Anshul Jain Vs Commissioner of Customs (CESTAT Allahabad)
CESTAT Allahabad held that legal ownership and acquisition of gold proved via documentary evidence on the other hand, the Department has not been able to provide any iota of evidence to show that the seized gold bar was smuggled. Thus confiscation under Section 121 Customs Act is unsustainable
Facts- DRI received specific intelligence that M/s Mahalaxmi Jewel Exports (Proprietor Shri Prem Sagar Arora) is misusing the EOU Scheme by misdeclaring export jewellery in terms of purity of the gold, and diverting the duty free imported gold into domestic market for sale. Shri Prem Sagar Arora was also Partner of another firm M/s Mine O Gold engaged in trading of gold, jewellery and export of gold jewellery.
Search was conducted at the residential and factory premises of Shri Prem Sagar Arora, and more than 25kgs gold and jewellery items and cash amounting to Rs.20,00,000/- were found. Accordingly, Show Cause Notice was issued proposing confiscation of seized gold u/s. 111, currency u/s. 121 as sale proceeds of smuggled gold and penalty u/s. 112(b) on M/s Mahalaxmi Jewel Exports, Shri Prem Sagar Arora, M/s Mine O Gold and the Appellant.
The impugned order confirmed all the allegations of the Show Cause Notice against all Noticees, hence the present appeal is filed before the Tribunal.
Conclusion- Since documentary evidence has been presented in favour of the gold showing the Appellant’s legal ownership and acquisition, we hold that tenets of Section 123 Customs Act are satisfied and the Appellant has discharged the burden of proof. The Appellant’s statement also reiterates the same. On the other hand, the Department has not been able to provide any iota of evidence to show that the seized gold bar was smuggled. We agree with the appellant’s submission that the Department has not shown any proof that the seized cash was sale proceeds of smuggled gold and thus confiscation under Section 121 Customs Act is unsustainable, more so since the appellant’s Books of Accounts clearly reflect that this was part of his Cash in Hand and had been received from legitimate sources.
Held that in absence of Prem Sagar Arora’s examination by the adjudicating authority, his statement cannot be relied upon for passing the impugned order against the appellant, more so since the Appellant had requested for his cross examination, as it does not adhere to the tenets of Section 138B Customs Act.
Held that without any corroboratory evidence or any other proof, a sole statement of co-noticee cannot be the only basis to impose penalty or to allege any mala fide on the Appellant.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
The present appeal has been filed by Shri Anshul Jain challenging the order passed by the Adjudicating Authority, i.e. Commissioner of Customs, Noida whereby he confiscated 1 kg gold bar but gave option to redeem it on payment of redemption fine of Rs.10,00,000/-, absolutely confiscated currency of Rs.41,75,000/- under Section 121 Customs Act and imposed penalty of Rs.25,00,000/- under Section 112(b) Customs Act.
2. Briefly stated, the facts of the case are that DRI received specific intelligence that M/s Mahalaxmi Jewel Exports (Proprietor Shri Prem Sagar Arora) is misusing the EOU Scheme by misdeclaring export jewellery in terms of purity of the gold, and diverting the duty free imported gold into domestic market for sale. Shri Prem Sagar Arora was also Partner of another firm M/s Mine O Gold engaged in trading of gold, jewellery and export of gold jewellery.
3. Search was conducted at the residential and factory premises of Shri Prem Sagar Arora, and more than 25kgs gold and jewellery items and cash amounting to Rs.20,00,000/- were found. During investigation, modus operandi of Shri Prem Sagar Arora was revealed as follows whereby he misused the EOU Scheme:-
a) M/s Mahalaxmi Jewel Export imported duty-free gold from UAE on FOC basis or outright basis for the purpose of manufacture of gold jewellery to re-export to UAE based supplier.
b) Shri Prem Sagar Arora also opened a Shell Firm in Dubai called M/s Al Rabiha Jewellery Trading by promising hefty salary to one Mr Vishal Kumar.
