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Meghraj Gordhandas Gehi and Mani Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1985)LC147Tri(Mum.)bai
AppellantMeghraj Gordhandas Gehi and Mani
RespondentCollector of Customs
Excerpt:
.....held by the 1st appellant panchas were called and both of them denied having any indian currency, foreign currency, gold, silver, diamonds or narcotics concealed in their baggage or on their persons and stated that they had no checked-in-pieces of baggage. the black brief case on examination was found to contain medicines and vitamin tablets and used personal effects of the 1st appellant along with a mirror. the frame of the mirror was found to contain a white paper envelope concealed between the cardboard packing and the mirror. this envelope was found to contain 2000 swiss francs (equivalent to rs. 8,700) and 20000 deutsche marks (equivalent to rs. 76,000). thereafter, the black brief case was emptied and 10 brown paper packets were revealed from the cavities on each of the 4 sides.....
Judgment:
1. These are two appeals by Shri Meghraj Gordhandas Gehi No. 255/83 (hereinafter referred to as 1st appellant) and Mani Parambath Aboobaekar (hereinafter referred to as 2nd appellant) filed to the Tribunal under Section 129A of the Customs Act, 1962 against order No.S/14-6-28/81 Pint dated 16th August 1982 passed by the Additional Collector of Customs (P) Bombay.

2. The facts of the case arc that as a result of surveillance by the Customs Intelligence Officers, the 1st and 2nd appellant who were bound for Hong Kong by Air India Flight No. A.I. 308 were intercepted at the Bombay Airport. The 1st appellant had been cleared through the Customs and was holding a black brief case while the second had yet to report to the Customs counter for baggage examination and was holding a black rexine handbag. Cursory examination disclosed concealment of foreign exchange in the brief case held by the 1st appellant Panchas were called and both of them denied having any Indian currency, foreign currency, gold, silver, diamonds or narcotics concealed in their baggage or on their persons and stated that they had no checked-in-pieces of baggage. The black brief case on examination was found to contain medicines and vitamin tablets and used personal effects of the 1st appellant along with a mirror. The frame of the mirror was found to contain a white paper envelope concealed between the cardboard packing and the mirror. This envelope was found to contain 2000 Swiss Francs (equivalent to Rs. 8,700) and 20000 Deutsche Marks (equivalent to Rs. 76,000). Thereafter, the black brief case was emptied and 10 brown paper packets were revealed from the cavities on each of the 4 sides into which they had been glued. From these packets, the following foreign currencies were recovered : From the person of Appellant No. 1, U.S. $500/- was recovered. The black rexine handbag held by the Appellant No. 2 was found to contain some fresh fruits, used wearing appeal and other eatables, belonging to him, as well as one long-sleeved, woollen sweater belonging to appellant No. 1. From the person of appellant No. 2, currencies of 529 U.S.$, 20 U.A.E. Dirhams, and 280 Kuwaiti Dinars were recovered. Thus, 1,17,800 Deutsche Marks, 2000 Swiss Francs and 400 Hong Kong Dollars (totally equal to Rs. 4,56,980) which were round concealed in the black brief case claimed by Appellant No. 1 were recovered and seized under panchnama in the reasonable belief that they were being smuggled out of India and hence liable to confiscation under the Customs Act. The Taj brand mirror and the black brief case from which the foreign currencies were recovered were also seized. The foreign currency recovered from the persons of the two appellants were detained for investigation. The statements of appellant No. 1 and appellant No. 2 under Section 108 of the Customs Act were recorded and after issue of a show cause notice and grant of personal hearing, Additional Collector passed the impugned adjudication order. He held that the currency found concealed was from the brief case recovered from appellant No. 1 who concealed the currency and there is no other claimant. He, therefore, confiscated it under Sections 113 (d), (e) and (h) or the Customs Act. He also confiscated the mirror and the brief case. He found the explanation that appellant No. 2 handed the brief case to appellant No. 1 in the Customs Departure hall unagreeable and there was no explanation why his medicines and personal effects should be found in that brief case and why appellant No. 1 should come to his house to pack his belongings in a brief case. He also later contradicts his own statement by saying that the brief case actually belonged to a third party. On the other hand, appellant No. 2 had categorically stated that the brief case belonged to appellant No. 1 whose son had called him and asked bim to bring 2 pairs of clothing for packing and he need not take any baggage.

