JUDGMENT P. Subramonian Poti, J. 1. Though the petitioner was a licensed dealer in gold earlier, at the time relevant for the purpose of this petition he held no such licence. On 4th June 1968 the Superintendent of Central Excise, Multiple Officers Range, Palghat searched the residential premises of the petitioner at Kongad. The search was made in the presence of the petitioner and two independent witnesses. As a result of the search the Superintendent seized certain items of primary gold under section 110 of the Customs Act, 1962 and the Defence of India Rules. Another item of primary gold, pieces of melted gold and gold ornaments were seized under the Defence of India Rules. Besides these he found Rs. 32,000 in Indian currency in a cloth bag inside an almirah and that too was seized by him and that seizure was purported to be because of an assumption that there was offence committed under section 112 (b) of the Customs Act consequent on which the currency was liable to confiscation under section 121 of the Customs Act, 1962. After explanation and hearing, Ext. P-3 final order was passed by the Collector of Customs, Cochin-3. The gold ingot, gold sovereigns and small pieces of gold described as serial Nos. 1 to 5 were confiscated under section 111 (d) of the Customs Act, 1962 read with section 22-A of the Foreign Exchange Regulation Act, 1947. A penalty of Rs. 35,000 was imposed under section 112 (b) of the Customs Act, 1962. The Indian currency of Rs. 32,000 found in the cloth bag in the almirah was confiscated under section 121 of the Customs Act with option to redeem it on payment of Rs.32,000. The matter was taken up in appeal to the Central Board of Excise and Customs, New Delhi and that was dismissed by Ext. P-5 order on the ground of non-compliance with the provisions of section 129 of the Customs Act, 1962. A revision was taken thereafter to the Government of India and on this the Central Government passed an order Ext. P-7, holding that there was no reason to interfere with the order in appeal. Ext. P-3 order as confirmed by Exts. P-5 and P-7 orders is challenged in this petition. 2. It is found from Ext. A revision was taken thereafter to the Government of India and on this the Central Government passed an order Ext. P-7, holding that there was no reason to interfere with the order in appeal. Ext. P-3 order as confirmed by Exts. P-5 and P-7 orders is challenged in this petition. 2. It is found from Ext. P-3 order that it does not concern the gold ornaments seized and it is mentioned at the hearing that independent proceedings under the Gold Control Act have been taken up in regard to such gold ornaments. With regard to the primary gold the petitioner does not urge any grievance and no relief is sought in regard to that. What is attacked is only the imposition of penalty of Rs. 35,000 and the confiscation of the Indian currency of Rs. 32,000. Therefore I need concern myself only with these two items. 3. In regard to the currency of Rs. 32,000 seized by the Customs Officers the petitioner furnished an explanation at the time of the search itself that the amount represented money entrusted to him by his brother-in-law one Ayyappan for safe custody in 1965. He evidently refuted the suggestion that it was the proceeds of smuggled goods. Evidently there was no enquiry other than questioning Shri Ayyappan, the brother-in-law, in June, 1968. He is seen to have stated that two years earlier he entrusted the petitioner with Rs. 46,000 out of which he had taken back Rs. 14,000. Whether this explanation was acceptable or not is a different matter. But even assuming that this explanation is not true whether that by itself is sufficient to hold that section 121 of the Customs Act, 1962 is attracted is the question for decision. 4. If smuggled goods are sold by a person having reason to believe that the goods are smuggled, the proceeds are liable to confiscation. This is the provision in section 21 of the Customs Act. The power of confiscation can therefore be exercised only when it is shown that smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods and further that what is seized is the sale proceeds thereof. The burden to establish this must necessarily be on the Customs authorities. The power of confiscation can therefore be exercised only when it is shown that smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods and further that what is seized is the sale proceeds thereof. The burden to establish this must necessarily be on the Customs authorities. There is no presumption to start with that any currency seized represents the sale proceeds of smuggled goods even if it be that the currency has been seized from the residence of one reputed to be a smuggler or who has been convicted earlier under the provisions of the Customs Act for offences concerning smuggling. As the section stands, it is necessary to establish by proper material that the currency represents the sale proceeds of smuggled goods, that the sale of smuggled goods was by a person having knowledge or reason to believe that they were smuggled goods. It is strange that the customs Collector should have assumed so in this case, evidently by reason of the fact that the Indian currency was found during a search in the course of which primary gold was seized. It appears to me that this has misled the collector to assume that the amount of Rs. 32,000 must be taken to be proceeds of sale of smuggled goods. Before me counsel for the Central Government has tried to support Ext. P-3 order and according to him the circumstances establish that the amount seized represented the sale proceeds of smuggled goods and these circumstances are, according learned counsel, sufficient to discharge the onus of proof or the part of the Customs authorities. Though many of those circumstances referred to by counsel appear to me to be absolutely irrelevant since I wish to do justice to counsel I would rather state all the circumstances narrated