ORDER
K.S. Dilipsinhji, Member (T)
1. Shri Jayantilal R. Patel has filed a Revision Petition dated 22.7.1980 to the Govt. of India under old Section 131 of the Customs Act which has been transferred to this Tribunal in terms of Section 131B ibid and it is to be treated as an appeal before us.
2. During the course of the oral submissions made by the learned advocate Shri J.R. Gagrat with Shri H.G. Mehta the learned advocate stated that two main issues were involved in the present appeal. The first question was whether the Customs were right in invoking Section 123 of the Customs Act with relation to the rough diamonds under confiscation in appeal and secondly the explanation offered by the appellant regarding the legal import was not such as would pass through the test of probability. Referring to the facts of the case, the advocate stated that on 10.8.1977, the officers of the Directorate of Enforcement searched the business premises of M/s. Mahendra Jewellers, Mukund Jewellers and associates situated at Prem Kutir, Church-gate, Bombay and seized certain documents. Shri Gagrat referred us to the panchanama of the seizures dated 10.8.1977. He specially drew our attention to the observaiion that in the cabin of Shri Mukund K. Patel, a steel cupboard was found which contained packets of rough and polished precious stones and this cupboard was sealed after affixing a paper seal with the officer’s signature and the safety of the seal was undertaken by Shri Mukund K Patel, a partner of the firm. On 12.8.1977, the Enforcement officers handed over the goods to the Customs officers and the Customs officers continued the search. The advocate referred us to the panchanama of the search of said premises dated 12.8.1977. The advocate stated that the Customs officers continued the search till 19.8.1977. In support of his averment, the learned advocate referred to the panchanama dated 19.8.1977. The advocate stated that on 13.8.1977, the Customs officers recorded the statement of Mukund K. Patel. In this statement, he inter alia stated that on 5.8.1977, Shri Jayantilal R. Patel came to his office at about 11 a.m. in the morning with a plastic bag containing rough diamonds which he desired to sell and quoted the price at Rs. 70/- per carat but Mukund K. Patel offered Rs. 50/- per carat only. Shri Jayantilal R. Patel also informed Shri Mukund K. Patel that the rough diamonds weighed 2,500 carats approximately. Shri M.K. Patel got a letter typed in his office to the effect that 2,500 carats of rough diaxannds were given on approval basis to Oriental Gem Co. and this chit was produced before the Customs officers on 12.8.1977. Shri J.R. Patel had also signed the approval memo for 2,500 carats of rough diamonds given on approval basis. Shri Jayantilal R. Patel was not in Bombay at that time and on his return to Bombay, he volunteered to have his statement recorded. Shri Jayantilal’s statement was recorded on 29.8.1977. In this statement he confirmed that the plastic packet containing rough diamonds was the same original packet in which Shri Rajesh Bhansali of Cherry Traders had handed over the 12 imported diamond packets to Shri Jayantilal. In this statement Shri Jayantilal R. Patel confirmed the fact that the diamonds in question were received by him from Shri Rajesh Bhansali and Shri Jayantilal R. Patel gave details of the previous lot of diamonds received for cutting and polishing by him from Shri Bhansali as also of all the details of the visits undertaken by him to Gujarat for the purpose of enquiry about cutting and polishing of the confiscated diamonds. The advocate submitted that Shri Jayantilal R. Patel did not give any authority to Shri Mukund K. Patel for the sale of the diamonds left by him in the custody of the latter for safety. Shri Jayantilal had mentioned the weight approximately in the approval slip as he had removed some samples for being taken to Gujarat for being shown to cutters as the entire lot of diamonds was required to be cut and polished and it would take about two to three months to do so. The advocate stated that a second statement of Shri Mukund K. Patel was recorded by the Customs officers on 13.8.1977 in which Shri Mukund K. Patel mentioned the details of the approval memo which was written in Gujarati to indicate that the rough diamonds weighed 2,500 carats approximately and were received from Jayantilal. Actually, Shri Rajesh Bhansali gave 2, 889.32 carats to Shri Jayantilal on 2.8.1977 and this quantity was duly mentioned in the stock account of Shri Rajesh Bhansali and covered with a delivery letter. Out of this quantity, Shri Jayantilal removed some quantity as samples. This weighed 105.10 carats and he took this quantity with him when he left for Cambay on 9.8.1977. Therefore, only 2784.24 carats of diamonds were left in the custody of M.K. Patel and this was indicated as 2,500 carats approx. Shri M.K. Patel admits these facts of the receipt of diamonds and the chit inside. The only discrepancy was that as per his statement it was mentioned that these diamonds were for sale and that the value of these diamonds was Rs. 70/- per carat. Shri Jayantilal was away from Bombay from 9.8.1977 to 26.8.1977 with the samples. On his return he was informed of the raid of Shri Mukund’s premises’by the Customs and on 29.8.1977 he went to the Customs House for recording his statement. In this statement, he had mentioned about the first lot of 122.10 carats having been received by him on 12.7.1977 from Shri Rajesh of Cherry Traders and he had got these diamonds cut and polished and returned the same to Shri Bhansali. The seized quantity plus the quantity of 122.10 carats of rough diamonds taken by Shri Jayantilal with him on 9.8.1977 to Cambay and other two places in Gujarat accounted for the entire quantity of 3133.04 carats imported by M/s. Cherry Traders, as 121.62 carats out of the imported consignment was retained by Shri Bhansali as these diamonds were of a superior quality. A second statement was also recorded from Shri Jayantilal on 30.8.1977. In this statement, Shri Jayantilal reconciled the version about the seized diamonds as per the statement of Shri Mukund Patel and Shri Jayantilal Patel. The Customs officers also recorded the statement of Rajesh Bhansali on 1.9.1977 and in this statement Shri Bhansali confirmed that the seized diamonds were out of the consignment imported by him and the advocate referred to the relevant portions in the statement of Shri Bhan-sali. The advocate submitted that the onus of proof cast under Section 123 of the Customs Act had therefore been discharged to the extent of preponderance of probability. Continuing his arguments, the learned advocate stated that the statement of Shri Rajesh Bhansali had also been recorded by the Customs authorities on 5.9.1977. With the statement, he had confirmed the version of Shri Jayantilal Patel regarding the import of diamonds weighing 3133.04 carats by M/s. Cherry Traders. But since Shri Rajesh Bhansali lost the diamonds through the seizure from the premises of Mukund Patel on 12.8.1977, Shri Rajesh Bhansali gradually turned hostile towards Shri Mukund K. Patel and Shri Bhansali did not later co-operate with him. This would be evident from further statements recorded by the Customs from Shri Rajesh Bhansali. In view of these aforesaid explanations regarding the import of the diamonds under seizure, the burden of proof cast under Section 123 of the Customs Act had been discharged and the small discrepancies regarding the value and the purpose of leaving the diamonds with Shri Mukund Patel could not go to show that the diamonds were smuggled. Apart from that, the Customs prosecuted Shri Jayantilal Patel under Section 135 of the Customs Act but he was discharged under the order of the Addl. Chief Metropolitan Magistrate in Criminal case No. 22/CW/79 before him, under his order dated 8.5.1980. The advocate referred to para 5 of the Magistrate’s order and read the order from para 5 onwards. He reiterated the various infirmities noticed by the magistrate in the prosecution case including the evidence of Shri Jain, an Expert Appraiser of Customs, who had deposed that the country of origin of the diamonds was difficult to identify. The advocate relied on the Judgment of the Tribunal at Calcutta vide 1983 ELT 1966 : 1983 ECR 1396D Cegat in the case of Kirtilal Gagaldas Shah v. Collector of Customs, Calcutta and the decision of the Bombay High Court in Criminal Appeal No. 1241 of 1969, in the case of P.M. Shah v. the State of Maharashtra, a copy of which had been filed with the paper book. In particular, the advocate highlighted the observations of Justice Ghatne to the effect that the burden which an accused person is called upon to discharge is not the same as the burden which the prosecution is required to discharge in a criminal trial. The advocate finally referred to the Govt. of India’s decision on Customs Revision Application vide their Order No. 181 A/78 of 1978 dated 29.8.1978, a copy of which has been filed with the paper book. In view of the aforesaid pronouncements, the advocate submitted that the appellant had discharged the onus of proof and that his appeal should be allowed.