His own son has testified as to the secret or nature of appellant No.2. He also sent appellant No. 1 for obtaining the tickets and first got himself cleared through the Customs. While there was some suspicion against appellant No. 2 regarding his residing in Saudi Arabia and getting continuous correspondence from there, there was nothing specifically on record. He found the possibility of passive collaboration by appellant No. 2 but found the main conspirator to be appellant No. 1. While holding both liable for action under Section 114, the Additional Collector imposed a penalty of Rs. 1 lakh on appellant No. 1 and Rs. 10,000 on appellant No. 2. He exonerated Shri Anil Meghraj Gehi, son of appellant No. 1 and Mrs. Bhagibai J . Ahuja, whose air ticket had been recovered from the residence of appellant No.3. The following grounds of appeal have been urged on behalf of appellant No. 1 :- (1) The Additional Collector erred in imposing a penalty of Rs. 1 lakh under Section 114.

(2) The show cause notice is vague and does not dearly indicate the offence.

(3) Foreign currencies are not goods for the purposes of the Customs Act.

(4) The Additional Collector erred in holding that the prohibition under Section 13(2) FERA 1973 read with Notification dated 1-1 -74 I prohibition deemed to have been imposed under Section 11 of the Customs Act.

(5) In the absence of a Notification under Section 11 of the Customs Act notifying currencies as goods or otherwise, the action taken is illegal and contrary to the provisions of the Act.

(6) He failed to appreciate that penal provisions of Section 114 are not deemed applicable to offences under the FERA. He failed to appreciate that the ingredients contained in Sections 113(d), (e) and (h) have not been proved beyond doubt.

(7) He ought to have appreciated that no wilful or criminal intent is established to warrant a penalty under Section 114.

(9) He ought to have fixed the proper onus or burden of proof on the Customs authorities and wrongly relied on certain superficial contradictions in the oral testimony.

(10) His order is against the weight of evidence and liable to be set aside.

(1) The order is against the weight of evidence and liable to be set aside.

(2) The currency detained was satisfactorily accounted and the order of confiscation does not cover it.

(3) His statement was accepted as true and correct and the only evidence is that of the co-accused who has involved him by saying that he accompanied him to the airport with one black coloured bag ; that he knows him for the last one month ; that he was going for sight seeing to Hong Kong ; that he took the brief case in the Customs Departure Hall and gave the appellant his black coloured handbag ; that he took the brief case just to help him and he wanted to help him as he was travelling to Hong Kong ; that the goods were packed at his residence where appellant No. 1 had handed over his personal effects and medicines ; that they came in a taxi to the airport and that he (Appellant No. 1) was involved in a Central Excise case 22 years back and both his sons were involved in Customs and/or police cases.

(4) The said statement of appellant No. 1 has been found to be a lie by the adjudicating authority.

(5) He went in a Fiat car driven by his son Anil to the airport and not in a taxi and his son corroborates that he was carrying the black bag.

(6) Being sickly his statement that he exchanged the black brief case is baseless and though he has poor eye sight he was going to Hong Kong for sight-seeing, according to him. He later on contradicted himself by saying that the briefcase belonged to a third party.

(7) According to the Additional Collector, a third party travelled in the car from the house to the airport and was known neither to the appellant No. 1 nor to Anil Gehi.

(8) It is a fundamental principle of jurisprudence that the evidence of a co-accused is not legal evidence, unless corroborated by independent evidence.