c) Prem Sagar Arora started mixing copper in gold jewellery and started exporting it by misdeclaring it as pure gold jewellery to fulfil his export obligation against the import of duty free gold. M/s Mahalaxmi Jewel Exports employees namely Shri Amit Kumar, Shri Sahib Kumar Bala, Ajay Dubey, Bharat Kashyap, Omendra Singh, Chitanjan and Vishnu Dutt also admitted the fact of making copper mixed jewellery and showed the steps and machines used for this purpose. The same was reflected in a Register recovered from the factory premises. This exported jewellery only contained 10-15% gold and the rest of the duty free gold was diverted and sold by him in the domestic market. Shri Vishal Kumar of M/s Al Rabiha Jewellery Trading, Dubai also confirmed the same in his statement u/s 108 of the Customs Act. Prem Sagar Arora had imported total 45 kgs of duty free gold by Bills of Entry No 8974 dated 02.10.2016 and 10240 dated 12.2016, and from this it was alleged that 25kgs gold was found secreted in his premises and the rest had been diverted to domestic market.
4. In his statement dated 17/18.12.2016, Prem Sagar Arora stated that he sold the diverted gold to various people such as the Appellant, M/s Ultimate Bullion, Mr. Kapil, Mr. Patil and Mr. Mridul Jain of M/s Satguru. Based on this statement, search was conducted at the Appellant’s premises on 19.12.2016 which led to seizure of 1kg gold bar of 995 purity having the description “VALCAMBI SUISSE 995” and demonetized currency of Rs .41,75,000/-.
5. The next day on 20.12.2016, the Appellant submitted documentary evidence like Purchase Invoices, Books of Accounts, Cash Ledger, Gold Stock Ledger, Balance Sheet and Trial Balance to the Investigating Officer as well as Director General DRI which showcased his legal ownership and possession of the seized gold and money.
6. In his statement dated 18.12.2016, Shri Saurabh Arora stated that he helped his father Shri Prem Sagar Arora in his business and had complete knowledge of all dealings. He stated that the diverted duty free gold was sold to Shri Mridul Jain of M/s Satguru, M/s Ultimate Bullion, Shri Damani owner of M/s Damani & Co. and Shri Ravi Jalan. However, he did not state that the diverted gold was sold to the Appellant.
7. In his statement dated 22.12.2016, the Appellant said that he was a jeweller running M/s Surya Jewellers (though managed by his father) and purchased foreign origin gold from many people like Saurabh and M/s Somya Bullion, NTS, Global, P C Gold etc; the seized gold bar was probably bought by RTGS from M/s Somya Bullion, the seized cash was duly accounted in the Books of Account and all documents regarding the seized gold and cash were submitted to DRI; serial numbers of gold bars are not written on invoices; and Serial number was erased by him because as he regularly cut the gold to sell small pieces to various customers.
8. DRI procured Call Detail Records of Shri Saurabh Arora, which showed that he was in regular contact with the Appellant. In the Show Cause Notice, it is mentioned that Prem Sagar Arora was asked about the CDR and he stated that he would direct his son Saurabh Arora to follow up with the Appellant for payment of diverted gold.
9. Accordingly, Show Cause Notice was issued proposing confiscation of seized gold under Section 111, currency under Section 121 as sale proceeds of smuggled gold and penalty under Section 112(b) on M/s Mahalaxmi Jewel Exports, Shri Prem Sagar Arora, M/s Mine O Gold and the Appellant.
10. The impugned order confirmed all the allegations of the Show Cause Notice against all Noticees, hence the present appeal is filed before the Tribunal. However, the present appeal is limited only to the Appellant Shri Anshul Jain.
11. Anup Kumar Srivastava and Shri Rahul Raheja, learned Counsel for the appellant state that the case against the appellant has been made on the basis of assumptions and presumptions and there is not an iota of evidence linking the appellant with any wrongdoing of M/s Mahalaxmi Jewel Exports, Shri Prem Sagar Arora, or M/s Mine O Gold, nor is there any proof that confiscated gold is smuggled, or that the confiscated money is sale proceeds of smuggled gold.
