By TIOL News Service

PATNA, OCT 04, 2016: ON 04.11.1950, the C.I.D. Branch of Bombay Police instituted a case against Late Santo Kumar Mitra for defalcation of Government money when it seized, amongst others, foreign-marked gold bars from his residential premises in Bombay.

The case of the police was that out of the defalcated money, Late Mitra acquired movable and immovable properties. Mitra was tried for the offences under Sections 409, 420, 467 and 120B of the Indian Penal Code. Mitra was convicted and a fine of Rs.15lacs was imposed upon him and he was also awarded substantive sentence. After serving of the sentence of imprisonment, Mitra died.

The Commissioner passed an order in January 1993, after conclusion of trial, to return valuables in the form of ornaments and gold of Indian and foreign origin to Smt. Nirmala Mitra after she deposited Rs. 17,95,375/- towards the fine and other awards.

After this order was passed, the AC, CEX filed a petition before Judicial Commissioner to the effect that the SBI, Main Branch, Ranchi should give delivery of the valuables to Smt. Nirmala Mitra whereas foreign origin gold may be kept in the custody of the SBI till necessary inquiry and investigation is made by Central Excise.

In terms of the liberty granted by the Judicial Commissioner, the AC, CE passed a detention order on the ground that there is reason to believe that the gold of foreign origin is illegally imported in India.

A seizure memo was prepared mentioning that the goods have been seized from Smt. Nirmala Mitra and who is a signatory to the same.

SCN was issued for confiscation of the said gold u/s 111(d) and 111(p) and imposition of penalty u/s 112(b) of the Customs Act, 1962.

The Adjudicating Authority confiscated the foreign marked gold weighing 19831.805 gms and also imposed a penalty of Rs.1,00,000/-.

The CEGAT allowed the appeal in June 2001 and, therefore, the Revenue is before the Patna High Court.

The following are the grounds on which the Tribunal allowed the appeal and set aside the order of confiscation and penalty imposed–

++ There was no seizure by the customs authorities under the Customs Act so as to invoke the provisions of section 178A of the Sea Customs Act, 1878 or section 123 of the Customs Act, 1962 against the appellants for placing the onus upon them as regards the non-smuggled nature of the gold in question;

++ Onus to prove non-smuggled nature of gold was not on the appellant (the respondent herein) as when the gold in question was seized by the police in the year 1950, the provisions of Section 178A of the Sea Customs Act, 1878 or the provisions of Section 123 of the Customs Act, 1962 were not in operation;

+ Commissioner has not referred to any positive evidence on record to show that the gold found from the possession of Sri Mitra was illegally smuggled into the Country, as the Revenue could not produce any evidence as regards the illegal character of the gold in question. Therefore, the same cannot be presumed to be smuggled one. The Tribunal referred to the statement of Sri Mitra recorded at the time of seizure and during investigation that gold in question was purchased by him from Reserve Bank of India through brokers. Since the prosecution case before the Criminal Court was that the gold was acquired by Sri Mitra by defalcation of money during the period 1941 to 1949, therefore, there is no evidence produced by the Revenue to show that the gold was smuggled and acquired illegally in the year 1950.

As mentioned, the department is before the Patna High Court against this order of Tribunal.

Extensive submissions were made by both sides.

The High Court while allowing the Revenue appeal observed thus -

++ The order passed by the Judicial Commissioner on 8th of January, 1993 as reproduced in Paragraph 4 of the order is that Smt. Nirmala Mitra shall give an undertaking to the effect that she will keep the gold of foreign origin in safe custody of the State Bank of India and Central Excise would be at liberty to take legal steps with regard to gold of foreign origin after the same is deposited by Smt. Nirmala Mitra in safe custody. Thus, the goods came in symbolic possession of Smt. Nirmala Mitra and were in actual custody of the State Bank of India.

++ It is thereafter the Customs Authorities have called upon the Bank to produce the goods including foreign marked gold bars and taken control of such goods after notice to the respondent on 4th of March, 1993. Therefore, the seizure of the goods is not from the police but after the goods were symbolically returned to Smt. Nirmala Mitra but kept in joint custody by virtue of an order passed by the Judicial Commissioner.

++ Since there is no challenge to the order passed by the Judicial Commissioner, the physical possession of the foreign gold bars shifted from the police to Smt. Nirmala Mitra though there was restraint on physical delivery of goods to her. It is thereafter, the goods were actually seized by the Customs Authorities when a notice was served on the Bank and to Smt. Nirmala Mitra for seizure of such goods. Thus, the goods came into symbolic possession of Smt. Nirmala Mitra and the finding recorded by the Tribunal to the contrary is not tenable in law (and, therefore, not sustainable).

++ Under Section 178 of the of the Sea Customs Act, 1878, any officer of the Customs can seize anything liable to confiscation. The goods were seized by the Custom Authorities on 4th of March, 1993 on the reasonable belief that they are liable to confiscation; that they have been imported into India illegally. The violation is of the prohibition contained by Notification dated 25th of August, 1948. The goods were seized by the Bombay police in the year 1950. Though, the seizure under the Act was on 4th of March 1993 but the relevant time to consider the legality of import is the year 1950 or prior thereto.

++ The stand of the respondent before the police as well as in written reply to the Custom Authorities is that Sri Mitra purchased the foreign marked gold bars from the Reserve Bank of India through brokers. The stand of the respondents that it was purchased between the years 1941 to 1949 is not made out.

++ The requirement of permission from Reserve Bank of India came to be introduced only by notification dated 25th of August, 1948. Prior thereto, there was no prohibition of import of gold. Therefore, once Sri Mitra has taken a stand of purchase of foreign marked gold bars from the Reserve Bank of India, it shows that the time of import was after 25th August 1948. It is for him or for his legal heirs to prove the purchase of gold from Reserve Bank of India any time.

++ Though Section 178-A puts the onus of proof with the person from whom recovery was effected but even prior thereto, the Custom Authorities could prove such facts to shift the burden on the respondent to show that the goods were not smuggled unauthorizedly or were purchased through the authorized sources.

++ Since undisputedly the gold bars are of foreign marking, therefore, they have been proved to be imported. The stand of Sri Mitra and later of his wife is that they have purchased the gold bars through brokers from Reserve Bank of India but in the absence of any proof of purchase from Reserve Bank of India, the initial burden which was on the Customs shifted to the respondent and the respondent having failed to prove the purchase, the Tribunal erred in law in holding that Sri Mitra or his wife discharged the onus only by the assertions that they have purchased it from the brokers.

++ To avoid the rigour of prohibition, the onus was on the respondent being a fact within his special knowledge, thus, in terms of Section 106 of the Evidence Act, the onus was on Sri Mitra and thereafter his wife to prove that the gold imported is prior to prohibition vide notification dated 25th of August, 1948 and or has been purchased from the Reserve Bank of India.

Concluding that the seizure and confiscation of the foreign marked gold bars is legal and proper as such gold bars were proved to be brought into India after the prohibition on 25th of August, 1948, the order of the Tribunal holding otherwise was held to be unsustainable.

The order passed by the Adjudicatory Authority was restored and the Revenue appeal was allowed.

(See 2016-TIOL-2328-HC-PATNA-CUS)