Dumpy Kumar Jain vs Commissioner Of Customs (Preventive), Vijayawada

A.K. Jyotishi, Member (T)

Shri Dumpy Kumar Jain, Proprietor of M/s Sri Shanti Jewellers, Kadapa (herein after referred to as appellant) was, interalia, issued show cause notice for imposition of penalty under Section 112(a) and 112(b) of the Customs Act. On adjudication, the Adjudicating Authority, interalia, held the gold jewellery collectively valued at Rs. 15,16,553/- seized on 18/19.12.2020 from the possession of one Shri Niazi Pathan Nymatulla Khan liable for absolute confiscation. Thereafter, the Adjudicating Authority imposed a penalty of Rs. 50,000/- on Shri Dumpy Kumar Jain. The appellants are in appeal against this imposition of penalty.

The main ground of appeal pleaded by the appellants are that Order of the Appellate Authority has crossed the boundaries of the show cause notice and the Order-in-Original and that there is lack of jurisdiction for issuance of show cause notice and Order-in-Original.

The issue in brief is that based on specific intelligence the Customs Officers of Tirupati Commissionerate intercepted one car on 18.12.2020 in which Shri Niazi Pathan Nasarulla Khan, Niazi Pathan Hyder Khan, Niazi Pathan Nymatulla Khan and Shaik Ali Share were travelling. Further, detailed examination of the vehicle resulted, inter alia, in detection of certain gold jewellery like bangles, bracelets, chains and on questioning about it’s bonafide they claimed to have procured the gold jewellery at Chennai. The said gold jewellery totally weighing 324.050 gms was certified to be of 22K purity and collectively valued at Rs. 15,16,553/-. The Officers under reasonable belief that the said jewellery was made out of re-melted smuggled gold of foreign origin, placed it under seizure. Further, statements were recorded under Section 108 of Customs Act from all concerned, wherein, interalia, Shri Niazi Pathan Nymatulla Khan gave details of source of procurement at Channai and also admitted of not having any valid documents of purchase etc. However, later on 20.04.2021 Shri Niazi Pathan Nymatulla Khan retracted his statements and stated that a part of jewelleries were purchased from Chennai from one H.K. Chains, and was meant for one Sri Shanti Jewellers, Kadapa and remaining jewelleries were procured from one Shreem Jewellery, Coimbatore, which was meant for one Jain Silver, Kadapa.

Shri Dumpy Kumar Jain of Sri Shanthi Jewellers in his statement dated 21.04.2021 stated that he got an order for 138.030 gms gold jewellery from his customer and he had placed order over phone to M/s HK Chains, Chennai for 138.030 gms of jewellery and had also paid an amount of Rs. 2,50,000/-on 09.12.2020 and Rs. 4,15,600/- on 14.12.2020. The Adjudicating Authority evaluated various evidences on record and relied on certain admitted facts from the statements made by Niazi Pathan Nymatulla Khan, Niazi Pathan Nasarullah Khan and also by the so called jewellers at Chennai, who had repeatedly supplied such jewellery. The Adjudicating Authority did not agree with the retraction in view of the mis-match in the quantities in the retraction letter with that of his earlier statements and held that the retraction letter dated 20.04.2021 is contradictory to his own admission during panchanama and his statement dated 20.12.2020 and also there were no specific markings on the ornaments of the invoices submitted by both the suppliers, nor the seized gold jewellery bear any markings which corroborates that they were actually purchased or manufactured by the said supplier. He also made the observation that during the 4 months gap between the date of seizure and date of retraction, none of the claimants made any effort to produce the documents and payments details till retraction was made by the Niazi Pathan Nymatullah Khan and that the claimant Shri Dumpy Kumar Jain failed to produce any corroborative evidence to the effect that they were the real owners of the seized gold jewellery weighing 53.280 out of 324.050 gms.

Learned Counsel for the appellant submits that admittedly the seized gold jewelleries were of 22K and there was a payment proof and on both these grounds no dispute has been made by the Department and therefore such jewelleries were not liable for seizure or subsequent confiscation. He also states that the seizure itself is vitiated because there was no reasonable belief and the Department ought to have carried out investigation to establish that such gold jewelleries were made out of smuggled gold and therefore were liable for confiscation. In so far as reliance being placed by the Department on the statement of the supplier is concerned, he states that Department had not asked him to disclose the source of gold from which said jewelleries were made and therefore it is the presumption of the Department that the said jewelleries were made out of smuggled gold. The Learned Counsel has also submitted that the show cause notice of seizure itself is vitiated on account of the fact that it has been issued beyond the statutory period of 6 months and that there is nothing on record to prove that the said 6 months period was extended by the Competent Authority. Further, the original order passed by the Adjudicating Authority is also without the authority of law as he is not the Jurisdictional Authority for passing such order. Further, the Order-in-Appeal also clearly suffers from non-application of mind in as much as the facts of another person, namely Shri Jacky Jain, has been relied upon while deciding the matter of penalty against the appellant.