3. The Senior Depttl. representative Shri S. Senthivel stated that in the appeal, an attempt had been made to co-relate the diamonds seized with the consignment of diamonds imported by some one else. At the outset, he pointed out that this was a belated attempt and it had not been successful. Referring to the adjudication order, the learned SDR continued that the explanation of the appellants had been rejected by the adjudicating officer on two grounds, firstly that the quantity seized was different from the quantity imported by Shri Bhansali and that the value of the two lots also differed. He drew our attention to the finding of the adjudicating officer vide page 7 of his order. An additional reason had been adduced by the Addl. Collector to reject the explanation of the appellants and this was the categorical statement of Shri Rajesh that the rough diamonds were given for cutting and polishing to Shri Jayantilal whereas Shri Mukund had stated that the diamonds were for sale. The adjudicating officer had also held that it could not be proved that Shri Rajesh had given the diamonds under seizure to Shri Jayantilal Patel. Shri Senthivel referred to the reply dated 9.7.1978 by Shri Rajesh Bhansali to the show cause notice to show that the seized diamonds were not those imported by M/s Cherry Traders. Besides, Shri Jayantilal had asked Shri Mukund Patel to let him know the decision with respect to the diamonds. This could only mean that the diamonds had been offered by Shri Jayantilal to Mukund Patel for sale and that they were not left for safe custody with Mukund Patel for being given and polished later by Shri Jayantilal. Referring to Shri Patel’s statement dated 20.7.1979, learned SDR pointed out that it mentioned the fact regarding the offer and it indicated that Jayantilal Patel was a man of means and it would not have been necessary for such a person to leave the diamonds in question with Mukund Patel for safe custody. No valid explanation had been forthcoming in this behalf as to how these diamonds were left for safe custody with Mukund K. Patel. As regards the plastic bag used as container for the diamond packets, the learned SDR referred to para 10(4) of the reply to the show cause notice of Rajesh Bhansali to the effect that such plastic bags were commonly available and that the possibility of the same bag being used for packing and wrapping other diamonds could not be ruled out. Shri Senthi-vel also referred to the panchnama dated 19.8.1977 of the premises No. 2A Prem Kutir, Churchgate to point out that Shri Mukund Patel had stated that the diamonds had been received from Shri Jayantilal Patel for approval basis and that there was no documentary proof to show legal acquisition or importation of the rough diamonds. The diamonds had accordingly been seized in the reasonable belief that they were smuggled. As regards the magistrate’s finding, Shri Senthivel submitted that Shri Jayantilal had been discharged on altogether a different footing, namely that the foreign origin of diamonds could not be established. Shri Senthivel stated that the seizure of diamonds was made in the reasonable belief that the same were smuggled and that the burden of proof had not been discharged. He relied on the decision of Supreme Court in Bhoormal’s case and read paragraph 26 of the judgement. Referring to the facts of the case, Shri Senthivel submitted that the Addl. Collr. had held that the burden of proof had not been discharged, regarding the appellant’s explanation that the diamonds were given to Shri Mukund Patel for safe custody. Shri Senthivel argued that as per the appellant’s version, the rough diamonds were received by Shri Jayantilal from Bhansali on 2.8.1977 while Shri Jayantilal left Bombay on 9.8.1977. During this interval, the diamonds were in safe custody with Shri Jayantilal till the alleged deposit with Shri Mukund Patel on 5.8.1977. Besides, sufficient time was available to weigh the packets of diamonds and there was no reason to write on the chit approximate weight of the packet of diamonds. No verifiable particulars of Shri Jayantilal’s journey to the place in Gujarat were mentioned with the result that it was not possible to verify the same. The interval between the seizure and the recording of Shri Jayantilal’s statement was used in manipulating the records and with a view to finding out the imports against which the seized goods could be allocated. It was not understood why the samples of diamonds said to have been taken away by Shri Jayantilal were brought back without being cut and polished. Shri Jayantilal’s statement was recorded much later than the date of seizure of the diamonds and therefore it could not be accepted to contain the truth. The difference in the values of the two lots of diamonds imported by Shri Bhansali and seized from Shri Mukund Patel could not be explained. The Board had also considered the evidence in this case in the appeal against the Addl. Collector’s order and had confirmed the findings. All these circumstances would indicate that the appellants did not discharge the onus of proof and that the Addl. Collector’s order of confiscation of diamonds as being smuggled was correct. Shri Senthivel therefore submitted that the appeal be rejected.
4. Advocate Shri Gagrat observed in reply that the discrepancy in the weight of the lots of the diamonds had been correctly explained. Similarly, the discrepancy regarding value had also been reconciled. There was therefore total reconciliation between the diamonds imported by M/s. Cherry Traders and those seized from Shri Mukund Patel. There was no question of the explanation being an after-thought. Shri Jayantilal’s statements had been recorded from time to time and in these he had fully explained the position Similarly, the statements of Shri Mukund Patel had also been recorded as also statements of Rajesh Bhansali. All these statements confirm the fact that the seized diamonds were imported by M/s. Cherry Traders. The Customs appraiser had assessed the c.i.f. value of the diamonds seized from Mr. Mukund Patel at Rs. 2,78,422/-. This was in keeping with the c.i.f. value of diamonds imported by M/s. Cherry Traders considering the difference in weight for which explanation had been offered. As regards the MJK s reservations that there had been no need for ending a safe place for the storage of diamonds by Shri Jayantilal from 2.8.1977 to 5.8.1977, Shri Gagrat stated that Shri Jayantilal was in Bombay during the relevant period and he had kept the diamonds with him. It was only when he wanted to leave Bombay that he entrusted these for safety to Mukund Patel on 5.8.1977. As regards the SDR’s reliance on the Supreme Court’s Judgment in the case of Bhoormal the advocate stated that the ratio would not apply to the present case as the defence put forward by Shri Bhoormal was found false and therefore the Supreme Court had held that the Customs could confiscate the goods On the other hand, in the present case, the explanation submitted by Shri Jayantilal was supported by documentary evidence and the stock register of the importer. In the Revision Petition to the Government, Shri Jayantilal Patel had reiterated the same position vide grounds H and N to point out how the Board had come to an erroneous conclusion in deciding his appeal In particular, it was submitted that an exorbitant penalty of Rs 50 000/- had been levied on Shri Jayantilal Patel which was quite unjustified Under Section 123, the burden could be cast either on the person from whose possession the goods are seized or on the owner of the goods. In the present case, Shri Jayantilal was an aggrieved person and he could approach the Tribunal for relief under Section 131B of the Customs Act. Referring to the provisions of amended Section 129A and 129D the advocate further submitted that any person aggrieved by the decision could appeal to the Appellate authorities. Shri Rajesh Bhansali had been duly compensated for the loss of diamonds by Shri Jayantilal Patel and therefore the confiscation of diamonds had aggrieved Shri Jayantilal Patel. The Addl. Collector and the Board had no justification for confiscating the diamonds and in confirming the order of confiscation in the circumstances narrated by the Advocate. He accordingly requested for their release and allowing the appeal.
