M. RAJAMANI Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE applicant filed this application for waiver of pre -deposit of penalty. After considering the submissions of both sides, as the matter is old one, we waive the pre -deposit of penalty and proceed to dispose of the appeal itself at the stage of stay petition hearing. The relevant facts of the case, in brief, are that on 23 -4 -1985, the Assistant Collector, Customs Preventive Section, attached to Customs Preventive Section, Madurai, searched the premises of the appellant situated at West Masi Street, Maduari, in the presence of the appellant and two independent witnesses and recovered 5 paper bundles and 1 cloth bag from the drawer of a steel table which contained Indian currency to the tune of Rs. 5,45,000/ -. The said officers recorded the statements of the appellant and others. The appellant in his statement stated that the said Indian currency recovered was the sale proceeds of contraband gold biscuits of foreign origin. The appellant in his statement stated the details of the procurement of the smuggled gold in respect of sale proceeds. The appellant was arrested and remanded to judicial custody on 23 -4 -1985. The said officers also recorded statements from various persons who have helped the appellant for smuggling of the gold. The appellant sent a representation dated 27 -4 -1985 to the Collector of Central Excise in which it is stated that one Shri S.S. Arumugam @ Rajarathinam of Srilanka who was a resident of Mellur, Madurai, was known to him. The same S.S. Arumugam on his request gave a loan of Rs. 5,50,000/ - on 22 -4 -1985 and thus the amount was seized by the Customs officers. He also attached a photocopy of the document dated 24 -4 -1985 and medical certificate dated 25 -4 -1985. During the enquiry, the Customs officers found that the concerned medical officer denied the authenticity of the medical certificate. A show cause notice dated 16 -10 -1985 was issued to various persons including the appellant proposing to confiscate the Indian currency and to impose penalty. By the impugned adjudication order dated 30 -9 -1988, the adjudicating authority absolutely confiscated the Indian currency under Section 121 of the Customs Act, 1962 holding that they represent the sale proceeds of contraband gold. He also imposed penalty of Rs. 25,000/ - on the appellant amongst others.

(2.) THE learned counsel for the appellant submits that the appellant took a stand before the adjudicating authority that the seized Indian currency was given by Shri S.S. Arumugam, who gave him as loan by executing a promissory note. He submits that Income Tax authorities initiated proceedings against the appellant. The matter went up to the Income Tax Appellate Tribunal. The appellant filed appeal before the Income Tax Appellate Tribunal, (ITAT) Madras. By order dated 31 -12 -1996, in I.T.A. No. 4329/MDS/89 for Assessment Year 1986 -87 (Shri Rajamani v. Dy. Commissioner of Income Tax, Special Range -I, Madurai), the Tribunal allowed the appeal of the appellant. The Tribunal held that Shri S.S. Arumugam @ Rajarathinam has lent the amount of Rs. 5,50,000/ - to the appellant. He also submits that the assessing officer have levied penalty of Rs. 3,83,183/ - which was challenged by the appellant before the Commissioner of Income Tax (Appeals), who has set aside the penalty. The Income Tax Department challenged the order of the Commissioner of Income Tax (Appeals) before the ITAT. By order dated 25 -7 -2003, the Tribunal dismissed the appeal filed by the Income Tax Department. He submits that the Income Tax authorities accepted the amount as declared income and therefore the same amount cannot be treated as sale proceeds of contraband gold.

(3.) AFTER hearing both sides and on perusal of the records, we find that the appellant at the time of seizure of the Indian currency stated that the amount in question was the sale proceeds of the contraband gold. It is seen that subsequently the appellant by his representation dated 27 -4 -1985 to the Collector of Central Excise, Madurai, stated that the amount in question was taken as loan from Shri S.S. Arumugam @ Raja Rathinam of Sri Lanka. We find that this issue went up to the ITAT. The Income Tax Officer by order dated 19 -9 -1989 for the Assessment Year 1986 -87 added the amount of Rs. 5,50,000/ - as borrowed from S.S. Arumugam of Melur during the previous year. The appellant filed appeal before the ITAT. By order dated 31 -12 -1996, the Tribunal held that the amount in question was lent by S.S. Arumugam alias Rajarathinam to the appellant and therefore the addition of the income is deleted and the appeal of the appellant was allowed. The relevant portion of the said order is reproduced below: - -