TMI Blog2010 (1) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... h was lying in the bank could not be considered to be a sale proceeds of the smuggled foreign currency. - 34 of 2005 - - - Dated:- 27-1-2010 - V.C. Daga and K.K. Tated, JJ. Shri P.S. Jately, for the Appellant. Shri V.M. Doiphode, i/b V.M. Doiphode Co., for the Respondent. [Judgment per : V.C. Daga, J.]. - This appeal filed by the Commissioner of Customs (Preventive), Mumbai, under Section 130 of the Customs Act, 1962 ("the Act" for short) arising out of the order of the Customs, Excise and Service Tax Appellate Tribunal, West Regional Bench, Mumbai ("the Tribunal" for short) was admitted by an order dated 19-10-2005. Brief Facts : 2. The office premises of the respondent M/s. LKP Merchant Financing Ltd. Colaba ("LKP" for short) was searched by the Officers of DRI, Mumbai on 14th July, 1997, on the basis of information. During the search, the Officers intercepted two persons who identified themselves as Hanif Godhrawala of Hotel Zam Zam, Money Changing Division, Mumbai and Rajesh Mhatre of M/s. Gulf Enterprises respectively. Certain incriminating documents were taken over from the premises of respondent-LKP along with two pay orders recovered from the two perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account of the respondent-LKP were the sale proceedings of smuggled foreign currency and hence liable to confiscation under Section 121 of the Act. 6. The respondent-LKP carried the matter in appeal before the Tribunal. The Tribunal was pleased to allow the appeal observing as under : (a) That it was not disputed that the above said amounts represented the sale proceeds of foreign currency sold by the respondent. It is not tainted in any way since it was obtained from RBI in the regular course of business transaction. (b) That the Indian Currency confiscated by the Commissioner is the sale proceeds of Foreign Currency which was not smuggled. (c) That the transaction was complete the moment remuneration for sale of the foreign currency came into the account of the appellant-LKP and that the investigation did not reveal complicity of the appellant-LKP with the nefarious activities of the persons which were concerned with Hotel Zam Zam (Money Changing Division). 7. Being aggrieved by the aforesaid order the Commissioner of Customs (A), Revenue has invoked the appellate jurisdiction of this Court under Section 130 of the Act. The said appeal was admitted by an order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes "goods" which includes currency as such seizure and confiscation thereof was legal and valid. In his submission, the Tribunal failed to appreciate this aspect of the matter. 10. Mr. Jately further submits that the Tribunal, by its order in the case of Wall Street Finance Ltd. v. Commissioner of Customs (Prev.), Mumbai - 2007 (209) E.L.T. 427 (Tri-Mumbai) has held that the liability to confiscation of sale proceeds of smuggled goods continues unbated even if their form undergoes a sea change. According to him, the legislative intent is to ensure that the smuggled goods do not escape the just punishment merely on account of a change in its form. He placed reliance on the Apex Court judgment in the case of Collector of Customs v. D. Bhurmal - 1983 (13) E.L.T. 1546 (S.C.) = AIR 1974 SC 859. He, thus, prayed that the questions framed needs to be answered in favour of the Revenue and the impugned judgment and order is liable to be quashed and set aside. 11. Per contra, Mr. Doiphode, learned Counsel for the respondent-LKP urged that the amount seized and later confiscated and released by the Tribunal cannot be considered as sale proceeds of smuggled goods. The respondent had depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts lying in the bank can be considered as sale proceeds of smuggled foreign currency. Apart from this, there was no immediate nexus with the sale of foreign currency. In his submission Section 121 can only be applied to the immediate sale proceeds of the goods smuggled. Accordingly to him, the sale proceed received from Shambunath and his associates were alone liable to be confiscated under the provisions of Section 121. Foreign currency purchased in exchange of Indian currency cannot not be held liable for confiscation u/s. 121 of the Act. If this be so, then the amounts seized were not the proceeds of the goods smuggled by Shambunath and his associates. 14. Mr. Doiphode further submits that the Custom Authorities did not challenge the findings of the Commissioner in the order dated 21st August, 1996 wherein the Commissioner had recorded following positive finding which became final and conclusive. The said findings reads thus : "This Section 121 of the Customs Act cannot be stretched to be applied to sale proceeds when changed in form, it can only be applied to the immediate sale proceeds for the goods smuggled i.e. if it is found that foreign currency is smuggled ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered to be a sale proceeds of the smuggled goods. 17. If one turns to Section 121 of the Customs Act, the said section reads as under : 121. Confiscation of sale-proceeds of smuggled goods : Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation. 18. The aforesaid Section contemplates sale of smuggled goods by a person having knowledge or reason to believe that the goods are smuggled then only, the sale proceeds thereof or value equal to the smuggled goods is liable to confiscation. Applying the ingredients of Section 121 of the Act, to the case in hand, the respondent-LKP sold foreign currency against the receipt of pay order and that transaction was a bona fide legal transaction. The pay orders were not the smuggled goods. The findings of fact in this regard were recorded by the Commissioner as well as the Tribunal in favour of the respondent-LKP If that be so, by no stretch of imagination, the Indian currency received against the bona fide transaction, can be said to be the sale proceed of the smuggled goods. Section 120 of the Act specifically pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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