1994 (7) TMI 207 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the absolute confiscation of Indian currency under Section 121 of the Customs Act, 1962.
2. Imposition of penalties on appellants under Section 112(b) of the Customs Act, 1962.
3. Voluntariness and admissibility of inculpatory statements made by the appellants.
4. Allegations of illegal detention and coercion by customs authorities.
5. Compliance with procedural requirements in the seizure and detention of currency.
6. Ownership and return of the confiscated currency.

Detailed Analysis:

1. Legality of the Absolute Confiscation of Indian Currency under Section 121 of the Customs Act, 1962:
The primary question was whether the currency under seizure represented the sale proceeds of contraband gold. The authorities detained the Indian currency based on a reasonable belief that it was linked to smuggling activities. However, the tribunal noted that the Department failed to establish a direct link between the currency and the sale of contraband gold. The tribunal criticized the Department for not recording the statement of Uttam Chand immediately after the seizure, which raised doubts about the voluntariness of the subsequent statements.

2. Imposition of Penalties on Appellants under Section 112(b) of the Customs Act, 1962:
Penalties were imposed on the appellants Uttam Chand, Selvaraj, and Kannan based on their alleged involvement in smuggling activities. However, the tribunal found that the inculpatory statements, which formed the basis for the penalties, were not voluntary and were extracted under coercion. Consequently, the penalties imposed under Section 112(b) were not sustainable.

3. Voluntariness and Admissibility of Inculpatory Statements Made by the Appellants:
The tribunal scrutinized the circumstances under which the statements were recorded. It was noted that the statements were recorded belatedly and under suspicious circumstances. The appellants alleged that they were subjected to illegal detention and coercion, which was supported by telegrams sent to higher authorities and affidavits filed in the High Court. The tribunal concluded that the statements were not voluntary and thus could not be relied upon as evidence.

4. Allegations of Illegal Detention and Coercion by Customs Authorities:
The appellants claimed that they were illegally detained and coerced into making inculpatory statements. The tribunal found merit in these allegations, supported by affidavits, medical certificates, and testimonies. The High Court had also issued interim orders restraining the Department from relying on the statements, indicating a prima facie acceptance of the allegations of coercion.

5. Compliance with Procedural Requirements in the Seizure and Detention of Currency:
The tribunal criticized the Department for not following proper procedures during the seizure and detention of the currency. The authorities prepared a detention mahazar instead of a seizure mahazar, and there was an unexplained delay in recording the statements of the appellants. These procedural lapses further weakened the Department's case.

6. Ownership and Return of the Confiscated Currency:
The tribunal noted that Uttam Chand had consistently claimed ownership of the currency. Despite the Department's contention that Uttam Chand had not proved his ownership, the tribunal held that he was entitled to the return of the currency. The tribunal emphasized that the currency could not be confiscated merely on the ground of unsatisfactory accounting without establishing a direct link to smuggling activities.

Conclusion:
The tribunal allowed the appeals, exonerating the appellants of all charges. It held that the inculpatory statements were not voluntary and thus inadmissible. The tribunal also ordered the return of the confiscated currency to Uttam Chand, emphasizing the procedural lapses and lack of evidence linking the currency to smuggling activities. The penalties imposed under Section 112(b) were also set aside.