JUDGMENT (Per Shri R.M Savant, J.)

1 The above Customs Appeal has been filed by the Commissioner of Customs being aggrieved by the Order dated 29th June, 2005, passed in Appeal No. C/331/2000 by the Customs Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (hereinafter referred to as “CESTAT”). The questions of law involved can be gainfully reproduced as follows:

“(a) Whether CESTAT was correct right in law in setting aside the absolute confiscation of Indian Currency amounting to Rs. 2,27,100/- under Section 121 of the Customs Act, 1962 and penalty of Rs. 1,00,000/- imposed under Section 112(b).

(b) Whether the findings of the Tribunal that the Revenue had failed to establish the necessary ingredients for invoking Section 121 of the Customs Act, 1962, was based on no evidence or partly relevant or partly irrelevant evidence and is otherwise perverse and arbitrary.

2 The factual martix involved in the above Appeal can be stated thus

On the basis of the information received by the officer of Marine and preventive Wing of the then Customs (preventive) Collectorate, Bombay searched was carried out of the premises being Room No. 103 Hotel Hayat, 12/14, Dontad Street, Haji Noor Mohammed Ahmed Marg, Dongri, 400 009 on 31st July 1992. In the said search the officers recovered electronic and misc goods of foreign origin and also recovered Indian currency. Apart from the said room some goods were also recovered from the passage in front of the said room. The Respondent-Shamsuddin M.A Kadar who was the occupant of the said room could not produce any legal documents in respect of the said goods or the Indian currency, electronic and misc goods of foreign origin totally valued at Rs. 1,63,493/- were seized in the reasonable belief that those are smuggled into India and are liable to confiscation under the provisions of Customs Act, 1962 (brevities sake referred to as the said Act).

The statement of the Respondent was recorded under Section 108 of the said Act on the same day i.e 31-7-1992, during the course of investigation. In the said statement he inter alia stated that he was a partner of Badari Hotel, Tandel Street, Cross Lane, Bombay 400 009 and that he was engaged in selling electronic goods of foreign origin from Room No. 103 of Hotel Hayat and that the said goods of the foreign origin were sent to him by one Abdullah Mohemmed of Dubai and that the said goods were brought to hotel Hayat by one Siddique. He further stated that no duty paying documents were received in respect of the said goods of foreign origin. In so far as the Indian currency is concerned, he stated that the Indian currency recovered from the said room, are the sales proceeds of the goods of foreign origin. After the said statement was recorded on 31-7-1992, letters dated 15-9-1992 and 25-9-1992 were received from the Respondent and his Advocate Smt. Anjana Gupta respectively. By the said letters, the Respondent sought to retract his statement dated 31-7-1992 and also disowned the goods under seizure. In the said letter dated 15-9-1992, the Respondent inter alia stated that the goods belong to his friend and that the Indian currency was given to him by a party pursuant to an Agreement dated 24-7-1992 for carrying out the business of hotel Badari. A copy of the said Agreement dated 24-7-1992, was also annexed to the said letter dated 15-9-1992, in support of his said claim.

3 In view of the fact that the customs authorities were satisfied that the goods of foreign origin under seizure were imported into India in contravention of the provisions of the said Act and since the burden cast under Section 123 of the said Act to prove that some of the goods covered by the said Section were not smuggled, was not discharged by any one, the authorities issued a Show cause notice dated 28-12-1992 to the Respondent, one Abdullah Mohammed and one Siddique requiring them to show cause as to why the goods of foreign origin valued at Rs. 1,63,493/- should not be confiscated under the provisions of Section 111(d) and 111(p) of the said Act and as to why the Indian currency amounting to Rs. 2,27,100/- should not be confiscated under the provisions of Section 121 of the said Act and as to why the penalty should not be imposed on each of them severally under the provisions of Section 112 of the said Act. The said Show Cause Notice was replied by the Respondent. The allegations in the said show cause notice were denied by him and in the said reply it was inter alia contended that the goods under seizure do not belong to him. In the said reply it was further contended that the seized currency was given to him by a party for conducting the business of hotel Badari and the details as to how the said currency was acquired were already mentioned in the letter dated 15-9-1992. It was further stated in the reply that the panchnama is not genuine and his statement was neither true nor voluntary. He requested for cross examination of the witnesses and urged for granting a personal hearing.

The Deputy Commissioner of Customs (preventive) adjudicated the said show cause notice and confirmed the same by his order dated 29-10-1993 and directed the absolute confiscation of the goods of foreign origin valued at Rs. 1,63,493/-, the confiscation of the Indian currency amounting to Rs. 2,27,100/- and imposed a personal penalty of Rs. 50,000/- on the Respondent under the provisions of the said Act. In so far as, the penal proceedings against Siddique and Abdullah Mohammed were concerned, the same were kept in abeyance till they were apprehended and their identity and involvement in the case ascertained. The said matter was carried in Appeal by the Respondent by filing Appeal No. 80 of 1994. The said Appeal came to be allowed by the Commissioner of Customs (Appeal) by his order dated 6-9-1994 and the matter came to be remanded back to the Deputy Commissioner of Customs (preventive) for a denovo consideration. This was on the ground that the order in original passed by the Deputy Commissioner of Customs (preventive) was vitiated on account of breach of the principles of natural justice.