12. Ld. Counsel states that there is no statement which says that the seized gold bar was procured by the appellant from M/s Mahalaxmi Jewel Exports or that the seized currency is the sale proceeds of smuggled gold. There is only a general uncorroborated statement of Prem Sagar Arora that he diverted duty free gold to the domestic market and the Appellant was one of the buyers. However, Ld. Counsel states that this statement could not have been given any credence for passing the impugned order in absence of Prem Sagar Arora’s examination as per Section 138B of the Customs Act by the Ld. Adjudicating Authority, especially since the Appellant had sought his cross‑ examination. Reliance is placed on the decision of Hon’ble Punjab & Haryana High Court in the case of G-Tech Industries vs Union of India 2016 (339) E.L.T. 209, which held in Paras 16-18 that:-
“16. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interest of justice.”
17. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-inchief has to precede cross-examination, and cross-examination has to precede re-examination.
18. It is only, therefore,-
(i) after the person whose statement has already been recorded before a Gazetted Central Excise officer is examined as a witness before the adjudicating authority, and
(ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise.
The following orders of the Tribunal also support the same:-
- H S Chadha vs Commissioner of Customs (Prev) Delhi 2020 SCCOnline CESTAT 8, affirmed by Hon’ble Supreme Court vide order dated 14.02.2023 in Civil Appeal Diary No 28951 of 2020.
- Kudrat Corporation vs Commissioner of Customs Ahmedabad 2020(7) TMI 705
- Anil Gadodia vs Commissioner of Customs (Preventive) Delhi 2020(4)TMI 82
- Linear Technologies vs Commissioner of Customs (Preventive) Delhi 2022 (9) TMI 1131 held that “Undisputedly, the process prescribed under Section 138B was not followed by the Commissioner with respect to the statements. Therefore, the statements are not relevant to this case on this ground alone”
- Commissioner Central Excise Udaipur vs Mittal Pigments Pvt Ltd 2022 (11)TMI 1071
- Karim Jaria and Crown Lifters Pvt Ltd vs Commissioner of Customs (Import-I) Mumbai 2022 (4) TMI 948
- Joginder Kumar vs Commissioner of Customs (Import) Delhi 2022 (9) TMI 227
13. Ld. Counsel states that since there is no corroboratory evidence, the statement of co-accused Prem Sagar Arora could not have been the sole criteria to arrive at the finding of any illegal act by the Appellant, or order for confiscation or impose penalty as held by:-
- Hon’ble Supreme Court in Surinder Kumar Khanna vs Intelligence Officer, Directorate of Revenue Intelligence 2018 (362) E.L.T. 935
- Hon’ble Allahabad High Court in Commissioner of Customs (Prev) Lucknow vs Shakil Ahmed Khan 2019 (366) E.L.T. 634
- Hon’ble Madras High Court in Commissioner of Customs vs Sushil Kumar Kanodia 2015 (319) ELT A73
- Tribunal in Mahabir Prasad vs Commissioner of Customs (Prev) Patna 2000 (126) E.L.T. 803 (TriCal)
14. Counsel further states that Statements of various employees of Prem Sagar Arora, viz. Amit Kumar, Ajay Dubey, Bharat Kashyap, Yogesh Kumar, Chitanjan, Vishnu Dutt and Vishal Kumar were recorded by DRI. However, none of them have incriminated the Appellant, nor have they ever said that Shri Prem Sagar Arora used to sell the diverted gold to the Appellant. Saurabh Arora (son of Prem Singh Arora) also did not mention the Appellant’s name as buyer of the diverted gold. Even the Register that was allegedly recovered from the premises of M/s Mahalaxmi Jewels Export does not mention the name of the Appellant. This further shows that the Appellant was not involved in any wrongdoing, nor did he have anything to do with any alleged diverted gold.