(9) Shri Gehi admitted possession and carriage of the bag but no contraband was seized from appellant No. 2, whose statement was also accepted, and yet he was adjudged guilty on certain facts regarding alleged activities in Saudi Arabia, which were never disclosed to him for an opportunity to explain. One solitary document could not have led to the conclusion that he was in the habit of carrying on illegal activities. It was not referred to in the show cause notice and ought not to have been used. It was not disputed that the appellant No. 1 had weak eyesight, two toes cut and could not walk properly which proved the personal assistance of Appellant No. 2 who had no reason to doubt that he intended mischief behind his back.

(10) It was true that he was to bring some foreign goods from Hong Kong along with Shri Gehi but this did not mean that they were to be smuggled.

(11) The oral agreement to pay Rs. 1000 for his personal services while abroad was a paltry sum if participation in the illegal activity was true. The finding of the Additional Collector clearly shows that Shri Gehi was acting secretly in holding the bag containing foreign currency and if he had confidence and trust in appellant No. (2), he would have made him carry the brief case.

(12) The finding of the order is based on suspicion, presumption and no evidence and therefore arbitrary.

(13) There is no evidence of prior knowedge or participation to bring appellant No. 2 within the ambit of Section 114.

(14) The order of the Additional Collector is bad in law and in any case the penalty of Rs. 10,000 is excessive considering that he merely accompanied appellant No. 1 on his trip and had no hand in his alleged act of smuggling.

4. Shri Rajgopal, learned counsel for appellant No. 1, reiterated the grounds of his appeal. He maintained that his client had denied possession of the bag as it belonged to appellant No. 2 and there is no evidence from whom the incriminating bag was actually seized. The order also suffers from grave legal infirmities. There is no Notification under Section 11 to prohibit the export of foreign currency and mere mention of Section 11 of the Customs Act in the notice is not enough.

Section 67 of the Foreign Exchange Regulation Act says that a restriction under Section 13 shall be deemed to be one under Section 11 of the Customs Act. According to the scheme of the Foreign Exchange Regulation Act, the Reserve Bank has domain and the Director of Enforcement is empowered to deal with offences under that Act. The show use notice mentions prohibition under Section 13(2) which is a prohibition by the Reserve Bank and not the restrictions by the Central Government contemplated under Section 13(1). Section 67 FERA places fetters on Section 3(d) Customs Act. In the present case there has been no attempt to export currency within the scope of Section 13 and for this purpose, the learned advocate cited page 66 of the 1982 edition of Shri Sethi's book on FERA. The show cause notice also mentions "suspected bona fides" which are not words used in the Act and the search of appellant No. 1 was illegal. The question to : answered is : whose brief case it was. It does not belong to appellant No. 1 and there is no evidence to show recovery from him. The only basis is the statements of the two co-accused and both contain contradictions. The Collector has drawn certain unwarranted inferences because of minor inconsistencies in the statement of appellant No. 1. He can account for these inconsistencies such travelling by taxi, but he all along denied ownership of the brief case. Counsel also pointed out that appellant No. 2 had written a letter retracting his statement given to the Customs showing that he is untruthful. While some incriminating documents were recovered from his residence, no such recovery was made from the residence of appellant No. 1. In fact, the incriminating letter, which was not made known, was the cause of the High Court releasing his client from preventive detention. He has not been proved to be the main conspirator. He is suffering from Diabetes and other Complaints and has been broken physically and financially. To make him a villain is incredible and the real villain is appellant No. 2. The appellant is also facing action under the Foreign Exchange Regulation Act as well as prosecution and the penalty of Rs. 1 lakh should be remitted in full in the justice and fairness to the appellant.