4 On remand, the denovo adjudication was again carried out by the Deputy Commissioner of Customs (Preventive) and by his order dated 29-6-1999, the show cause notice came to be confirmed. The said authority relied upon unreported Judgment of the Apex Court which has been quoted in the order, held that the statement of the Respondent made on 31-7-1992 is a material piece of evidence collected by the Customs Officers under Section 108 of the Customs Act 1962 and that since the material incriminates the Respondent inculpating him in the contravention of the provisions of the Customs Act, the said material can certainly be used to connect the Respondent to the said contravention. The said Authority relied on the said Judgment held that the statement under Section 108 of the said Act was a substantive piece of evidence. In so far as the seizure of the Indian Currency is concerned, the said Authority was of the view that since no records of Income tax returns, balance sheets of Badari hotel have been produced by the Respondent, there was, therefore, no material produced by the Respondent to indicate that the said amount was legally acquired. The said authority was also of the view that since the Respondent had not pointed out the facts of the legal acquisition of the Indian Currency amounting to Rs. 2,27,100/- from 31-7-1992 i.e the date of seizure till 15-9-1992 i.e the date of retraction. It was unlikely that he was in possession of the documents i.e copy of the agreement dated 24-7-1992 and yet chose to remain silent for such a long period despite loosing custody of the currency seized. The said authority was of the view that nothing prevented the Respondent from producing the documents at the time of seizure, that the currency was legally acquired or to tell the authorities that he has the documents in support of his said case. The said authority also considered the aspect that the goods were seized from the premises being Room No. 103 hotel Hayat which was booked on 31-7-1992 in the name of the Respondent who was the occupant and was also present in the said room. The said authority, therefore, confirmed the show cause notice and ordered absolute confiscation of the goods of foreign origin valued at Rs. 1,63,493/-, as also absolute confiscation of Indian currency amounting to Rs. 2,27,100/- under the relevant provisions of the said Act. The said Authority imposed penalty of Rs. 1,00,000/- on the Respondent under the provisions of Section 112(b)(ii) of the said Act and imposed penalty of Rs. 10,000/- on Siddique under Section 112 of the said Act. However, in so far as, the penal proceedings against Abudllah Mohammed are concerned, they were kept in abeyance till he was apprehended and his statement recorded.

5 Being aggrieved by the said order dated 3-5-1999 the Respondent filed an Appeal. The said Appeal came to be dismissed and the order in original came to be confirmed by the Commissioner of Customs (Appeals) by his order dated 13-1-2000. Thereafter, the Respondent filed an Appeal before the CESTAT, though there was a requirement of pre-deposit imposed by the Tribunal vide order dated 8-12-2000, since the Respondent did not make the pre-deposit within the time stipulated by the Tribunal, the Appeal consequently came to be dismissed, in view of the self operative order of the Tribunal dated 8-12-2000. The Respondent thereafter moved misc Application for variation and modification of the said order dated 8-12-2000. The Tribunal by its order dated 27-11-2002 dismissed the application seeking variation and modification of the said order dated 8-12-2000. The said Appeal thereafter, came up for hearing on 12-10-2004 before the CESTAT. The said Appeal came to be dismissed for non prosecution on account of the non deposit of the amount of Rs. 25,000/- as directed by the Tribunal by its order dated 8-12-2000, as also the Appeal came to be dismissed on merits by upholding the order of the Commissioner (Appeals) as well as the adjudicating authority which were orders based on the statement of the Respondent recorded under Section 108 of the said Act. The Respondent thereafter, filed Misc Application for restoration of the said Appeal which according to him was dismissed for non prosecution. By an order dated 12-5-2005, the said Appeal came to be restored and was fixed for hearing on 20-7-2005. The said Appeal was thereafter heard by the CESTAT and by the impugned order dated 29-6-2005 the said Appeal came to be allowed. Before the Tribunal, it was contended that since the Respondent did not question confiscation of the goods of foreign origin as the same did not belong to him, the only issue which arose for consideration before the Tribunal was as regards the confiscation of Indian currency amounting to Rs. 2,27,100/-.

6 On behalf of the Respondent, it was contended before the Tribunal that the burden to prove that the currency was the sale proceeds of smuggled goods was on the revenue and that they have failed to discharge the said burden and, therefore, requirement of Section 121 of the said Act has not been satisfied. The Tribunal accepted the said contention made on behalf of the Respondent and held that since the requisites of Section 121 of the said Act have not been fulfilled, the Tribunal set aside the confiscation of the Indian Currency as well as the imposition of the penalty on the Respondent and the Appeal was accordingly allowed. As indicated above, it is the said order dated 29-6-2005 that is under challenge in the instant Appeal.

We have heard Shri P. S. Jetly appearing for the Appellant and Shri Arun Mehta appearing for the Respondent who advanced submissions in support of their respective cases, namely in support of confiscation and against it.

