TMI Blog2009 (4) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... "the Collector of Customs") being Order No.48/92 and Order dated 29/12/1995 passed by the Customs Excise and Gold (Control) Appellate Tribunal (for short, "the CEGAT") in appeals arising therefrom. 2. It is necessary to begin with the facts. Petitioner 1 claims to be a broker and dealer in diamonds. He is also a partner of M/s. Sudit Gems, a firm carrying on business at Navsari. Petitioner 2 is also a broker and a dealer in diamonds. 3. Pursuant to specific information, the officers of M P Wing of Customs visited, on 21/3/1991, the business premises of M/s. M. Ambalal Co. at S.V. Road, Bombay, and apprehended one Rajendra @ Raju, who was standing outside the premises with a cloth bag in his hand, which, on subsequent examination was found to contain 7390.82 carats of diamonds valued at Rs.79,40,506.25. They were claimed by the firm, but no accounts were found to have been maintained for the same. Inside the premises, one Dayabhai Patel, partner in the firm as also, Ukabhai Patel and Himatbhai Thedi were present, and while search was in progress, Dharmendra Shah, Shailesh Jogani i.e. petitioner 1 and Pankaj Jogani i.e. petitioner 2 entered the premises. The search of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts should have more appropriately been recorded under Section 107 of the Customs Act, 1962 and the provisions of Section 123 of the Customs Act, 1962 are not applicable to the case and that there is no evidence to justify the confiscation of diamonds and imposition of penalty. 5. The Collector of Customs upon considering the relevant material and the submissions advanced on behalf of the noticees ordered confiscation of seized diamonds from Rajendra Bhamra and M/s. M. Ambalal Co. He gave option to redeem the said diamonds. He ordered payment of appropriate duty on the said diamonds. So far as petitioner 1 is concerned, he ordered confiscation of 223.75 carats of diamonds valued at Rs.4,50,618/. He gave option for redemption of the said diamonds on payment of fine of Rs.3 lakhs. He ordered confiscation of 2.57 carats of diamonds valued at Rs.4,955/from petitioner 2. He gave him an option to redeem the said diamonds on payment of Rs.2,500/. He imposed penalty under Section 112 (b)(i) of the Customs Act, 1962 on petitioner 1 and ordered him to pay Rs.40,000/. He also imposed penalty on petitioner 2 under the same provision and ordered him to pay Rs.1,000/. 6. The said orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court [R.M. Lodha J.P. Devadhar, JJ.] on 8/3/2006. c) The CEGAT has wrongly observed that petitioner 1 had no documentary evidence to substantiate his case that he had purchased the seized diamonds from a trader in Navsari. In fact, by letters dated 2/4/1991 and 24/4/1991, he retracted his statements dated 22/3/1991 and 23/3/1991 and explicitly stated that the diamonds were not smuggled and that he was willing to produce and give accounts and information. He gave names of suppliers Ramesh T. Shah and Mayank Diamonds Private Limited and others. He addressed several letters to the Customs praying for release of the diamonds. d) The finding of the CEGAT that only after issuance of show cause notice, names of the parties were specifically furnished for part quantity of diamonds and no details were furnished for the balance quantity is wrong. Letters dated 2/4/1991 and 24/4/1991 establish this. Besides the petitioners made personal visits seeking opportunity to produce documents. Letter dated 3/9/1991 was addressed to the Department expressing readiness to show all original documents. The petitioners addressed letters forwarding documents and ledger accounts showing tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lish that they are not smuggled diamonds. Only after show cause notice was issued, some particulars were supplied but they were not satisfactory. The documents subsequently produced could not be linked to seized diamonds. c) In this connection, judgment of the Supreme Court in Shah Guman Mal v. State of A.P., 1980 SCC (Cri.) 432 is important. In that case, it is held by the Supreme Court that if the accused failed to disclose identity of the person who gave him the smuggled gold it was open for the court to presume under Sections 106 and 114 of the Evidence Act that the gold in his possession was smuggled and imported without permission. d) Judgment of the Supreme Court in Bhoormall's case (supra) supports the respondents. In that case, it is held that on the principles underlying Section 106 of the Evidence Act, the burden to establish facts relating to smuggling which remain in the special knowledge of the person concerned in smuggling, is on him and if he fails to explain those facts, adverse inference of fact may arise against him. e) The judgment of the Supreme Court in Vinod Solanki's case (supra) has no application to this case because there the Supreme Court was deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized. (2) This section shall apply to gold, gold manufactures, diamonds and other precious stones, cigarettes and cosmetics and any other goods which the Central Government may, by notification in the Official Gazette, specify in this behalf. (3) Every notification issued under subsection (2) shall be laid before both Houses of Parliament, as soon as may be after it is issued." Section 123 of the Customs Act reads thus: "123. Burden of proof in certain cases. (1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be ( a) in a case where such seizure is made from the possession of any person, (i) on the person from whose possession the goods were seized; and (ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person; (b) in any other case, on the person, if any, who claims to be the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. As pointed out by Best (in Law of Evidence' 12 th Edn. Article 320. page 291), the "presumption of innocence is, no doubt, presumptio juris; but every day's practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property, though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumptions of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden, to discharge which, very slight evidence may suffice." 