5. I have examined the arguments on both the sides. The first question which comes up for consideration is whether on the facts of the case, Section 123 of the Customs Act is applicable to the seizure of diamonds. The learned advocate has raised a contention that the diamonds in question were discovered by the Enforcement officers in the possession of Shri Mukund Patel when the Enforcement officers searched the premises of M/s. Mahendra Jewellers, Mukund Jewellers and associates situated at Prem Kutir Churchgate, Bombay. Referring to the panchnama, the advocate stated’ that the officers found a steel cupboard in the cabin of Mukundbhai Patel and the steel cupboard contained packets of rough and polished precious stones. The enforcement officers locked the cupboard and sealed it after affixing a paper seal which bore the signatures of the officers and the panch witnesses. Shri Gagrat has argued that this action tantamounts to seizure of diamonds by the Enforcement officers. It was only two days later that the Customs officers were called on the scene by the enforcement officers, who formerly took over the possession of the diamonds. In other words, the learned advocate has tried to equate the action of the Enforcement officers to the proviso to Sub-section (1) of Section 110 of the Customs Act which states that where it is not practicable to seize any goods, the Proper Officer may serve on the owner of the goods an order that he shall not remove, part with or otherwise deal with the goods except with the previous permission of the officer. Though the Panchnama for search on 10.8.1977 by the Enforcement Officers, does not indicate under what provisions of law the search warrant was issued by the Assistant Director of Enforcement on 10.8.1977 and though the learned advocate for the appellants has not thrown any light on this subject, it is reasonable to presume that this search was carried out under the provisions of Section 37 of the Foreign Exchange Regulation Act, 1973 as the search was of the premises belonging to Shri Mukund Patel. This Section does not have any provision analogous to proviso to Sub-section (1) of Section 110 of the Customs Act and hence there could not be any order of restraint by the Officers of the Enforcement on Shri Mukund Patel with regard to the disposal of the packets of diamonds kept in Shri Patel’s premises on 10.8.1977. It is therefore wrong to conclude that while sealing the cupboard which contained other articles besides the diamonds, the Enforcement officers seized the diamonds in question. Besides, the diamonds are such that the Enforcement Officers could have easily seized them if they wanted to do so and there would have been no need for issuing any order of restraint as argued by the learned advocate. Besides the panchnama of the seizure dated 12.8.1977 shows that the aforesaid cupboard contained large number of packets of precious stones. It also records the fact that nothing was taken over or seized by the officers of enforcement from the said cupboard. Since a large number of packets of precious stones were contained in the cupboard, the officers of the Customs department continued their search under their own warrant. The panchnama therefore clearly confirms that the diamond packets were not seized by the Enforcement officers but they were seized by the Customs Officers. Hence it is not possible to accept the earned advocate’s contention that there was no reasonable belief in the minds of the seizing officers that the goods were smuggled and therefore it is not admissible for the Additional Collector of Customs to rely on Section 123 of the Customs Act in throwing the burden of proof on Shri Mukund K. Patel from whose possession the diamonds were seized by the Customs Officers. It is pertinent to observe that in the present case, the diamonds were in the possession of Mukund K. Patel and Shri Jayantilal Patel was not the owner of the diamonds, the alleged owner being Rajesh Bhansali. There is therefore no question of Shri Jayantilal R. Patel discharging the onus as required under Section 123 of the Customs Act. I find that the show cause notice has been issued among others to Shri Mukund K. Patel and Rajesh Bhansali and they have not come in appeal before us nor put forward any contention regarding non-applicability of Section 123 of the Customs Act, to the diamonds under confiscation. In view of the above, I am unable to uphold Shri Gagrat’s contention that Section 123 of the Customs Act does not apply in the present case. Having reached the aforesaid conclusion, it is necessary for us to consider whether the burden cast under Section 123 of the Customs Act has been discharged. Shri Jayantilal Patel has no locus standi to discharge this burden. He has made an attempt, which the learned SDR has described as trying to allocate the goods under confiscation to any imports. I am inclined to believe the submission of the learned SDR. Shri Jayantilal has come into the picture quite late On the day in question, when the diamonds were seized from Shri Mukund K Patel, he has stated that the diamonds were left with him for sale This statement is contrary to the claim of Shri Jayantilal Patel that the diamonds were left for safe custody pending their being cut and polished. There are material discrepancies in the weight and value of the diamonds seized from those imported by M/s. Cherry Traders. The difference in weight as sought to be explained by stating that the weight of diamonds left with Shri Mukund Patel was indicated approximately. This explanation cannot be treated as valid in terms of Section 123. Besides the purpose for which Shri Bhansali gave the alleged diamonds to Shri Jayantilal Patel was for cutting and polishing. According to the appellant’s version he had already successfully got a parcel of diamonds cut and polished and returned the same to Shri Bhansali. The appellant is alleged to have left Bombay on 9.8.1977 for Cambay, Baroda and Surat. These are the centres which are well known for cutting diamonds and when the diamonds received from Shri Bhansali were to be cut and polished, it is not known why they were left with Shri Mukund Patel. Besides if this was the second venture of Shri Jayantilal Patel with Shri Rajesh Bhansali, it is not known why Shri Rajesh Bhansali could entrust such a big lot of diamonds to Shri Jayantilal for cutting and polishing when this process required about three months. As regards the value of the diamonds, the learned advocate has stated that as per the Customs Appraiser, the c.i.f. value of 2784.22 cts. of rough diamonds seized from Shri Mukund Patel would came to Rs. 2,78,322/-. On the other hand as per Shri Rajesh Bhansali’s statement recorded under Section 108 of the Customs Act on 5.9.1977, the c.i.f. value of 3133.04 cts. of rough diamonds imported by him comes to Rs. 4,68,639/-. There is thus a wide disparity in the value appraised by the Customs Appraiser of the diamonds seized from Shri Mukund Patel and the c.i.f. value of the diamonds imported by Shri Rajesh Bhansali. Besides, the rates per carat also differ very widely the offer made by Shri Jayantilal Patel to Shri Mukund Patel being Rs 50 to Rs. 70/- per carat while the lot imported by Shri Bhansali was valued at Rs. 137/- to Rs. 140/- per carat. The aforesaid discrepancies glare us squarely in the eye when an attempt has been made to discharge the onus under Section 123 of the Customs Act. In view of this fact, I agree with the Additional Collector’s finding in his order that the onus under Section 123 has not been discharged. In view of this fact it is immaterial that the learned magistrate discharged Shri Jayantilal for offences under Section 135 of the Customs Act. Besides the Rules of evidence in the Magistrate’s court are not applicable to the adjudication proceedings under the Customs Act and similarly the ratio of the Judgment in the criminal case cannot apply in toto the adjudication proceedings. In view of these facts, we find that the burden of proof is not discharged and that the diamonds have been correctly confiscated.
6. The Additional Collector has also imposed a penalty of Rs. 50,000/- on Shri Jayantilal Patel under Section 112 of the Customs Act Reading the Collector’s order with the show cause notice dated 25.1.1978 it is seen that the penalty on Shri Jayantilal Patel was for being concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or dealing in the diamonds which he knew, or had reason to believe were liable to confiscation under the Customs Act. The facts as they emerge indicate that the diamonds were seized from the possession of Mukund K. Patel. Shri Jayantilal’s claim for having received the diamonds from Shri Rajesh Bhansali and depositing them with Shri Mukesh Patel has not been accepted. There is no evidence to show that Shri Jayantilal Patel dealt with the diamonds in any manner and that he knew or had reason to believe that the diamonds were smuggled under the Customs Act. In the “absence of such an evidence, Shri Jayantilal Patel is not liable to any ‘penalty. Accordingly, I set aside the Collector’s order of penalty of Rs. 50,000/- on Shri Jayantilal Patel.
7. Except for the modification mentioned above, the order of the Additional Collector of Customs is otherwise confirmed and the appeal by Shri Jayantilal Patel is rejected.
Sd/- (K.S. Dilipsinhji)
Member (Technical)
K. Gopal Hegde, Member (J)
1. The undisputed facts are that on 12.8.1977 the Customs Officer, on receipt of a message from the Enforcement Directorate, searched the office and residential premises of Shri Mukund M. Patel and Kannayalal M. Patel. The search among other things, yielded rough diamonds weighing 2784.22 Cts. and 32 wrist watches having gold and diamond contents. The statement of Shri M.K. Patel was recorded on the same day under Section 108. He inter alia stated that these rough diamonds were given by the appellant Jayantilal R. Patel on 5.8.1977 for sale at a price of Rs. 70/- per carat as Jayantilal could get offer of only Rs. 50/- per carat. He also stated that he did not decide to purchase the rough diamonds, that he agreed to keep them on approval basis and obtained an Approval Memo dated 5.8.1977 made out in the name of M/s. Oriental Gems Co. for Rs. 2500 cts. rough diamonds, according to the normal trade practice. It was also in his statement that at the time of receipt of the rough diamonds or at the time of obtaining the approval memo the diamonds were not weighed.