15. Counsel also states that even though Call Detail Records of Saurabh Arora show regular conversations with the Appellant, no adverse inference can be drawn against the Appellant since it is not known what the conversations were about and that there is no irregularity in them being in regular touch as they belong in the same business of jewellery. Ld Counsel states that the contention of the Department in the Show Cause Notice that on being asked about the CDR, Prem Sagar Arora stated that the calls were in reference to the fact that he would ask his son Saurabh Arora to follow up with the Appellant regarding payments of diverted gold, is based purely on presumption and assumption as none of the four statements of Prem Sagar Arora have any question about calls between Saurabh Arora and the Appellant, or that he ever asked his son to talk to the Appellant regarding payments. Ld Counsel further states that there has been no investigation by DRI from Saurabh Arora or the Appellant regarding the calls. He also states that since Saurabh Arora has not been made a Noticee, it was incorrect on the part of the Appellant to be made a Noticee.
16. Counsel states that the gold confiscated from the Appellant had marking of “VALCAMBI SUISSE 995”, which is different from the bars imported by Prem Sagar Arora in B/E No 10240 dated 01.12.2016 and B/E No 8974 dtd 02.10.2016 as these had Country of Origin as UAE. Also, DRI has not recovered any gold bar with marking “VALCAMBI SUISSE” during searches at the residence or factory of M/s Mahalaxmi Jewel Exports. This shows that the seized gold is not similar in any manner to the gold imported or allegedly diverted by Prem Sagar Arora.
17. Ld Counsel further states that search of the appellants premises on 19.12.2016 led to recovery of 1kg gold bar with marking “VALCAMBI SUISSE 995” and Rs.41.75 lakhs/- for which the Appellant gave verbal explanation to the seizing officers which was ignored. The next day on 20.12.2016, the Appellant sent a letter to the DRI IO as well as DG DRI alongwith proper documentary evidence, such as:-
—Purchase Invoices, including the VAT paid Tax Invoice No.T/16-17/441 dated 21.11.2016 showing purchase of 2 gold bars of 1kg each from M/s Somya Bullion & Jewellers, 45, 4th Floor, Kucha Mahajani, Chandni Chowk, Delhi-06, by virtue of which the appellant bought the gold bar
—Cash Ledger, which shows that there was accounted cash amounting to Rs.44,33,223/- from 06.12.2016 onwards. It further reflects that when demonetization was announced, the appellant had accounted cash of more than Rs.1.95 crores/- in demonetized currency notes in his Books of Accounts from which more than Rs1.50 crores/- cash was deposited in the appellants Bank on 11.11.2016, 12.11.2016 and 19.11.2016 and the rest could not be deposited due to heavy rush. It was from this Rs.44,33,223/-, that DRI seized Rs.41,75,000/-. The seizure of cash is also reflected in the Cash Ledger.
—Gold Stock Ledger shows that from 11.12.2016 onwards the Appellant had 12 18.255 grams of gold as his legal stock. DRI seized 1kg bar from this stock. The seizure of gold is also reflected in the Gold Stock Ledger.
— Balance Sheet as on 17.12.2016 clearly shows that Cash in Hand on 17.12.2016 was Rs.44,33,223/- from which Rs.41,75,000/- was seized by DRI. The Balance Sheet as on 3 1.03.2017 clearly shows that Rs.41,75,000/- seized by DRI is considered as a Receivable by the Appellant.
—Trial Balance clearly shows that Cash in Hand on 17.12.2016 was Rs.44,33,223/- from which Rs.41,75,000/- was seized by DRI.