5. Shri Madhu Patel, learned counsel for Appellant No. 2 reiterated the contentions made in the appeal. There was no charge of conspiracy and no evidence to show this. Appellant No. 1 is a landlord, deals in old cars and is obviously untruthful. He has tried to implicate appellant No. 2 who was merely a driver and agreed to assist him in his trip to Hong Kong. In order to penalise a person mens rea is a cardinal requirement. Conscious possession of incriminating foreign currency has to be proved and suspicion cannot take the place of evidence. Counsel relied on 1983 E.L.T, page 61, 1983 E.L.T. 1611 and 1983 E.C.R. 2054 D.There was no evidence whatever against the appellant No. 2 and he should be exonerated of the charge and the deposit of Rs. 500 already made against the deposit of Rs. 10,000 may be ordered to be refunded.

6. Shri Jain, the learned SDR, supported the impugned order. He said that there was no doubt that the brief case was recovered from appellant No. 1. He was a sick person and the medicines recovered from it tallied with the prescription given by the Airport Health Doctor when he fell ill during interrogation. His sickness is such that he could never be far from his medicines and this belies his having gone to the house of appellant No. 2 to pack his medicines. He has also not given any reason why the bags were exchanged, since he was physically handicapped; in fact both the bags should have been held by the healthy person, namely, appellant No. 2. When he was so sickly why he was travelling to Hong Kong for sightseeing is inexplicable and the real purpose, as revealed from the concealed currency, was not for a pleasure trip. He has also hopelessly contradicted himself as brought out in the adjudication order. Regarding the legal aspect, Shri Jain stated that no Reserve Bank permit was produced for export of the seized currency and it was liable to confiscation under Section 113(d).

The restrictions in Section 13 FERA is squarely covered by Section 113 of the Customs Act. As regards appellant No. 2, his close association with the appellant No. 1., as evidenced by the sharing of bags and other circumstances, indicate that he had knowledge that the trip to Hong Kong was not entirely innocent.

7. In reply, Shri Rajagopal stated that even if possession of the brief case was fixed on appellant No. 1, there was no conscious possession of the incriminating currency. As regards each of them holding one bag, this is all that is permitted by the Customs and one person cannot carry two handbags., Why he was going abroad is a matter of speculation and it is not established that it was for smuggling. Shri Patel stated that there was no other evidence to show that appellant No. 2 was not accompanying appellant No. 1, only for the purpose of assisting him, since he was sickly and handicapped.

8. The main challenge is the legal one. Section 11, it is contended, confers certain powers on the Central Government to issue prohibitions orrestrictions in regard to specified matters which, inter alia, include safeguarding foreign exchange. This section requires issue of a notification and no such notification exists. Consequently, the attempt to export foreign currency does not come within the ambit of the Customs Act. Likewise, under Section 13(1) of the FERA, the Central Govt, has not issued any notification. It is the Reserve Bank which has done so, under Section 13(2). Thus the deeming provision of Section 67 that any prohilition or restriction under Section 13 of the FERA will be deemed to have been issued under the Customs Act will not cover the notification dated 1-1-74, cited in the show cause notice, as it has been issued by the R.B.I, and not the Government, We are unable to accept this interpretation. Under Section 13(1) the Government is empowered to impose restrictions and this has been done by entrusting the RBI with the power to permit export of foreign currency. Failure to obtain a permit constitutes a violation of Section 13. By virtue of Section 67, this violation is deemed to be a contravention of the Customs Act. Coming to Section 113 of the Customs Act, it speaks of contravention of "this Act, as well as any other law for the time being in force". Admittedly, the law in force, FERA, prohibits the export of foreign currency without the authority of a permit from the R.B.I. From this angle also, the penal provisions of Section 113 of the Customs Act are attracted. Counsel's contention that action is possible only by the Directorate Enforcement, and not the Customs, also does not carry conviction for he has himself brought to our notice that, apart the present proceedings, Appellant No. 1 is facing prosecution under the Customs Act and FERA as well as adjudication proceedings under FE Regulation Act. Incidentally, learned Counsel admitted that his legal challenge was original and hence he could not cite any precedents to support his arguments. For the reasons discussed above, we reject the contentions assailing legality of the proceedings against Appellant No.9. Coming to the facts of the case, there is enough evidence to support the allegation that the incriminating brief-case was cleared through the Customs by Appellant No. 1 and was recovered from his possession.