On the other hand, the Learned DR has given the background of the seizure and the context in which such seizures were made. He stated that while gold jewellery was recovered from a secret compartment, which was under the possession of Niazi Pathan Nymatulla Khan, certain other gold jewellery and foreign marked gold pieces were also recovered from the same car in respect of which the other persons have owned up and for which a separate panchanama has been drawn and the same forms part of separate show cause notice and adjudication proceedings. Therefore, in the totality of facts of the case, there was sufficient reasonable belief for Department to presume that said gold jewellery were made out of smuggled gold and therefore were rightly seized. The subsequent follow up investigation from the supplier, as also from the so called claimant of the said jeweller namely M/s Dumpy Kumar Jain, also could not establish that these jewellery were legitimate jewellery and were therefore not a prohibited goods. He relies on the provisions of Section 123 of the Customs Act under which once the gold or gold jewellery are seized under reasonable belief, the onus to prove that they are not smuggled goods passes on to the person from whose possession it is recovered or from the person who claims to be the owner and in this case both failed to prove that these jewelleries were not made out of smuggled gold and therefore jewelleries were rightly liable for confiscation. Since jewelleries were liable for confiscation and actually confiscated on Adjudication, Shri Dumpy Kumar Jain is also liable for penalty in view of his role.

He further points out that the show cause notice was issued to Niazi Pathan Nymatulla Khan for confiscating the gold jewelleries and not to Shri Dumpy Kumar Jain whose claim to ownership of part of seized jewellery was rejected by Adjudicating Authority on valid grounds and therefore since the Niazi Pathan Nymatulla Khan has not come in appeal against the said order, the order of the Commissioner (Appeals) to that extent is final and the only issue left is to decide whether the Shri Dumpy Kumar Jain is liable for penalty under Section 112(a) and 112(b) in the facts of the case or otherwise. He has relied on various case laws in support that Section 123 was rightly invoked in the facts of the case and the totality of evidence has to be taken into account to arrive at reasonable belief for invoking Section 123 of Customs Act:

i. Kuldeep Singh & Ors Vs State of Rajasthan [2000 (5) SCC 7]

ii. Kanungo & Co. Vs Collector of Customs, Calcutta [1972 (2) TMI 35 SC]

iii. Om Prakash Khatri Vs Commissioner [2019 (11) TMI 796 SC]

iv. Indru Ramchand Bharvani Vs Union of India [1988 (7) TMI 78 SC]

v. Labhchand Dhanpat Singh Jain Vs State of Maharashtra [1974 (12) TMI 40 SC]

vi. Pukhraj Vs D.R.Kohli, Collector of Central Excise, Madhya Pradesh, Vidarbha and Another [1962 (93) TMI 2 SC]

vii. State of Gujarat Vs Shri Mohanlal Jitamalji Porwal and Another [1987 (3) TMI 111 SC]

Heard both the sides and perused the documents.

In this appeal, the main issue to be decided is whether the appellant is liable for penalty under Section 112(a) and 112(b) of the Customs Act or otherwise in the facts of the case. It is to be noted that penalty under Section 112 is meant for improper importation of goods by any person -

(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, or

(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111

In so far as the issue of confiscation of the seized gold jewellery is concerned, that is not the subject matter of this appeal as it has not been challenged by Shri Niazi Pathan Nymatulla Khan by way of appeal. The argument made by Shri Dumpy Kumar Jain to be part owner of the said seized jewellery is also not tenable in view of the clear cut findings of the Commissioner (Appeals) discarding the ownership and the untenability of retraction of statement by Shri Niazi Pathan Nymatulla Khan. Commissioner (Appeals) has observed that once the reasonable belief is there and the goods have been seized, in terms of provisions under Section 123, it was the responsibility of Shri Niazi Pathan Nymatulla Khan or Shri Dumpy Kumar Jain, who claimed to be the part owner, to prove that said goods were not made out of smuggled gold. Both of them have failed to prove the same and instead expected Department to prove that said jewellery was not made out of smuggled gold. Therefore, the issue of confiscation of gold jewellery recovered from the possession of Shri Niazi Pathan Nymatullah Khan is not a subject matter for decision in this appeal. As far as the confiscation of the gold jewellery is concerned, I do not find any reason to indulge in the examining the legality of the same in the order of the Commissioner (Appeals), as no appeal has been filed by Shri Niazi Pathan Nymatullah Khan against the said absolute confiscation.

A plain reading of Section 112(a) and 112(b) would indicate that in order to bring somebody within the purview of Section 112, he has to do something or omit to do something so as to make such goods liable to confiscation under Section 111 or abates in the doing or omission of such an act. Similarly, in terms of Section 112(b), he has to either acquire possession of or be concerned in any manner dealing with any goods which he knows or has reason to belief are liable to confiscation under Section 111. This section is clearly meant for person who has actively abated an act of omission or commission either directly or by way of abatement in certain activities which makes the goods liable for confiscation under Section 111 or has in any another dealt with such goods which he has reasons to belief are liable to confiscation under Section 111.