18. Ld. Counsel states that in his statement dated 22.12.2016, the Appellant also reiterated the documentary evidences and stated that the recovered gold and cash were from his legitimate stock and also submitted the supporting legitimate documents. These documents have never been questioned/challenged or denied by the Department. The Appellant never stated that the gold was smuggled or that the cash was proceeds of sale of smuggled gold, nor has he stated to be part of any wrongdoing or involvement with M/s Mahalaxmi Jewel Export. Ld Counsel states that the appellant’s statement clearly shows that he purchased foreign origin gold from many people like Saurabh and M/s Somya Bullion, NTS, Global, P C Gold etc and the seized 1kg gold bar was probably bought by RTGS from M/s Somya Bullion, and that Serial number of the seized gold bar was erased by him because he regularly cuts gold to sell small pieces to various customers. Ld. Counsel states that this statement clearly reflects that there is nothing incriminating in the Appellant’s statement regarding any commercial dealing with Prem Sagar Arora and that the seized gold and cash was illegally seized by DRI as it was legally acquired and duly reflected in his Books of Accounts..
19. Ld. Counsel states that the Appellant has satisfied the requirement of Section 123 of the Customs Act as proper Invoice, Cash Ledger, Stock Ledger, Balance Sheet, Books of Accounts etc were submitted to the Department showing legitimate acquisition of gold which was never challenged and his statement also reflects the same. Various statements also show that he was not associated with M/s Mahalaxmi Jewel Exports in any manner, nor did he have any commercial dealings with it which is clearly reflected in the Ledgers. Ld. Counsel also states that no evidence has been adduced by the Department to show that the seized cash is sale proceeds of smuggled gold and therefore confiscation u/s 121 Customs Act is untenable. To fortify his submissions, Ld Counsel for the Appellant relies on the following orders of this Tribunal:-
– Nand Kishore Sumani vs Commissioner of CX & Customs Siliguri 2016 (333) E.L.T. 448 (affirmed by Hon’ble Calcutta High Court 2016 (337) E.L.T. 10
– Ratan Saha vs Commissioner of Customs Patna 2021 (375) E.L.T. 435
– Nitya Gopal Biswas vs Commissioner of Customs (Prev) Kolkata 2016 (344) E.L.T. 209
20. Ld. Counsel further states that mere foreign marking on gold cannot lead to the inference that it is smuggled as once gold bars are legally imported, they get mixed up with the mass of goods in the country. Foreign markings can at best be considered as hearsay evidence because there is no way to know whether the marks were made abroad or within India by a local goldsmith to increase saleability. He draws support from the decision of Hon’ble Bombay High Court in State of Maharasthra vs Prithviraj Pokhraj Jain 1973 (6) TMI 68, Hon’ble Gujrat High Court in Assistant Collector Customs vs Mukbujusein Ibrahim Pirjada 1969 (2) TMI 1974 and this Tribunal in Sanjeeb Kumar vs Commissioner of Customs (Prev) Lucknow 2019 (1) TMI 77.
21. Counsel further points out that the Ld Adjudicating Authority himself observed in his findings that penalty u/s 112(b) Customs Act is not imposable on the Appellant, yet he imposed penalty in the operative part of the order.
22. Therefore, the learned Counsel for Appellant prays that confiscation of gold and seized currency be held unsustainable and be returned and no penalty be imposed.
22. The Learned D.R justifies and reiterates the findings of the impugned order by referring to the statement of Shri Prem Sagar Arora and accordingly prays that the appeal be dismissed being devoid of any merits.
23. Heard both sides and perused the appeal records.
24. We find force in the contention of the learned Counsel for the Appellant that the entire case is built on assumptions and presumptions against the appellant. In the very first instance on the next day after DRIs search and seizure of gold bar and cash, the Appellant gave documentary evidence like Purchase Invoice of M/s Somya Bullion & Jewellers, Cash Ledger, Stock Ledger, Balance Sheet and Trial Balance showing legal acquisition and ownership of the gold and cash. The Appellant’s Stock Ledger clearly showed that he had 1218.255 grams of gold on 19.12.2016 from which DRI seized 1kg gold bar. The Cash Ledger, Balance Sheet and Trial Balance also clearly show that the appellant had Rs.44,33,223/- in his Books of Accounts as “Cash in Hand” on 19.12.2016 from which DRI seized Rs.41,75,000/-. It is also reflected in his Books of accounts that he had more than Rs.1,95,00,000/- when demonetisation was announced and that he had deposited more than Rs.1,50,00,000/- in the bank since then. We also find that neither it is unusual, nor illegal for a jeweller to have this amount of cash, especially if it is duly accounted in his Books of Accounts. We also find that two days later, the Appellant reiterated his documentary evidences regarding legitimate ownership of the seized gold and cash. He did not admit to any wrongdoing, nor did he say that he was involved in buying diverted duty free gold from M/s Mahalaxmi Jewel Exports. Infact, the appellant’s Ledger shows absence of any sale-purchase with Prem Sagar Arora.