2. During the course of investigation, efforts were made to trace the present appellant but neither his wife nor his father could give any information regarding his whereabouts. The statement of Kannayalal M. Patel was recorded on 16.8.1977. On 19.8.1977 the Customs Officers seized the rough diamonds and wrist watches in the reasonable belief that they were smuggled into India and were liable to confiscation under the provisions of the Customs Act, 1962.
3. On 29.8.1977 the appellant Jayantilal attended the Custom House and his statements were recorded on 29.8.1977 and 30.8.1977. Among other things, Shri Jayantilal stated that he learnt diamond business from Rajesh, a partner of M/s. Cherry Traders sometime in February, 1977. It was further stated by Shri Jayantilal that on 12.7.1977, Shri Rajesh gave him 122.10 Cts. of rough diamonds for cutting and polishing. He got them cut and polished and returned to Shri Rajesh on 3.8.1977. It was also stated by Shri Jayantilal that on 2.8.1977 Rajesh again gave him 2889.32 Cts. of rough diamonds in a plastic bag bearing the name “Jockey Men’s Wear” for cutting and polishing. He took the rough diamonds to his residence and extracted sample from the rough diamonds for taking to Cambay and Surat. It was also in the statement of Shri Patel that as he had no safe in his house he took the rough diamonds packed on 5.8.1977, to M/s. Oriental Gems Co. and requested Shri Mukund to keep them in safe custody. He agreed to the proposal of Shri Mukund that an approval memo should be there and he made out an approval memo for a weight of 2500 Cts. He, however, stated that he did not offer the rough diamonds for sale nor did he quote the prices of Rs. 70/- per carat nor did he tell Mukund that he did not get an’offer above Rs. 50/-. He further stated that he had ascertained from Shri Rajesh that the diamonds were legally imported and he had also informed his father and wife that he would be staying in Cambay or Surat and he had also informed them of the purpose of his visit to Surat and Cambay. It was then stated by him that the samples which he had taken was brought back by him without getting them cut. On 1.9.1977 the statement of Shri Rajesh of M/s. Cherry Traders was recorded. Shri Rajesh inter alia stated that in February, 1977 he was introduced to the appellant Jayantilal by a diamond broker by name Jayant, as a trustworthy person and he had satisfied himself as to the trustworthiness of the appellants. He also corroborrated the statement of Shri Jayantilal that he had given 122.10 Cts. of rough diamonds for cutting and polishing. He further stated that on 2.8.1977 Jayantilal delivered to him the cut and polished diamonds. On that day he was in possession of another lot of 2889.32 Cts. of rough diamonds. As he was satisfied with the cutting and polishing by Jayantilal he informed of the stock and told Jayantilal that he would give them on the next day i.e. on 3.8.1977 but then at the instance of Shri Jayantilal he handed over the entire quantity to him on the same day namely on 3.8.1977. On the next day he gave a delivery letter dated 2.8.1977. Jayantilal signed on that letter in token of having received the lot of rough diamonds. Shri Rajesh further stated that on 6.7.1977 he had cleared a consignment of rough diamonds of Zaire origin unworked/uncut/unset weighing 3133.04 Cts. in 12 lots valued at Rupees 4,68,639/- on account of M/s. Cherry Traders under Bill of Entry Cash No. A6598/23.6.1977 from Antwerp and Belgium and he had paid a duty of Rs. 23,431.95. It was further stated by Shri Rajesh that out of the quantity so imported he gave 122.10 Cts. on 12.7.1977 to Jayantilal for cutting and polishing and on 2.8.1977 he gave 2889.32 Cts. to Jayantilal for cutting and polishing. On questioning further, Rajesh stated that the import licence was given to him for importing rough diamonds on condition that he should export the polished diamonds. He also stated that Jayantilal had cheated him. He, however, stated that Jayantilal made good the value of the rough diamonds given to him.
4. After the completion of the investigation show cause notices were issued to Shri Mukund, Rajesh, Kannayalal and the appellant, Jayantilal. In his reply, Shri Rajesh contended that rough diamonds were given to Jayantilal for cutting and polishing and not for sale. In his reply, Shri Kannayalal however stated that the diamonds were received by Mukund for safe custody but Shri Mukund misunderstood them for sale.
5. The Addl. Collector of Customs (Preventive), Bombay who held the enquiry after consideration of the material placed before him and after hearing the arguments of the Advocate who represented Kannayalal M. Patel, Mukund R. Patel, Rajesh and Jayantilal ordered release of the wrist watches but however ordered absolute confiscation of the rough diamonds, seized from the almirahs of Mukund M. Patel. He also imposed a personal penalty of Rs. 50,000/- on Jayantilal, the present appellant under Section 112 of the Customs Act. He, however, exonerated Mukund Patel and Rajesh Bhansali. He disbelieved the version of the appellant that the rough diamonds which he had given to Mukund, were given to him by Rajesh.
6. Being aggrieved by the order of the absolute confiscation and levy of penalty, Shri Jayantilal filed an appeal before the Central Board of Excise & Customs. The Board, however, rejected the appeal. Being aggrieved by the order of the Board, Shri Jayantilal filed a revision application before the Central Government which statutorily stood transferred to the Tribunal.
7. During the hearing of this appeal, Shri J.G. Gagrat, the appellant’s learned Advocate, urged the following grounds:
(1) The order of the Board was not based on any legal evidence but was based on suspicion, surmises and conjecture, therefore, it is void and of no legal effect,
(2) The Board being an appellate authority was required to pass a speaking order after considering the contentions urged before the Board but then the Board’s order is not a speaking order. It had not considered the various contentions urged during the hearing of the appeal,
(3) The Board failed to notice that the facts established did not warrant invoking of the provisions of Section 123,
(4) The various circumstances urged on behalf of the appellant to explain the discrepancies in weight; the discrepancy between the statement of Mukund and the appellant; the discrepancy with regard to the price, were not considered or appreciated by the Board,
(5) The Board has further failed to appreciate the contention of the appellant that rough diamonds were given to the appellant by Rajesh of M/s. Cherry Traders for cutting and polishing and that Rajesh had imported the rough diamonds legally against an import licence by payment of duty,
(6) The Board ought to have accepted the contention of the appellant and set aside the order of confiscation as well as the penalty.
8. Shri Gagrat further urged that the Addl. Collector had given the following reasons for rejecting the appellant’s contention that the diamonds which he had given to Shri Mukund were not the diamonds which he had received from Rajesh Bhansali:
(1) Rough diamonds weighing 2784.22 Cts were given to Shri Mukund for sale and not for safe custody, (2) The difference between the actual weight of the seized diamonds and the weights mentioned in the approval memo, (3) Quantity given by Shri Rajesh was 2889.32 Cts but quantity found with Mr. Mukund was 2784.22 Cts., (4) In his statement Mukund Patel had stated that rough diamonds were given to him for sale at the price of Rs. 70/- per carat. But the diamonds given to Shri Rajesh and imported under the Bill of Entry were priced about Rs. 130/-per carat (5) Shri Jayantilal had given a false explanation which clearly proved that he had knowledge about the smuggled nature of the diamonds.