Shri Dumpy Kumar Jain (aka Dumpy Jain) in his statement dated 21.04.2021 has admitted that he knew Shri Niazi Pathan Nasarullah Khan, who is father of Nymatulla Khan and he had asked him to brings gold jewellery from one M/s H K Chains, Chennai. He has also voluntarily admitted to have made certain payments to M/s HK Chains, Chennai against their invoice no. 50/20-21 dated 08.12.2020. Thus, it is obvious that Shri Dumpy Kumar Jain has not denied his association with Shri Nasarulla Khan and Shri Nymatulla Khan in relation to gold jewellery seized from the possession Shri Nymatulla Khan and in fact he has tried to claim the ownership also but further investigation conducted and especially the investigation at the end of the supplier clearly showed that Shri Dumpy Kumar Jain had tried to cover up for the seizure of jewellery made on 18.12.2020, by referring to some other unrelated transactions made with HK Chains on earlier occasions and this act makes him liable for penalty under Section 112, in as much as he abated with Nasarulla Khan in relation to the seized gold jewellery, and indirectly with Nymatulla Khan by trying to claim the same as his legitimate jewellery. The seized gold jewellery were liable to confiscation and actually confiscated, against which no appeal has been filed by Shri Niazi Pathan Nymatulla Khan.

In so far as the issue on jurisdiction is concerned, the matter has already been dealt with by the Original Authority and I do not find any reason to interfere with the same in as much as the Additional Commissioner work under who is having jurisdiction over the entire geographical area and he can adjudicate any matter arising within the jurisdiction in terms of any specific or general order given by Commissioner and therefore it does not vitiate the adjudicating proceedings. It is not disputed that the Additional Commissioner, who has adjudicated the case is not within administered control of the Commissioner, who has the jurisdiction over the entire area where the goods were seized.

As far as the issuance of show cause notice beyond 6 months is concerned, it is noticed that in terms of general relaxation for limitation due to COVID as allowed by Hon’ble Supreme Court vide their order reported in 2022 (56) GSTL 385 (S.C.), there is no breach of limitation of 6 months as the show cause notice could have been issued up to 28.02.2022, whereas, in this case, the show cause notice has been issued on 10.12.2021.

In so far as the allegation of non-application of the mind by the Commissioner is concerned, I find that because of multiple persons involved in carrying the offending goods and drawal of different panchanamas, facts applicable to Shri Jacky Jain has been analysed as the facts applicable to Shri Dumpy Kumar Jain by the Adjudicator. However, that alone will not make it a case of non-application of mind if the entire Order-in-Original and Order-in-Appeal are read holistically bringing out the culpability of Shri Dumpy Kumar Jain vis-a-vis the offending goods, which were liable for confiscation and were actually confiscated by the Adjudicator.

Learned Counsel for the appellant has relied on various case laws in support of his arguments that gold jewellery are neither smuggled goods nor prohibited goods and therefore they were not liable for confiscation either under Section 111(d) or under Section 111(o). I have already discussed, supra, that the issue of absolute confiscation of the gold jewellery has not been challenged by Shri Niazi Pathan Nymatulla Khan and therefore any case law which has bearing on that cannot be decided in this appeal. The limited issue which is required to be decided in this case is whether he has either colluded with Shri Niazi Pathan Nymatulla Khan, directly or indirectly, in relation to the said jewellery or has in any manner dealt with that or otherwise. In the facts of the case, by claiming to be the owner of the part of said goods, which ultimately he could not established, it is a clear case of abatement when the goods were already held to be liable for confiscation. It is a case where he actually tried to cover the offending seized goods by claiming it as some other legitmate jewellery items, which however could not stand to test in view of various contradictions as well as admitted facts by Shri Niazi Pathan Nymatulla Khan, Shri Niazi Pathan Nasarullah Khan and so called supplier. The retraction of statement by Nymatullah khan also does not help him because of the reasons given in detail by Original Adjudicating Authority.

A great deal of argument has been made by the Learned Advocate of the appellants that Section 123 is not invokable in the facts of the case. I observe that in this case, interception was made on specific intelligence, recovery of jewellery was made from concealed compartment, Shri Niazi Pathan Nymatulla Khan could not give any valid answer to the bonafide purchase or source or documents at the time of seizure and in fact gone wrong details about source, therefore Section 123 was rightly invoked for seizure and the onus to prove thereafter shifted to Shri Niazi Pathan Nymatulla Khan to prove otherwise that it is neither smuggled good nor made out of smuggled gold. Further, he has chosen not to come in appeal against said decision or confiscation. On the other hand, reliance on certain judgements cited by Learned AR, supra, clearly supports invokation and applicability of Section 123 of Customs Act, 1962 in the facts of the case.

Therefore, in the facts of the case penalty has been rightly imposed on Shri Dumpy Kumar Jain under Section 112(a) and 112(b) of the Customs Act 1962 and therefore there is no legal infirmity in the impugned order passed by Commissioner (Appeals).

Appeal dismissed.