Since it was found to have concealed cavities containing a huge amount of foreign currency, the onus of proving licit possession and producing a permit for export was squarely on him. His attempt to do so has been to shift responsibility on his companion, Appellant No. 2; then on some third unknown person and finally to disclaim knowledge of the fact that the briefcase contained any concealed foreign currency. His Counsel has sought to explain the various prevarications and contradictions as being due to his confused state of mind due to his undoubted ill health. But the evidence of his co-accused, corroborated in essence by the testimony of his own son and the circumstantial evidence as argued by learned SDR, put the charges against him beyond doubt. The explanation by Counsel for Appellant No. 2 that his letter retracting his statements under Section 108 was of a protective nature, anticipating that action of detention under COFEPOSA would be taken against him, is not also implausible. The only matter to be decided is whether there was in fact a conspiracy between the two appellants, so that they equally share the guilt, or whether appellant No. 2 was only an abettor. There is not a shred of evidence to implicate Appellant No.2 in regard to direct knowledge, possession, custody, etc. of the incriminating foreign currency except uncorroborated allegations by appellant No. 1. Even in regard to abetment, therefore, whereas there may be serious doubt and suspicion, these cannot substitute for evidence. The alleged letter from Saudi Arabia was neither used in evidence in the proceedings nor produced before us. The disparity in financial status of the two appellants also goes to support the plea of appellant No. 2 that he was going abroad to physically and medically assist appellant No. 1 and not for a nefarious purpose. We, therefore, accept the contentions of his Counsel and set aside the penalty imposed on him. As regards Appellant No. 1, his appeal fails on all counts.

10. In the circumstances we confirm the impugned order in so far as appellant No. 1-Shri Gehi is concerned and set aside that portion relating to imposition of penalty on Appellant No. 2, Shri Aboobaekar.

11. I have had the advantage of going through the order passed by my learned brother Shri, Souza. I entirely agree with the conclusions arrived at by my learned brother and also agree with his reasonings in so far as it relates to the appreciations of facts are concerned. I only wish to record my own reasons as to why we are unable to agree with the legal contentions raised by Shri Rajagopal the learned Advocate for the appellant.

12. It was the contention of Shri Rajagopal that in the absence of a notification under Section 11 of the Customs Act, 1962 (hereinafter referred to as the Customs Act), the action taken under the Customs Act is illegal. His further contention was that the Additional Collector had erred in holding that the prohibition under Section 13(2) of the Foreign Exchange Regulation Act, 1973 read with Notification dated 1st January, 1974 is prohibition deemed to have been imposed under Section 11 of the Customs Act. Incidentally Shri Rajagopal also contended that penal provisions of Section 113 of the Customs Act, 1962 are not applicable to deemed offences under FERA.13. Having regard to the contentions of Shri Rajagopal the question that properly arise for consideration is whether in the absence of a Notification under Section 11 of the Customs Act, the Customs Authorities have no jurisdiction to take action against the appellant in Appeal No. 255 of 1983 for the alleged illegal attempted export of foreign currency.

14. There is no dispute that no notification had been issued under Section 11 of the Customs Act prohibiting or restricting the export of foreign currency. The Additional Collector has relied on the provisions of Section 67 of the FERA for confiscation of the seized currency and also for imposition of personal penalty.

15. Section 67 of the FERA reads "The restrictions imposed by or under Section 13, Clause (a) of Sub-section (1) of Section 18 and Clause (a) of Sub-section (1) of Section 19 shall be deemed to have been imposed under Section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly".