9. Shri Gagrat contended that the circumstances relied upon by the Addl. Collector have been satisfactorily explained but were not considered by the Addl. Co lector in their proper perspective. Shri Gagrat urged that according to Rajesh he gave 2889.32 Cts. to Jayantilal for cutting and polishing on 2.8.1977. Jayantilal had stated in his statement that he had extracted some samples and taken them to Surat and Cambay for the purpose of getting them cut and polished. The quantity he had taken was 105.10 Cts ft 2 in the statement of Shri Jayantilal that while handing over the quantity of rough diamonds for the safe custody the diamonds were not weighed TH statement was corroborated by Shri Mukund who received the diamonds Further, even in the approval memo the weight had been mentioned as approximately 2500 Cts. Thus what was given to the custody was only an approximate quantity which was further cleared from the fact that at the time of seizure on weighing the Customs Officer found 2784 22 Cts Shri Gagrat further urged that according to the statement of Jayantilal he brought back the sample without cutting and polishing and the weight of the samples taken as 105.10 Cts. If this weight is added to the weight of the diamonds seized by the Customs it exactly tallies with the weight of the diamonds given by Rajesh to Jayantilal on 2.8.1977. The discrepancy in the weight is sufficiently and satisfactorily explained. The discrepancy regarding the purpose for which rough diamonds were given to Shri Mukund according to Shri Gagrat was also satisfactorily explained. Shri Gagrat drew our attention to the statement of Shri Jayantilal wherein he categorically stated that rough diamonds were given to the safe custody of Mukund as he was to go out of Bombay and there was no safe in his house to keep them. Shri Gagrat further pointed out that Mukund in his subsequent statement did state there was some misunderstanding by him as to the purpose for which the diamonds were given to him. Shri Gagrat also drew our attention to the reply to the show cause notice given by the father of Shri Mukund which also indicated that Mukund did not properly understand the purpose for which the diamonds were entrusted to him. As regards the discrepancy in price, Shri Gagrat contended that neither Jayantilal nor Rajesh had any intention to sell the rough diamonds and it is on account of the misunderstanding by Shri Mukund the statement was made by Shri Mukund that the diamonds were given for sale on approval basis. Shri Gagrat tried to explain the sale memo by stating that it was given in accordance with the trade practice so that Shri Mukund may not come to trouble in the event of any authority checking the stock.
10. It was further contended by Shri Gagrat that in the show cause notice it was alleged that Rajesh Bhansali violated the condition of the licence inasmuch as he gave the rough diamonds imported for sale through Jayantilal whereas the licence condition required him to re-export. This allegation according to Shri Gagrat, established beyond doubt that the diamonds seized formed part of the diamonds imported by M/s. Cherry Traders and cleared by them on payment of duty and therefore they ceased to be smuggled goods. Shri Gagrat further urged that the statement of Shri Jayantilal was corroborated by Shri Rajesh and the Department had no alternative case as to how Rajesh disposed of the rough diamonds he had imported.
11. Shri Gagrat urged that the seizure of the diamonds in the instant case was not by the Customs under the Customs Act but by the officers of the Enforcement Directorate and therefore the burden of proving that the diamonds are licitly imported will not be on the appellant and that the Department had not led any evidence to establish that the seized diamonds were illicitly imported into India. It was further urged by Shri Gagrat that the diamonds were seized from the possession of Mukund. Mukund had been exonerated therefore he was not required to discharge the burden under Section 123 of the Customs Act. According to the appellant Jayantilal, the diamonds were given to him by Rajesh Bhansali. Rajesh Bhansali had admitted that he had given the diamonds to Jayantilal. Therefore, there is no obligation in law for Jayantilal to prove that the seized diamonds were licitly imported into India. He had not claimed any ownership. Therefore, the provisions of Section 123 would not be applicable in his case. The burden, if any, of establishing that the diamonds imported were licitly imported, would be on Rajesh Bhansali and that Rajesh Bhansali did discharge that burden by production of documentary evidence regarding the licit import of 3000 and odd carats of rough diamonds just a few days earlier to the handing over of diamonds to Jayantilal. The adjudicating authority had also exonerated Shri Rajesh Bhansali. In the circumstances, the adjudicating authority was not justified in holding that the appellant had failed to discharge the burden cast on him under Section 123 and, therefore, the diamonds seized are smuggled and became liable to confiscation.
12. It was next contended by Shri Gagrat even otherwise the burden which the appellant was required to discharge under Section 123 is not beyond reasonable doubt. In this connection, Shri Gagrat relied upon the decision of the Tribunal reported in 1983 ELT page 1966.
13. Finally, Shri Gagrat urged that the appellant was prosecuted for the same offence before the Chief Metropolitan Magistrate and the learned Magistrate had discharged the appellant and therefore the order of confiscation and imposition of the penalty should be set aside.
14. Shri Senthivel appearing for the Respondent Collector, however, contended that the order passed by the Addl. Collector and confirmed by the Board is correct in all respects, the explanation offered by the appellant that the diamonds seized were given to him by Rajesh Bhansali is not believable, the Addl. Collector had given cogent reasons for not accepting the explanations and he would adopt those reasons. Shri Senthivel further submitted there was no need for Jayantilal to give the rough diamonds to Shri Mukund because according to his own statement be has his residence and his wife and father are staying in the house. Further, even according to him he received the rough diamonds on 2.8.1977. The handing over of the rough diamonds was only of 5.8.1977. Between 2.8.1977 and 5.8.1977 if the appellant could keep the rough diamonds in his residence there was no necessity to hand over to Mukund for safe custody on 5.8.1977.
15. It was further urged that the fact that at the time of seizure the diamonds were found in a bag the description of which tallied with the description given by Bhansali and Jayantilal will have no significance because such types of bags are commonly available.
16. Shri Senthivel further urged that according to the appellant he had extracted some sample when he left for Swat and Cambay for the purpose of cutting and polishing but then he does not get them cut and polished. No explanation is forthcoming as to why he did not get them cut and polished. This explanation was offered at a late stage to explain the discrepancy in the weight of the diamonds.
17. As regards the burden of proof Shri Senthivel contended that neither Shri Mukund K. Patel nor Shri Kannayalal M. Patel could produce documentary evidence for the legal acquisition of the diamonds seized by the Customs Officer. Therefore the Customs Officer in the reasonable belief that the diamonds were smuggled into India and liable to confiscation seized them and therefore the burden of establishing that the diamonds were licitly imported into India would be on the appellant since admittedly he had handed them over to Mukund and since the adjudicating authority had not accepted his explanation that the diamonds in question were given to him by Rajesh Bhansali.
18. Shri Senthivel also contended that no importance should be attached to the statements of Shri Rajesh and the appellant Shri Jayantilal since the seizure was on 19.8.1977 and the statements were recorded after a lone delay.
19. It was also urged by Shri Senthivel that according to the appellant he received the diamonds on 2.8.1977 they were given to him for the purpose of cutting and polishing. It was highly improbable that he did not weigh them at all. It was further impossible to believe his version that at the time he handed them over to the safe custody of Shri Mukund the diamonds were not weighed. Having regard to the value of the diamonds, it is highly improbable that either Mukund or Jayantilal would not weigh the diamonds.
20. As regards the discharge of the appellant by the Addl. Chief Metropolitan Magistrate’s Court, Shri Senthivel contended that two proceedings are independent and further before the Criminal Court it was contended that the diamonds were of indigenous variety but no such contention was taken up in the reply to the show cause notice or before the adjudicating authority.
21. As regards the burden of proof, Shri Senthivel contended that the burden initially lies on the appellant in regard to provisions of the Section 123 of the Customs Act and Shri Senthivel also placed reliance on the decision of the Supreme Court (Bhoormal’s case), Shri Senthivel further contended that the appeal filed by the appellant is not competent since he does not claim ownership of the diamonds.
22. In reply, Shri Gagat submitted that the appellant kept the diamonds in his house till 5.8.1977 because he was also staying in the house. When he was required to go outside to a distant place the appellant thought fit that it would not be safe to keep the diamonds in the residence and therefore like any other prudent man he gave to the safe custody of Shri Mukund and there is nothing improper in the conduct of the appellant. Shri Gagrat urged that the ratio of the decision in Bhoormal’s case is inapplicable to the facts of the present case. It was also urged by Shri Gagrat that under the then existing law any aggrieved person could file a revision and since he had adequately compensated Rajesh Bhansali he is entitled to file this appeal as he would be an aggrieved person. Shri Gagrat also urged that the payment was made because the diamond business is mostly carried on trust and confidence and to maintain commercial morality the appellant paid to Rajesh the value of the diamonds.
