicated by the Commissioner vide OIO. 4/97 dt.31.10.1997 observing that Sri Kailash, being in jewellery business 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.

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, Central Excise, Cochin 1997(90) E.L.T. 241 (SC). 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.

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?

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.

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 possible. Therefore, according to him, the Tribunal has erred in allowing the Appeals of the accused.

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.

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 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.

The Appeals filed by the Department are accordingly dismissed. No order as to costs.

Pending miscellaneous petitions, if any, in these Appeals shall also stand dismissed.