Whether burden of proof under section 123 applicable when the goods were not directly seized by customs officers?

PJ/Case Laws/2012-13/1375

Case : - COMMISSIONER OF CUSTOMS & CENTRAL EXCISE VISAKHAPATNAM Vs KEERTHI KUMAR JAIN, GANTA RAMACHANDRA RAO, VEGI RAMAMOHANA RAO

Citation: - 2012-TIOL-1948-CESTAT-BANG

Brief Facts: - The relevant brief facts of the case are:

(1) Shri Ganta Ramachandra Rao and Shri Vegi Ramamohana Rao were intercepted by the Police on 18.03.2008 at Jonnada and 44 gold bars of 100 grams each and gold mound weighing about 481.52 grams and small piece totally weighing 15.08 grams, (totally 4896.60 grams) were seized.

(2) Subsequently, on order dated 25.03.2009 Mandal Revenue Officer (MR0), the seized gold was handed over to the Customs authorities. As per the investigation conducted by the department, Shri Keerthi Kumar Jain was found to be a trader and he has purchased foreign mark gold from M/s Chanda Anjaaiah Parameswar, Secunderabad, a dealer of foreign gold who has procured foreign gold from MMTC and State Bank of India, Hyderabad. It was claimed that the seized gold were sent through two of his employees Shri Ganta Ramachandra Rao and Shri Vegi Ramamohana Rao to be delivered to four buyers who were jewelers in Mandapeta. But the employees were not carrying any documents with them at the time of interception by the police.

(3) On the basis of investigation, the department has released 44 bars of gold. However, not satisfied with the documents produced in respect of mound of gold and small piece of gold, show-cause notice was issued proposing confiscation of 499.500 grams of gold and proposing imposition of penalties.

(4) Original authority absolutely confiscated the gold and imposed a penalty of Rs. 50,000/- on Shri Keerthi Kumar Jain and Rs. 5000/- each on S/Shri Ganta Ramachandra Rao and Vegi Ramamohana Rao.

(5) On appeal by the three parties, Commissioner (Appeals) has set aside the order of confiscation of the gold and imposition of penalties on the respondents.

(6) Hence, the department is in appeal against the said order.

Appellant’s Contention: - Learned Deputy Commissioner (AR), reiterating the grounds of appeal, submit that the documents produced on behalf of the respondents to claim licit nature of the confiscated gold do not correspond to the material facts available on the mound of gold and therefore, the Commissioner erred in setting aside the order of confiscation. Though, Commissioner (Appeals) held that Section 123 of the Customs Act was applicable, he has wrongly given the benefit to the respondents. In this regard, he relies on the decision in the case of Bharat Kumar Jaini Vs. CC, Jaipur 2007(217) E.L.T. 42 (Tri.-Del.)] =2007-TIOL-1481-CESTAT-DEL

Respondent’s Contention: - Learned advocate appearing for the respondents strongly defends the order of the Commissioner (Appeals) with the following submissions:

a) The respondent Shri Keerthi Kumar Jain is not an importer but a dealer who has purchased from importer of gold/dealer of imported gold. It is by mistake the documents were not carried by the employees.

b) The fact that 44 bars of gold carried out by the employees were found to be part of genuine transaction should have been appreciated by the original authority. Therefore, the Commissioner (Appeals) took the said fact into account and his order is legal and proper.

c) In the present case, the gold was not seized by the customs from the respondents but seized by the police authorities and handed over to the customs authorities. Therefore, the burden of proof under Section 123 cannot be thrust on the respondents as held by the Hon'ble High Court of Madhya Pradesh in the case of CCE Vs. D.K. Singh [2006 (199) E.L.T. 202 (M.P.)].

d) They have produced documents relating to procurement of gold bars of purity 995 and the seized gold mound was also of 995 purity and the markings CHI ESSAYEUR FONDEUR was inscribed by the respondent to indicate the imported nature of the part of the gold which was being sent.

e) The smaller pieces were remnants of other gold and they were not carrying any marks.

Reasoning of Judgment: - After considering the submissions from both the sides and perusal of the records. At the outset, it is to be noted that 44 bars of gold were also carried by the respondents 2 & 3 and seized by the police authorities. The entire gold was handed over to the customs authorities in pursuance of order of the Mandal Revenue Officer concerned. On the basis of investigations, 44 bars of gold stand released to Shri Keerthi Kumar Jain. This indicates the status of the said Keerthi Kumar Jain as a dealer of foreign gold. The claim of the respondent Shri Keerthi Kumar Jain was that he has procured foreign marked gold from a dealer in Secunderabad who has purchased from MM IC and also from State Bank of India, Hyderabad. The disputed quantity involved is very small quantity when compared to 44 bars of gold which stands released based on the documents submitted and claims made by Shri Keerthi Kumar Jain. As already mentioned, the gold has been taken over, on the orders of the Mandal Revenue Officer, from the police authorities and the same have not been seized directly from the respondents. Therefore, Section 123 of the Customs Act cannot be invoked to the facts of this present case as rightly claimed by the learned advocate for the respondents. Under these circumstances, it was incumbent on the department to rely on evidence to show the illicit nature of the seized gold mound and pieces of gold. There is no such evidence adduced by the department. In fact, it appears that no verification has been conducted with the prospective dealers like Jindath Jewellers, M/s. Sri Kanya Jewellers, M/s. Ganesh Jewellers and M/s. Vasavi Jewellers of Man dapeta .

Commissioner (Appeals) has given the benefit of doubt to the respondents with the following findings:
"In other words, it is clearly probable that the gold was imported (rendering the certification of the assayer true) and it was also clearly probable that the mound and the small piece were remnant of the imported bar of gold on which the markings were inscribed by the appellants to make it marketable (rendering the defence of the appellant true, inasmuch as, neither the impossibility of the contention was established nor the trade practice claimed to have been prevalent and practiced by the appellant was controverted by revenue). Hence, this should render the rival contentions evenly poised. However, what tilts the balance in favour of the appellants is the fact that their claims regarding a very substantial portion of the seized gold i.e. 44 gold bars had been proved to be correct, by the revenue, resulting in release of the same to the appellants at the investigation stage itself. As already discussed above the contention of the appellants regarding the gold mound and the piece of gold remain uncontroverted and hence cannot be merely brushed aside on the strength of an observation made by an assayer. hence, to me, the defence adduced by the appellants is more probable given the fact that credentials of the appellants have been proved beyond all doubt in respect of a very significant portion of the gold seized."

No valid reasons have been adduced to doubt the correctness of the above findings especially when it has been held that Section 123 of the Customs Act cannot be applied to the facts of the present case. The claim that the respondents marked the mound of gold with the words "CHI ESSAYEUR FONDEUR" as the mound was part of the imported gold has been rightly accepted by the Commissioner (Appeals). The expert opinion given by the assayer that the gold of purity 995 could not have been manufactured by any venture in India is irrelevant as the respondents are claiming that the impugned gold is only part of what was imported.

Since the documents given in respect of substantial quantity of the seized gold (44 bars) produced by Keerthi Kumar Jain stands accepted by the department, the acceptance of the evidence by the Commissioner (Appeals) in respect of the balance quantity of 499.500 gms of gold calls for no interference.

Decision: - Revenue Appeal Rejected.

Comment:- The analogy drawn from this case is that where substantial seized goods have been found to be legal and proper, benefit in respect of balance goods to also be legal and proper is available. Moreover, as the goods were not directly seized by the customs departmental officers, burden of proof under section 123 that the seized goods are of illicit nature shifted on to the department.

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PJ/Case Laws/2012-13/1375

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