23. I have carefully considered the submissions made on both sides and perused the records of the case. The points that appropriately arise for consideration in this appeal are : (1) Whether the Addl. Collector and the Board were unjustified in holding that the seized diamonds did not form part of the rough diamonds imported by the firm Cherry Traders, (2) Whether the Additional Collector and the Board were unjustified in invoking the provisions of Section 123 of the Customs Act in respect of seized diamonds., (3) Whether on the facts and in the circumstances of the case the order of absolute confiscation of the seized diamonds was not justified, (4) Whether on the facts and circumstances of the case, the levy of personal penalty on the appellant was unjustified, (5) Whether the penalty imposed on the appellant was harsh and unreasonable, (6) What if any is the effect of the discharge of the appellant by the Criminal Court?
24. Let me take up for consideration the points set out above in their seriatim.
Point No. 1:
(1) As has been seen earlier, the Addl. Collr. who adjudged the confiscation and penalty recorded a finding that the diamonds seized from the possession of Mukund K. Patel did not form part of the rough diamonds imported by the firm Cherry Traders. He had given certain reasons to arrive at that conclusion. The finding had been accepted by the Board and the order passed by him was confirmed by the Board. Shri Gagrat vehemently contended that were taken into consideration by the Additional Collector could be explained and that the appellant had offered reasonable explanation and every circumstance has been properly explained and there was sufficient proof in support of the explanation. The burden if any cast on the appellant has been adequately discharged. Having regard to Shri Gagrat’s contention, it is for consideration whether the Addl. Collector was unjustified in holding that the seized diamonds did not form part of the rough diamonds imported by the firm Cherry Traders.
25. Rough diamonds weighing 2784.22 Cts. were seized from the business premises of Mukund K. Patel on 12.8.1977. The statement of Shri Mukund was recorded on the same day under Section 108 of the Customs Act. Among other things, Shri Mukund categorically stated that the seized diamonds were given to him for sale on approval basis by the present appellant on 5.8.1977. Mukund also stated that at the time of handing over the diamonds by the appellant to him the appellant further told him that he could get offer of only Rs. 50/- per carat and the price agreed to between the parties was at Rs. 70/- per Ct. It is not the bare words of Shri Mukund, his oral statement is corroborated by the approval memo signed by the appellant. According to the appellant he received 2784.22 Cts. of rough diamonds on 2.8.1977 from Rajesh Bhansali, a partner of Cherry Traders for the purposes of cutting and polishing. As he had to go out of Bombay and as he found his house not safe to keep the quantity of diamonds after taking sample for the purposes of cutting and polishing, he entrusted the remaining quantity to the safe custody of Mukund K. Patel. The diamonds were not given to Shri Mukund K. Patel for the purpose of disposal. The question of telling Mukund that he could get an offer of only Rs. 50/- per carat or that the sale price was agreed to Rs. 70/- per carat did not arise. Admittedly, Shri Mukund and the appellant are related to each other. There was no reason for Shri Mukund to state a falsehood if really the diamonds were not given for sale on approval basis. It was not contended that Mukund had any animosity against the appellant nor was it contended that Mukund made a false statement. The contention urged was that Shri Mukund did not understand the appellant properly. In other words, there was some misunderstanding on the part of Shri Mukund. To substantiate the appellant’s contention that there was some misunderstanding reliance was placed on the statement of Shri Mukund recorded on 30.8.1977 and also on the contents of the reply to the show cause notice by Mukund Patel’s father Kannayalal Patel. While recording Shri Mukund’s statement on 30 8 1977 Mukund was asked that the appellant in his statement dated 30.8.1977 had stated that he had given to Mukund rough diamonds approximately 2500 Ct for safe custody and that it was not given for sale. Further, that the appellant had denied that there was any talk about the price as stated by Shri Mukund and Mukund was asked to explain. Mukund’s reply was:
Mr. Jayantilal has originally requested me for only safe custody which is not a usual practice. I insisted for the approval memo which he gave It is my impression that it is for sale. As regards the price, we had a general discussion at which the rough diamond in question would cost it seems that there is some misunderstanding in Shri Jayantilal’s denying Whatever I have already stated earlier and here is correct”. Now it is seen from Mukund’s further statement that it was not a trade practice to keep any diamonds in safe custody. When such was the practice question of the appellant entrusting the diamond to Shri Mukund for safe custody is ruled out. Even in his statement recorded on 30.8.1977, Mukund did not deny his earlier statement. He confirms it. At the time of recording of the statement of the appellant, the appellant was shown the approval memo of 5.8.1977 and his attention was drawn to the following sentence:
Please let me know your decision at the earliest. The appellant stated”, (sic) To this I say that this is the normal trading of the approval memo. There was no decision to be taken by Mukund Patel regarding the purchase of these rough diamonds as I have already stated that I have kept these rough diamonds with Mukund Patel for safe custody only till my return from Surat, Baroda, Cambay trip”. The explanation of the appellant is rather difficult to accept. If the diamonds were given for safe custody question of writing in the approval memo as to Mukund decision at the earliest would not arise. There can be hardly any doubt that the appellant did give the rough diamonds to Mukund for disposal and not for safe custody. So far as Mukund’s father’s statement in reply to the show cause notice is concerned, it was no doubt stated therein that there was some misunderstanding on the part of Mukund. But then father of Mukund was admittedly not present at the time of transaction. Therefore he is not competent to offer any explanation and his explanation under any circumstances cannot prevail over the explanation given by Mukund himself on 30.8.1977.
26. If the rough diamonds which were given to Shri Mukund formed part of the diamonds received by the appellant firm by Rajesh Bhansali for the purpose of cutting and polishing the appellant could not have told Mukund regarding the offer which he got and the price for which Mukund could purchase. Shri Gagrat had emphasied that the diamond trade is a trade of confidence and trust. The statement of Bhansali is also to the effect that entrustment of rough diamonds to the appellant was made after satisfying himself that the appellant was trustworthy. While that was so the diamonds if any received by the appellant from Cherry Traders would not have been given for sale on approval basis. As a matter of fact, it was not the case of the appellant that the diamonds which he received from Cherry Traders were given by him for sale on approval basis to Mukund. Therefore, the diamonds which were given to Mukund could not form part of the diamonds if any received by the appellant from Cherry Traders. There are other circumstances to support the finding of the Addl. Collector that the seized diamonds could not have been the diamonds imported by Cherry Traders. According to the statement of Rajesh Bhansali the total quantity of rough diamonds imported weighed 3133.04 Cts. valued at Rs. 4,68,639/-. The import was from two countries namely from Antwerp and Belgium. After sorting rough diamonds weighing 121.62 Cts. the remaining quantity were mixed together. The diamonds imported are of different colours, some are brown, some are light brown and the diamonds imported from Belgium contained white diamonds. The mixed diamonds having the above colours were given to the appellant according to Shri Rajesh. The seized diamonds are all of one colour. There were no white diamonds among the seized diamonds. It was not the case of the appellant that after he received the diamonds from Rajesh he assorted them and kept the white diamonds separately. The only explanation was that he took some sample when he left for Cambay and Surat. Even those diamonds were brought by him without cutting and polishing. Further, Rajesh Bhansali gave the diamonds for cutting and polishing there was an export obligation on the part of Rajesh. Cutting and polishing were normally done at Cambay and Surat. The appellant had earlier got cut and polished certain quantities at those places. The appellant does not explain why he did not take the diamonds entrusted to him to Cambay Surat when they were given to him only for cutting and polishing. The theory of safe custody is somewhat difficult to believe. According to the statements of Rajesh and the appellant, diamonds were given to the appellant on 2.8.1977. Till 5.8.1977, the diamonds were in the residence of the appellant. Only on 5.8.1977 they were given to Mukund. The reason given was that the appellant was to proceed to Cambay and Surat and he found his house unsafe to keep the diamonds. The appellant does not proceed to Cambay and Surat on 5.8.1977. He actually left for Surat and Cambay only on 9.8.1977. Thus there was no need for the appellant to entrust the diamonds to Mukund on 5.8.1977. Further, according to the appellant, his father, mother and his wife were also residing with him. When there were other members in the family, there was no need for the appellant to entrust the diamands for someone else even if he was to leave for an outstation.