25. We also find force in the arguments of the learned Counsel for the Appellant that the marking on the gold bar seized from the appellant’s premises matches neither with the gold imported by M/s Mahalaxmi Jewel Exports by Bs/E No 8974 dated 10.2016 and 10240 dated 1.12.2016, nor the gold recovered from the residential and factory premises of Shri Prem Sagar Arora. This also points to the fact that the gold bar seized from the appellant is not diverted duty free gold by M/s Mahalaxmi Jewel Exports. We also hold that no link has been found between the gold imported by M/s Mahalaxmi Jewel Exports and the 1kg gold bar seized by DRI from the appellant’s shop.
26. Since documentary evidence has been presented in favour of the gold showing the Appellant’s legal ownership and acquisition, we hold that tenets of Section 123 Customs Act are satisfied and the Appellant has discharged the burden of proof. The Appellant’s statement also reiterates the same. On the other hand, the Department has not been able to provide any iota of evidence to show that the seized gold bar was smuggled. We agree with the appellant’s submission that the Department has not shown any proof that the seized cash was sale proceeds of smuggled gold and thus confiscation under Section 121 Customs Act is unsustainable, more so since the appellant’s Books of Accounts clearly reflect that this was part of his Cash in Hand and had been received from legitimate sources. Our view is fortified by the following decisions; Nand Kishore Sumani (supra), Ratan Kumar Saha (supra) and Nitya Gopal Biswas (supra).
27. We also find that apart from one statement of Prem Sagar Arora, there is no other statement of anyone else or any proof that the Appellant used to buy diverted gold from Shri Prem Sagar Arora. Even Saurabh Arora (son of Shri Prem Sagar Arora) in his statement does not take the Appellants name. We also find force in the arguments of the Learned Counsel for the Appellant that no questions regarding the CDR of Saurabh Arora and the appellant have been placed to either of them and so contents of their conversation cannot be known. We also hold that the Department’s contention that Prem Sagar Arora said that the phone calls occurred as he asked his son Saurabh Arora to enquire about payments from the appellant as incorrect as it is not borne out in any of the four statements of Shri Prem Sagar
28. We also hold that in absence of Prem Sagar Arora’s examination by the adjudicating authority, his statement cannot be relied upon for passing the impugned order against the appellant, more so since the Appellant had requested for his cross examination, as it does not adhere to the tenets of Section 138B Customs Act, as held byG-Tech Industries (supra), H S Chadha (supra), Kudrat Corporation (supra), Anil Gadodia(supra), Linear Technologies (supra), Mittal Pigments (supra), Karim Jaria(supra) and Joginder Kumar(supra).
29. We also find force in the submission of the learned Counsel for the Appellant that without any corroboratory evidence or any other proof, a sole statement of co-noticee cannot be the only basis to impose penalty or to allege any mala fide on the Appellant, as held by Surinder Kumar Khanna (supra), Shakil Ahmed Khan(supra), Sushil Kumar Kanodia(supra) and Mahabir Prasad (supra).
30. Therefore, in view of the above discussions and decisions cited supra, there can be no confiscation of the seized gold bar and currency under the Customs Act, 1962 and it is accordingly quashed. Imposition of penalty on the Appellant is also untenable and is set aside. Since the impugned order qua the Appellant cannot be sustained, it is set aside. Accordingly, the appeal is allowed with consequential benefits as per law.
(Order pronounced in the court on 16th October, 2023)