By TIOL News Service

MUMBAI, FEB 09, 2010 : THIS is a high profile case booked in March, 2000 by the officers of Directorate of Revenue Intelligence and concerns seizure of 575 gold bars from Imtiyaz Pothiyawala . Following the seizure, the officers of DRI searched the premises at Thakkar Niwas in the occupation of Bhupendra Thakkar . Here the officers also seized three vehicles in addition to the vehicle, which had been used for transporting 575 gold bars. These three vehicles viz. M&M Commander, M&M Armada and a Maruti 800 car were seized since they were found parked in the premises along with the other vehicle, which had been used for transportation of gold bars. Incidentally, the officers also found that all the three vehicles had special cavities made for the purpose of transportation of smuggled goods.

When the search was going on, one Suresh Bhanji Patel entered the premises carrying currency of Rs.2.50 lakhs. He told the officers that the money had been given to him by his employer, Babubhai Jain for being given to Rajubhai. Since there was no one in the premises named Rajubhai, the officers became suspicious and seized the currency. Babubhai Jain , when confronted by the officers the next day, confirmed that he has given the money to Suresh Patel for being passed on to Rajubhai , who, he says, was an angadia , for being sent to his (Jain's) marble factory at Rajasthan to defray the expenses which has been incurred there.

Amongst others, the notice issued to Babubhai Jain and Suresh Bhanji Patel called upon them to show-cause as to why the currency should not be confiscated under Section 121 of the Act, as sales proceeds of smuggled gold. The Commissioner ordered confiscation of the currency and imposed penalties on both these persons.

They ( Babubhai Jain and Suresh Bhanji Patel ) had filed appeals before the CEGAT (as it was known then) and while allowing the same vide order no. CII/255-258/WZB/03 dated 15.02.2003 , the Bench had while coming down heavily on the adjudicating authority observed thus –

“ It does not need any great discussion to say that these three sentences do not form any basis to hold that the currency was the sale proceeds of gold. It is not enough evidence to satisfy the requirement of Section 121 of the Act explained in various decisions of the Tribunal, that before any money is seized as being the proceeds of sale of smuggled goods, it must be established that there was a sale of goods which were smuggled, and that the money in question is established to be the proceeds of sale of such goods. … It was however up to the officers of the Directorate of Revenue Intelligence to conduct proper investigation to establish a credible basis for the claim that the money was the proceeds of sale of gold . This does not appear to have been done. As the things stand, which according to the Commissioner, the money is the proceeds of sale of smuggled gold, the identity of the gold, its quantity, or its buyer, seller, approximate date of sale, anything relating to the transaction is not known.

The Commissioner's order seems to suggest that it is up to the owner of the currency to prove that this is not the proceeds of the sale of smuggled gold. There is no such provision in law and the department has completely failed to advance any evidence. The Commissioner's order is totally silent as to the reason for imposition of penalty on these appellants.”

Interestingly, as regards the three vehicles, which were seized for the reason that they had special cavities made for transporting smuggled goods, the Commissioner held that the same were not liable to confiscation since the department had not produced any evidence to show that smuggled goods were actually transported by these vehicles .

It is against this portion of the order that the Revenue is aggrieved and has filed appeals along with Stay applications before the CESTAT. Surprisingly there is also a Stay application filed by the Revenue against the confiscation of currency by the Commissioner .

The Bench noted that since the matter of confiscation of currency had already been decided in favour of the appellants Babubhai Jain and Suresh Bhanji Patel, the Stay Application filed by the Revenue becomes infructuous and was accordingly rejected .

In respect of the Stay application/Appeal filed by the Revenue in the matter of the three vehicles, which the Commissioner had held were not liable to confiscation, the CESTAT held thus –

“4. As regards the three vehicles, no doubt the Commissioner did not confiscate these vehicles. He has also held that they are not liable to confiscation. We find that according to section 115(1)(a) of the Customs Act, 1962, vehicles specially constructed for the purpose of smuggling of goods can be confiscated if they are found in the Customs Area. Otherwise, the department would have to prove that the vehicles have been used for smuggling. Therefore, we cannot really find fault in the order of the Commissioner. Nevertheless the fact remains that according to the investigation, in respect of one vehicle, the owner in her statement dated 24.03.2000 has stated that she did not know anything about these vehicles and no one in her family ever owned any vehicle. She also stated that she did not know any person by name Shri Imtiyaz Iqbal Pothiawala, who was the main party responsible for smuggling according to the department in this case. Summons sent to owner of another vehicle Mahindra & Mahindra Armada was returned by the postal authorities with remarks “not known”. The address was also found to be bogus and no such person was found reside in such address. In respect of Maruti car also, it was found that Shri Javed Khan, in whose name the vehicle was found registered also could not be traced and the Secretary of the Society clarified that he had never seen Shri Javed Khan. From the submissions made in the appeal by the department itself, the conclusion that emerges is that there is no owner for this seized vehicle. Therefore, the department could have taken steps to issue notices to the owners and if there was no response, the vehicles could have been disposed of. Any way, it is not our concern to advise the department . We do not find any justification to set aside the Commissioner order as regards the confiscation of vehicles. In the result, we find that the stay applications were to be rejected. In fact, we do not find any reason to keep the appeals pending, in view of the observations made by us.”

Accordingly, the appeals were also rejected.

NACEN, here I come!

(See 2010-TIOL-231-CESTAT-MUM in 'Customs')