27. According to the statement of Shri Rajesh, the average value of the diamonds per carat entrusted to the appellant could come to Rs. 130/- to 140/-. The statement of Mukund was that the appellant had told him that the highest offer the appellant could get was Rs. 50/- per carat and the price agreed on approval basis was Rs. 70/- per carat. If the diamond entrusted to the appellant by Rajesh were the very diamonds, which the appellant had given to Mukund, there was no scope for the appellant to tell Mukund that he could not get an offer exceeding Rs. 50/- per carat or agreeing with Mukund for a sale price of Rs. 70/- per carat. I have already referred to the contention of the appellant namely, there was a misunderstanding on the part of Mukund as to whether the diamonds were given for safe custody or sale. As has been observed earlier, Mukund had no reason to state something other than what the appellant himself had told him. The statement of Mukund was recorded on the day of search. It is significant to note that the almirahs were examined by the officers of the Enforcement Directorate on 10.8.1977, two days earlier to the search. Mukund had enough time to think over the matter. If really the diamonds were given for safe custody Mukund had no ostensible reasons to state on 12.8.1977 that they were given for sale on approval basis. I have already referred to the relationship between Shri Mukund and the appellant. The appellant is no other than Mukund’s young brother’s son. Considerable weight has to be attached to the statement of Mukund which was spontaneous and also supported by documentary evidence which bears the signature of the appellant. As a matter of fact, the appellant admits the sale memo. If once the statement of Shri Mukund is accepted (I have no reason not to accept) then there should be no difficulty to uphold the finding of the Additional Collector that the diamonds given by the appellant to Mukund did not form part of the diamonds imported by Cherry Traders.
28. It is necessary to remember that in respect of 122.10 Cts, rough diamonds given to the appellant by Rajesh on 12.7.1977 the appellant took to Cambay on the very next day and handed over the packet to Star Diamonds and Watch Manufacturers & Co. on 14th morning. According to the appellant the owner of the said Company Bharat Bhansali was his cousin brother. If the appellant could take rough diamonds given to him on 12.7.1977 and entrust them to Bharat he could as well have taken the rough diamonds given to him on 2.8.1977 to Bharat if not for cutting and polishing at least for safe custody but then the appellant does not take the rough diamonds given to him by Rajesh but given them to Mukund. Significantly, according to the appellants, he took some rough diamonds with him when he left for Cambay and Surat. Though he was away for more than 15 days he did not get those samples cut and polished, he brings them back. This story of the appellant apparently was trotted out to explain the discrepancy in the total weight of the rough diamonds seized from Mukund and the rough diamonds entrusted to the appellant by Rajesh.
29 The story of Rajesh and the appellant that rough diamonds 2889 32 Cts. were entrusted by Rajesh to the appellant on 2.8.1977 appears unbelievable. According to the statement of Rajesh as early as on 6.7.1977 he imported 3133.04 Cts. of diamonds after paying Customs duty. Out of 3133 04 Cts he entrusts only 122.04 Cts. to the appellant on 12.8.1977. It was stated by Rajesh that on the appellant returning the cut and polished diamonds on 2.8.1977 he gave the balance quantity of 2889.32 Cts. to the appellant for cutting and polishing. The acquaintance of Rajesh and the appellant commenced only in February, 1977. It is highly improbable that Rajesh would entrust at a time 2889.32 Cts. to the appellant for cutting and polishing, particularly if one has regard to the quantity earlier entrusted, namely 122.10 Cts. In any case, it is unnecessary to go into the so-called entrustment because from the facts established in this case the rough diamonds given to Mukund by the appellant could not be the diamonds imported by Cherry Traders.
30. The seizure of the diamonds took place on 19.8.1977. Mukund from whose business premises the diamonds were seized, informed the Seizing Officers on 12.8.1977 that the diamonds were given to him by the appellant The Customs Officers made efforts to trace the appellant. They questioned his wife and father. They could not furnish information as to the appellant’s whereabouts. The appellant, however, in his statement made on 29.8.1977 stated, among other things, that before leaving for Cambay, he had informed his wife and father as to for what purpose he was leaving for Cambay and how many days he would be there. He was emphatic that every time when he leaves the house for any place outside Bombay he informs his wife and father as to where he was going and to what place. If what was stated by the appellant was correct, there was no reasons for the wife and father to inform the Customs Officer that they were unaware of the whereabouts of the appellants. The search had taken place on 12.8.1977 and the statement of the appellant was recorded only on 29.8.1977. He could have come to know of the search and seizure. He had enough time in the world to find a way out. Having regard to his relationship with Shri Rajesh he found it convenient to state that the seized diamonds formed part of the imported diamonds of Cherry Traders.
31. On consideration of the evidence as a whole and the circumstances of the case, I see no reason to hold that the findings of the Additional Collector that the seized diamonds did not form part of the diamonds imported by M/s. Cherry Traders suffers from any infirmity or that such a finding was unjustified on the facts and circumstances of the case.
Point No. 2:
32. Admittedly the seized diamonds were rough diamonds. Seizure was made by the Customs Officers on 19.8.1977. Though the search was carried on 12.8.1977, seizure was done on 19.8.1977 since Mukund and his father could not produce proof regarding licit import of the seized diamonds. The seizure was in the reasonable belief that these diamonds were smuggled into India. Since the seizure could be considered as from the possession of Mukund and his father and the goods seized being diamonds and since the seizure was in the reasonable belief that they are smuggled goods and under the Customs Act, the burden of proving that they are not smuggled goods would be on Mukund and his father or if any person claims to be the owner of the seized goods on such person. Mukund and his father did not claim ownership of the seized diamonds. Mukund’s version that they were given to him by the present appellant was accepted by the adjudicating authority. The appellant also stated that he gave the diamonds to Mukund. The appellant, no doubt, did not claim ownership but contended that the seized diamonds were given to him for cutting and polishing by Rajesh Bhansali of Cherry Traders. Rajesh Bhansali only stated that he had entrusted 2889.32 Cts. of rough diamonds to Jayantilal. He did not state that the seized diamonds were the very diamonds which were entrusted to the appellant by him. Thus, the appellant was the person who was in possession of the diamonds before he gave it to Mukund. His version that they were given to him, by Shri Rajesh, could not be believed. Therefore the ownership rested with the appellant. Mukund was only in custody of the diamonds. For all practical purposes, the possession of the seized diamonds was that of the appellant. He has to discharge the burden that they were licitly imported. He failed to discharge that burden.
33. On behalf of the appellant, Shri Gagrat contended that the seizure of the diamonds was done by the Officers of the Revenue Enforcement as early as on 10.8.1977 and the said seizure was not done under the Customs Act and not by the Customs Officers and therefore there is no scope to invoke the provisions of Section 123 of the Customs Act. In support of his contention that the seizure took place on 10.8.1977 and by the Officers of the Enforcement Directorate, Shri Gagrat relied upon the panchnama drawn up on 10.8.1977 and a further panchnama drawn up on 12.8.1977. In the panchnama dated 10.8.1977 among other things, it was stated that “In the cabin of Shri Mukund K. Patel came across a steel cupboard which contained packets of rough and polished precious stones. The said officers after locking the said cupboard sealed it after affixing a paper seal which bears our signatures. The safety of the seal was undertaken by Mukund K. Patel, one of the partners of the said firm who came later. In the panchnama dated 12.8.1977, it was stated that the panchas found the seal in the almirah intact. Thereafter the Enforcement Officers broke open the seal and handed over two Godrej keys to the Customs Officers who carried out the search”. From the panchnamas referred to above, it is clear that the Enforcement Officers did not seize the packets containing rough diamonds. They only sealed the almirahs containing rough diamonds and took the keys with them. Though the action of the Enforcement Officer prevented Mukund or his father from opening the sealed cupboard, it cannot be said that there was actual seizure of the rough diamonds found inside the steel cupboard. A thing can said to have been seized only when it is taken out of the possession of the owner of person in control against his wish. Seizure amounts to deprivation of possession. The Enforcement Officers did not take possession of the rough diamonds. The actual seizure namely taking possession of the rough diamonds was done by the Customs Officers that too not when they conducted the search but on 19.8.1977 when the father and the son could not produce proof regarding licit imports of diamonds found inside the almirah. The contention of Shri Gagrat that seizure was not by the Customs Officer or was not under the Customs Act and therefore there was no scope to invoke the provisions of Section 123 of the Customs Act is not tenable. The seizure was by the Customs Officers under the Customs Act and in the reasonable belief that the Addl. Collector and the Board were justified in invoking the provisions of Section 123.
