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2013 (4) TMI 540 - BOMBAY HIGH COURTSale proceeds of smuggled goods - Whether pay orders though obtained in respect of genuine transactions but not encashed represented sale proceeds of smuggled goods? - orders for confiscation of pay orders with penalty levied - Held that:- On plain reading of Section 121 of the 1962 Act, it is clear that the confiscation of the sale proceeds under Section 121 would be permissible, provided, firstly, there must be sale of smuggled goods, and secondly, the person selling the said goods must have knowledge or reason to believe that the goods are smuggled goods. In the present case, the finding of fact recorded by the adjudicating authority is that the foreign currencies were sold by the assessee in the normal course of the business. If the foreign currencies were sold by the assessee in the normal course of the business, then obviously it cannot be said that the assessee has sold the smuggled goods, because it was not the business of the assessee to sell smuggled goods. Moreover, in the present case, the adjudicating authority has declined to impose penalty on the assessee on the ground that the assessee had no knowledge that the foreign currencies were going to be smuggled out of India and that there was no breach of the provisions of the 1962 Act committed by the assessee. Therefore, if the assessee has neither sold the smuggled goods (foreign currencies) nor the assessee had any knowledge that the foreign currencies are going to be smuggled out of India, the question of invoking Section 121 of the 1962 Act does not arise at all. The decision of this Court in the case of LKP Merchant Financing Ltd. (2010 (1) TMI 610 - BOMBAY HIGH COURT) would be squarely applicable to the facts of the present case as so long as the pay orders represent the sale proceeds of the foreign currencies sold by the assessee in the ordinary course of business and the foreign currencies sold by the assessee were not smuggled goods, the amounts under the pay orders cannot be confiscated as sale proceeds of the smuggled goods. Appeals allowed by quashing the impugned orders and the respondents are directed to refund the amounts under the pay-orders with interest quantified @ 6% per annum from the date of encashment of the pay orders till payment.
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