Decided on August 23,1974

Subramanian Moothan Appellant


P.SUBRAMONIAN POTI,J. - (1.) THOUGH the petitioner was a licensed dealer in gold earlier,at the time relevant for the purpose of this petition he held no such licence.On 4 th June 1968 the Superin­tendent of Central Excise,Multiple Officers Range,Palghat searched the residential premises of the petitioner at Kongad.The search was made in the presence of the petitioner and two independent witnesses.As a result of the search the Superintendent seized certain items of primary gold under section 110 of the Customs Act,1962 and the Defence of India Rules.Another item of primary gold,pieces of melted gold and gold ornaments were seized under the Defence of India Rules.Besides these he found Rs.32,000 in Indian currency in a cloth bag inside an almirah and that too was seized by him and that seizure was purported to be because of an assumption that there was offence committed under section 112(b)of the Customs Act consequent on which the currency was liable to confiscation under section 121 of the Customs Act,1962.After explanation and hearing,Ext.P -3 final order was passed by the Collector of Customs,Cochin -3.The gold ingot,gold sovereigns and small pieces of gold described as serial Nos.1 to 5 were confiscated under section 111(d)of the Customs Act,1962 read with section 22 -A of the Foreign Exchange Regulation Act,1947.A penalty of Rs.35,000 was imposed under section 112(b)of the Customs Act,1962.The Indian currency of Rs.32,000 found in the cloth bag in the almirah was confiscated under section 121 of the Customs Act with option to redeem it on payment of Rs.32,000.The matter was taken up in appeal to the Central Board of Excise and Customs,New Delhi and that was dismissed by Ext.P -5 order on the ground of non -compliance with the provisions of section 129 of the Customs Act,1962.A revision was taken thereafter to the Government of India and on this the Central Government passed an order Ext.P -7,holding that there was no reason to interfere with the order in appeal.Ext.P -3 order as confirmed by Exts.P -5 and P -7 orders is challenged in this petition.
(2.) IT is found from Ext.P -3 order that it does not concern the gold ornaments seized and it is mentioned at the hearing that independent proceedings under the Gold Control Act have been taken up in regard to such gold ornaments.With regard to the primary gold the petitioner does not urge any grievance and no relief is sought in regard to that.What is attacked is only the imposition of penalty of Rs.35,000 and the confiscation of the Indian currency of Rs.32,000.Therefore I need concern myself only with these two items. In regard to the currency of Rs.32,000 seized by the Customs Officers the petitioner furnished an explanation at the time of the search itself that the amount represented money entrusted to him by his brother -in -law one Ayyappan for safe custody in 1965.He evidently refuted the suggestion that it was the proceeds of smuggled goods.Evidently there was no enquiry other than questioning Shri Ayyappan,the brother -in -law,in June,1968.He is seen to have stated that two years earlier he entrusted the petitioner with Rs.46,000 out of which he had taken back Rs.14,000.Whether this explanation was acceptable or not is a different matter.But even assuming that this explanation is not true whether that by itself is sufficient to hold that section 121 of the Customs Act,1962 is attracted is the question for decision.
(3.) IF smuggled goods are sold by a person having reason to believe that the goods are smuggled,the proceeds are liable to confiscation.This is the provision in section 21 of the Customs Act.The power of confiscation can therefore be exercised only when it is shown that smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods and further that what is seized is the sale proceeds thereof.The burden to establish this must necessarily be on the Customs authorities.There is no presumption to start with that any currency seized represents the sale proceeds of smuggled goods even if it be that the currency has been seized from the residence of one reputed to be a smuggler or who has been convicted earlier under the provisions of the Customs Act for offences concerning smuggling.As the section stands,it is necessary to establish by proper material that the currency represents the sale proceeds of smuggled goods,that the sale of smuggled goods was by a person having knowledge or reason to believe that they were smuggled goods.It is strange that the customs Collector should have assumed so in this case,evidently by reason of the fact that the Indian currency was found during a search in the course of which primary gold was seized.It appears to me that this has misled the collector to assume that the amount of Rs.32,000 must be taken to be proceeds of sale of smuggled goods.Before me counsel for the Central Government has tried to support Ext.P -3 order and according to him the circumstances establish that the amount seized represented the sale proceeds of smuggled goods and these circumstances are,according learned counsel,sufficient to discharge the onus of proof or the part of the Customs authorities.Though many of those circumstances referred to by counsel appear to me to be absolutely irrelevant since I wish to do justice to counsel I would rather state all the circumstances narrated by him.They are,( i)when the officers went over to the house of the petitioner his wife is alleged to have said that the petitioner was not in the house at that time,that the search cannot be conducted and when nevertheless search was conducted in accordance with law the petitioner is said to have appeared,( ii)as a result of the search gold was recovered which has now been established to be smuggled gold by Ext.P -3 order,( iii)that the amount of Rs.32,000 seized is a fairly large amount and it is said to be money entrusted by one Ayyappan to the petitioner for safe custody in 1965.The said Ayyappan,when he was questioned in 1968,said that he had made the entrustment two years earlier which must be in 1966,( iv)the money was found inside a cloth bag on which it was written.Komala Jewellery Mart ;,Ottappalam žthe name by which the petitioner was conducting his business earlier,( v)the peti­tioner though a licensed dealer in gold earlier,had no licence as such at the relevant time when the search was conducted,( vi)the petitioner having been found to have contravened the provisions of the Customs Act in Ext.P -3 and the Gold Control Act in other independent proceedings it is only logical to assume that the amount recovered from him is the amount representing price of smuggled gold.;

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