13. Thus the Supreme Court accepted that in respect of goods which are not specified in subsection 2 of Section 178A and in respect of which no notification is issued by the Central Government the burden of proving that they are not smuggled goods lies on the Department. Referring to Section 106 of the Indian Evidence Act, which states that when any fact is especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court referred to Section 71(2) of the FERA and observed that the burden of proof related to use of the foreign exchange for the purpose for which permission was granted to acquire it and not to possession. There was no reverse burden and no presumption of commission of an offence under the FERA. The Supreme Court observed that the evidence brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidence. The Supreme Court further observed that initial burden to prove that the confession was voluntary in nature would be on the Department. In the context of Section 106 of the Indian Evidence Act, the Supreme Court restated what it had stated in Bhoormall's case that the special and peculiar knowledge of the person proceeded against would not relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of the fact in issue. It may only alleviate the burden to discharge and very slight evidence may suffice. The Supreme Court further observed that to arrive at a finding as to whether the retracted confessional statement is voluntary or not, the court must bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oluntary or not, the court must bear in mind the attending circumstances which would include the time of retraction, the nature thereof, the manner in which such retraction has been made and other relevant features. (9) The mere retraction of a confessional statement may not be sufficient to make the confessional statement irrelevant, but the court is obliged to take into consideration the pros and cons of both the confession and the retraction made by the accused; 16. We shall examine this case in the light of the above principles. It is true that diamonds are not notified under Chapter IV of the Customs Act nor are they notified under Section 125 thereof. Therefore, onus of proving that the diamonds are of foreign origin and are smuggled into India is on the Department. However, the Department has not to prove the impossible. It has to establish it's case with such a degree of probability that a prudent man may on it's basis believe in the existence of the fact in issue (Bhoormall's case). 17. None of the persons present at the office premises could satisfactorily explain from whom the diamonds were purchased. They did not give particulars of the sellers from whom the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has to bear in mind the attending circumstances. The Department can rely on the attending circumstances to show the voluntary nature of the confessional statement. The court has to weigh the pros and cons of the confession and retraction. It must evaluate both. It must find out whether confessional statement is substantially corroborated by other cogent evidence. If there is such corroboration, it can be relied upon. 19. We have already narrated the circumstances which substantiate the Department's case. They provide the needed corroboration to the confessional statements. Besides from the order of the Collector of Customs, it is apparent that he has considered the confessions as well as the retractions. After going through the confessional statements of Maganbhai Patel and Ambalal Patel and their retractors, he has observed that there was no denial of the fact that Rajesh Bhamre alias Raju, the employee of the firm who was standing outside the premises with a bag of diamonds had instructions to run away in case he finds the Custom Officers approaching. It has also not been denied that the diamonds valued at Rs.79,40,506.25 were recovered from him and no document regarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the documents produced could not be linked to the consignment of diamonds under seizure and that the said documents are not genuine documents. These observations are not disturbed by the CEGAT. We concur with this view. In our opinion, apart from the fact that the documents produced by the petitioners do not bear out the petitioners' case, the time taken to furnish them reflects on their authenticity. 23. Belated attempt made to reconcile the stock of diamonds by enclosing copies of documents by M/s. Ambalal Co. vide their letter has also rightly been repelled by the Collector of Customs. Mr. Kanuga's case that the petitioners have nothing to do with M/s. Ambalal Co. can never stand the scrutiny of the court in view of the fact that they entered the premises of M/s. Ambalal Co. with diamonds which could not be accounted for. 24. So far as M/s. Aakash Enterprises case (supra), is concerned in that case this court has reiterated what the Supreme Court has said in Bhoormall's case that in case of nonnotified goods even if a person who is to be proceeded against, has a special or peculiar knowledge of facts, the Department is not relieved of its burden to es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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