7 As can be seen from the reading of the order in original as well as the order passed by the Commissioner of Customs (Appeals), the said two authorities have not accepted the retraction of the statement by the Respondent vide his letter dated 15-9-1992 and have proceeded on the basis of the statement of the Respondent recorded on 31-7-1992 i.e the date of seizure. Both the authorities have for cogent reasons stated as to why the retraction cannot be accepted. The Tribunal however, without going into the said aspect has adjudicated the matter on the touch stone of Section 121 of the said Act and the fulfillment of his requirement and the Tribunal without referring to the statement of the Respondent dated 31-7-1992 or without mentioning as to why the retraction is to be taken into considered, has straight away mentioned that the provisions of Section 121 of the said Act have not been fulfilled. In our view, the Tribunal has totally misdirected itself in approaching the said issue on the said basis.

8 We find considerable merit in the submissions of the Learned Counsel appearing for the Appellant that the retraction made vide letter dated 15-9-1992 is an after thought and, therefore, cannot be relied upon. It would be pertinent to note that the Respondent in his statement which was recorded on 31-7-1992 has categorically mentioned that the goods of foreign origin were belonging to him and were brought to the said room by one Siddique who brings cargo and that the said goods were sent to him by one Abdullah Mohammed who is residing in Dubai. He has further stated that he has not been given any duty paying documents in respect of the said goods which were recovered from his room. He has further admitted that he fully owns the goods.

In so far as the Indian currency is concerned, he has admitted that the amount of Rs. 2,27,100/- was nothing but sale proceeds of the goods of foreign origin which were brought to his room by Siddique. It was also pertinent to note that room No. 103 in the said hotel, was, on 31-7-1992 booked in the name of the Respondent. By the said statement the Respondent has, therefore, accepted in clear terms that he was dealing in goods of foreign origin and that the goods recovered from the said room were belonging to him and that the Indian currency was the sale proceeds out of the sale of foreign goods.

Now coming to the retraction, it would be significant to note that the said retraction is by letter dated 15-9-1992 i.e almost after a period of one and half months of 31-7-1992 when the statement of the Respondent was recorded. In the said retraction, the Respondent disowned the said goods recovered from his room, as also sought to justify the possession of the Indian currency of Rs. 2,27,100/- seized from him on the basis of an agreement purported to be dated 24-7-1992, in pursuance of which, he claimed in the said retraction that he had received the said sum of Rs. 2,27,100/- for running his hotel business. The authorities below have, in our view, rightly rejected the said retraction on the ground that the possession of the said amount of Rs. 2,27,100/- which sought to be justified on the basis of the agreement dated 24-7-1992 could not be accepted inasmuch as, if the Respondent really had the documents in support of possession of Rs. 2,27,100/- in his possession, he could have produced the same before the authorities immediately or at least told the authorities on 31-7-1992 as regards the origins of the said amount of Rs. 2,27,100/-. Both the authorities below were, therefore, right in our view that the case of the Respondent that the said amount was advanced to him for the purpose of his business by a party with whom he had entered into an agreement dated 24-7-1992, could not be accepted in the absence of any documents under the Income Tax Act or the audited accounts of the Hotel business run in the name of hotel Badari.

9 We, therefore, find merit in the submissions of the Learned Counsel for the Appellant that the said retraction was an after thought and could not be taken into consideration.

We to satisfy ourselves, had asked the Learned Counsel for the Respondent to produce the original agreement dated 24-7-1992. The Learned Counsel for the Respondent had accordingly produced the said Agreement. A perusal of the said Agreement indicates that the stamp paper is in the name of an Advocate and bears a different date then the said agreement. Though requirement of the stamp paper in the name of the one of the parties to the agreement was not in force at the time when the agreement was entered into. But considering the conspectus of the facts as mentioned above and especially the fact that though the agreement is dated 24-7-1992, no reference to it was made by the Respondent on 31-7-1992 at the time of seizure. We have our serious doubts as regards the genuineness of the said Agreement and the said Agreement seems to have been prepared to some how justify the possession of the amount of Rs. 2,27,100/-. The question as to why the Respondent was with the said amount in Hotel Hayat at the relevant time also begs an answer. In our view there are too many loose ends for which no answers are forthcoming from the Respondent.

10 In the light of the admission of the Respondent in his statement dated 31-7-1992 and in the absence of any corroboration, to the case of the Respondent that the said amount was advanced by the party with whom he had entered into an Agreement on 24-7-1992 for running the hotel business. The Tribunal has erred in recording a finding that the conditions mentioned in Section 121 of the said Act, in so far as the seizure of the Indian Currency is concerned, have not been fulfilled. In our view, the statement as recorded of the Respondent under Section 108 of the said Act is a material piece of evidence against the Respondent for contravention of the provisions of the said Act, in so far as, the amount of Rs. 2,27,100/- is concerned.

11 In that view of the matter we have to answer the questions of law in favour of the Appellant/revenue and against the Respondent/Assessee. Resultantly the Appeal is allowed. The impugned order of the CESTAT is set aside and the order of the Commissioner (Appeals), the Order in original is upheld.

(R.M SAVANT, J.) (V.C DAGA, J.)