16. The head note of this section reads "Application of the Customs Act, 1962". The plain reading of this section makes it clear that the restrictions imposed under Section 13, Clause (a) of Sub-section (1) of Section 18 and Clause (a) of Sub-section (1) of Section 19 shall be deemed to have been imposed under Section 11 of the Customs Act. This section confers jurisdiction on the Customs Authorities to deal with the contraventions of Sections 13, 18(1) (a) and 19(1) (a) of the FERA.Since the Customs Authorities have been given exclusive jurisdiction to deal with the contraventions of Sections 13, 18(1) (a) and 19(1) (a) the Officers of the Enforcement Directorate will have no jurisdiction to deal with the contraventions of the aforesaid sections.

Investigation, adjudication and prosecution in respect of contraventions of the aforesaid section can be handled only by Customs Department and the same shall have to be done under the provisions of the Customs Act. By reasons of the provision contained in Section 67 of the FERA the Customs Officer gets jurisdiction to deal with the persons who have contravened the provisions of Section 13, Section 18(1) (a) and Section 19(1) (a) of the FERA under the Customs Act. If the Customs Authorities initiate proceedings for contravention of the aforesaid Sections then all other provisions of the Customs Act becomes applicable to deal with the contraventions. In the said circumstances, the contention of Shri Rajagopal that the action taken under the Customs Act in the absence of notification under Section 11 of the Customs Act is illegal has no force.

17. The contention of Shri Rajagopal that the learned Additional Collector had committed an error in holding that the prohibition under Section 13 of the FERA read with notification dated 1st January, 1974 is a prohibition deemed to have been imposed under Section 11 of the Customs Act has also no force. The provisions of Section 67 of the FERA are clear, explicit and unambiguous. It states that the restrictions imposed by or under Section 13 shall be deemed to have been imposed under Section 11 of the Customs Act. Shri Rajagopal contended that what is provided under Section 13(2) are not restrictions within the meaning of Section 67 and the restrictions which are deemed to have been imposed under Section 11 of the Customs Act are only the restrictions the Central Govt, has been authorised or empowered to impose under Section 13 (1) by means of a notification. This contention of Shri Rajagopal if accepted would make the provisions of Section 69 nugatory.

All the restrictions whether it was under Section 13 (1) or Section 13 (2) are intended to be included in Section 67. If the intention of the Parliament was to confine the restrictions contemplated under Section 13(1) only then the Parliament would have so worded Section 67 of the FERA. Whenever the Parliament intended that only Sub-section of a section should apply the said intention had been manifested in the provisions of Section 67. For instance in Section 67 in respect of Sections 18 and 19 only Clause (a) of Sub-section (1) of these sections have been referred to but in the case of Section 13 it is the entire section that had been referred to. Further the expression used in Section 67 is restrictions imposed by or under Section 13. The head note to Section 23 reads 'restrictions on import and export of certain currency and bullion". All the restrictions on import and export of certain currency and bullion whether imposed by the Central Government or by the Reserve Bank shall have to be deemed to be the restriction imposed under Section 11 of the Customs Act by reason of the provisions of Section 67 of the FERA. I, therefore, reject this contention of Shri Rajagopal.

18. The contention of Shri Rajagopal that penal provisions of Section 113 of the Customs Act are not applicable to deemed offences under the FERA has also no legs to stand. I have already pointed out the effect of Section 67 of the FERA. It had the effect of making applicable all other provisions of the Customs Act to deal with the contraventions of Sections 13, 18(1) (a) and 19 (1) (a) of the FERA. It may be stated here that the present appeal itself is under the Customs Act and not under the FERA.19. Considering all aspects I hold that the legal contentions raised by Shri Rajagopal are not sound and the same are rejected.

20. In the result and also for the reasons stated by my learned brother Shri D'Souza I dismiss appeal No. 255 of 1983 filed by Shri Meghraj Gordh-andas Gehi and allow appeal No. 664 of 1983 filed by Mani Parambath Aboobaekar and set aside the imposition of penalty on him.


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