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:-