Points 3 to 5:
34. Under Section 111 any goods which are imported or attempted to be imported or are brought within the Indian Customs waters for the purpose of being imported, contrary to any prohibition imposed by or under the Customs Act or any other law for the time being in force becomes liable to confiscation. Section 122 provides for confiscation and penalties. It empowers the Officers of Customs to adjudge confiscation and penalty. Option to pay fine in lieu of confiscation is provided under Section 125 of the Act. Granting of option to pay fine in lieu of confiscation is not obligatory. It is in the discretion of the officer who orders confiscation. The discretion, no doubt, may have to be exercised-judicially and not capriciously or arbitrarily. The goods seized are rough diamonds. I They require an Import Licence for import. The burden of establishing the licit import was on the appellant but he did not discharge that burden. The| quantity found was also considerable. The explanation offered by the appellant was unbelievable. In the said circumstances, if the Additional Collector ordered absolute confiscation and if the Board has confirmed such an order, it cannot be contended that the Addl. Collector or the Board were unjustified in passing the orders which they had passed.
35. Section 112 provides for imposition of penalty for improper importation of the goods, or acquiring possession or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111. The quantum of penalty that could be levied, is also set out in that Section. The appellant was in possession of rough diamonds. He was unable to discharge the burden that they were licitly imported into India. Therefore the diamonds became smuggled diamonds. His explanation that they were given to him by Rajesh of Cherry Traders was rightly disbelieved. The evidence of Mukund disclosed that the appellant was concerned in disposing of the diamonds. Knowledge of the appellant that they are smuggled goods shall have to be gathered from the conduct and the circumstances established in the case. From the facts and circumstances established in this case, it could be safely said that the appellant was concerned in the disposal of smuggled diamonds knowing that they were smuggled, and therefore, no exception can be taken to the imposition of penalty on him.
36 As regards quantum of penalty, the Additional Collector had imposed Rs. 50,000/-. The value of the seized diamonds was more than Rs. 2 lakhs. The Board has confirmed the penalty imposed. There are no extenuating circumstances requiring the reduction in the amount of penalty. I see no reason to interfere with the quantum of penalty imposed on the appellant.
Point No. 6:
37. Shri Gagrat appearing for the appellant contended that the appellant was prosecuted under Section 135 of the Customs Act but was discharged by the Additional Chief Metropolitan Magistrate and in the said circumstances the penalty imposed on the appellant should be set aside and the Judgment of Additional Chief Metropolitan Magistrate should be respected. On behalf of the Respondent, it was urged that the two proceedings, namely criminal prosecution and adjudication are independent of each other the findings in one would not bind the other.
38. I have gone through the order of the learned Additional Chief Metropolitan Magistrate. The learned Magistrate held that the statement of Mukund Patel can be used as a relevant piece of evidence but he did not place reliance on the evidence of Mukund Patel because he considered Mukund Patel as an accomplice and there was no independent corroboration of accomplice’s evidence. Thus the learned Magistrate had resorted to the provisions of the Evidence Act, which was not made applicable to the adjudication proceedings. Further, in the Criminal Prosecution, the learned Magistrate came to the conclusion that there was no proof that the seized diamonds were of foreign origin. In the adjudication proceeding, no contention was taken that the seized diamonds were not of foreign origin. If in these circumstances, the learned Magistrate had discharged the appellant, the discharge order cannot, in any way, affect the adjudication proceedings. The learned Departmental Representative is right in contending that the two proceedings are independent of each other and the finding in one is not binding on the other. The adjudicating authority is not bound by the provisions of Criminal Procedure Code or the Evidence Act whereas the Criminal Court is bound by the said provisions. In the criminal prosecution the accused is not even required to open his mouth. The same is not the position in an adjudication proceeding. The discharge order does not, ‘in any way, invalidate the order of adjudication. This point is answered accordingly.
39. In the result, the appeal fails and the same is rejected.
Sd/- (K. Gopal Hegde)
Bombay 10.12.1985. Member (J)
40. As there is difference of opinion between the two Members regarding the levy of penalty on the appellant, the matter is referred to the President for referring the under mentioned point to one or more of the other members of the Tribunal.
Whether on the facts and in the circumstances of the case the levy of penalty of the appellant was not legal or unjustified.
Sd/- (K.S. Dilipsinhji) Sd/- (K. Gopal Hegde) Member (T) Member (J) K.L. Rekhi, Member (T) 1. As there was difference of opinion between the two learned Members who comprised the Bench, the President has assigned the matter to me for disposal under Section 129C(5) of the Customs Act, 1962. 2. After due notice and making available copies of the orders already recorded by the learned two Members, both sides were heard by me at Bombay today. Shri J.R. Gagrat, Advocate appeared for the appellant and Shri Section Senthivel for the Department. 3. Shri Gagrat stressed the points that the rough diamonds were not seized from the possession of the appellant but from possession of Shri Mukund, that the appellant's failure to rebut the statutory presumption under Section 123 (which made the goods liable for confiscation) could not amount to saying that the diamonds were necessarily smuggled diamonds and it could not amount to an automatic presumption of mens rea required for imposition of personal penalty under Section 112(b) and that the burden to prove the mens rea had to be independently discharged by the department which had not been done. 4. The learned representative of the department stated that Shri Mukund was only in temporary custody of the diamonds and that possession and ownership thereof rested with the appellant only. He asserted that the appellant had the knowledge that the diamonds had been illicitly imported and the penalty was, therefore, correctly imposed.
5. I have carefully considered the matter. I agree with brother Hegde that the presence or absence of mens rea has to be judged from the overall circumstances of this case. I particularly agree with his findings in paragraphs 32 and 35-37 of his order. The appellant himself admits that Shri Mukund was only in temporary custody of the diamonds. Shri Rajesh’s link with the subject diamonds has not been believed by the lower authorities as well as by both the earlier Members of the Tribunal for cogent reasons. If Rajesh was the real owner, it is curious that he did not come forward to file an appeal as the aggrieved party. He says that the appellant compensated him for the loss of diamonds. But how ? By cash ? By cheque ? There is no evidence of that. The diamonds were of the market value of about Rs. 4 lakhs. Not at all a small sum. Where did the appellant get the money from to compensate Rajesh ? Again, if Rajesh was the real owner, why should the appellant not leave the diamonds with him rather than with a third party (Mukund) ? Diamonds are a precious commodity. It is curious that Rajesh did not weigh them while giving them to the appellant nor did the appellant weigh them while giving them to Mukund. The conduct of the appellant throughout has been raising more questions rather than answering any I am satisfied that he was the real owner of their diamonds and he has the knowledge as to the illicit source through which they came and the fact that they were liable to confiscation under the Customs Act, 1962. The penalty imposed on the appellant is legally tenable and is justified. The penalty is not excessive. I uphold the penalty and reject the appeal.
Sd/- (K.L. Rekhi)
Bombay dt. 6.2.1986. Member (Technical)
FINAL ORDER
The point of difference in this appeal was referred by the President in terms of Section 129C(5) to the Third Member and that Member has since recorded his findings.
As per Section 129C(5), the appeal has to be disposed of in terms of the majority opinion. Accordingly, this appeal fails and the same is rejected.