by him. They are, (i) when the officers went over to the house of the petitioner his wife is alleged to have said that the petitioner was not in the house at that time, that the search cannot be conducted and when nevertheless search was conducted in accordance with law the petitioner is said to have appeared, (ii) as a result of the search gold was recovered which has now been established to be smuggled gold by Ext. P-3 order, (iii) that the amount of Rs. P-3 order, (iii) that the amount of Rs. 32,000 seized is a fairly large amount and it is said to be money entrusted by one Ayyappan to the petitioner for safe custody in 1965. The said Ayyappan, when he was questioned in 1968, said that he had made the entrustment two years earlier which must be in 1966, (iv) the money was found inside a cloth bag on which it was written. "Komala Jewellery Mart", Ottappalam the name by which the petitioner was conducting his business earlier, (v) the petitioner though a licensed dealer in gold earlier, had no licence as such at the relevant time when the search was conducted, (vi) the petitioner having been found to have contravened the provisions of the Customs Act in Ext. P-3 and the Gold Control Act in other independent proceedings it is only logical to assume that the amount recovered from him is the amount representing price of smuggled gold. 5. I do not think a detailed examination of these reasonings is necessary or called for. I fail to see how the conduct of the wife in saying that the husband was not at home and the husband being found later when the search was commenced has any relevancy or connection in regard to the issue before me. The discrepancy in the statement of Ayyappan as to the year of entrustment is again quite immaterial. Even assuming that the explanation given by the petitioner is not satisfactory that has absolutely no relevancy in the matter of finding the requirements under section l21. The fact that smuggled gold was recovered by reason of the search is not sufficient to take proceedings in regard to money found in the petitioner possession and the very argument that therefore the Indian currency must also be found to be sale proceeds of smuggled goods is not attractive. Equally irrelevant is the fact that the money was found in a cloth bag on which it was written Komala Jewellery Mart, Ottappalam and the petitioner, though a licensed dealer, had no licence as such at the relevant time would be of no assistance to the Customs authorities. Counsel no doubt agrees that if each of these circumstances is taken by itself it would not be sufficient to establish the connection between the money and the smuggled goods which it is said to represent as sale value. Counsel no doubt agrees that if each of these circumstances is taken by itself it would not be sufficient to establish the connection between the money and the smuggled goods which it is said to represent as sale value. A number of irrelevant circumstances put together cannot make relevant circumstances. It is not unusual to find instances of similar wrong approach made by authorities, who are expected to decide matters in a judicial way, that though each one of the circumstances relied on in support of the case would not be relevant, all the circumstances put together may be of assistance in resolving the issue. What is required to be shown in the case is the origin of the amount of Rs. 32,000 seized. That has to be established by some rational connection. No attempt has been made in this direction but irrelevant arguments are seen to have been urged to find contravention of section 121 of the Customs Act, in Ext. P-3 order and these are pursued before this court in a rather more elaborate manner. But this cannot have Ext. P-3 to the extent it directs confiscation of Rs. 32,000. Hence the order in so far as it relates to the direction of confiscation of Rs. 32,000 under section 121 of the Customs Act is quashed and that direction vacated. The amount will be refunded to the petitioner forthwith. 6. The question of penalty is one on which, on the merits this court is not called upon to pronounce. Section 129 (1) requires that when the appeal relates to any duty demanded in respect of goods which are not under the control of Customs authorities or any penalty levied under the Act, any person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the duty demanded or the penalty levied. Therefore the petitioner had a duty to pay a penalty of Rs. 35,000 imposed under Ext. P-3 order as a condition precedent to the admission of his appeal. Therefore the petitioner had a duty to pay a penalty of Rs. 35,000 imposed under Ext. P-3 order as a condition precedent to the admission of his appeal. The proviso to section 129 reads: "Provided (That where in any particular case the Appellate Authority is of opinion that the deposit of duty demanded or penalty levied will Cause undue hardship to the appellant, it may in its discretion dispense with such deposit, either unconditionally or subject to such conditions as it may deem fit."� It is entirely in the discretion of the appellate authority to dispense with the deposit or order part of the deposit to be made under section 129 (1). This discretion is one which is expected to be exercised judicially. It must be so, for, if it be otherwise, it is open to exercise at the whims of the appellate authority. It would then be capable of abuse and moreover of discriminatory exercise. It may be dispensed with in the case of some appellants, while it may be declined in similar cases of others, and any provision which gives rise to any such exercise is liable to be successfully attacked on the ground of violation of Article 14 of the Constitution of India. I am referring to this only to show that the exercise of discretion Contemplated in the proviso is a judicial exercise. The appellate authority must take note of the relevant circumstances. What circumstances are relevant is not defined in the Act and it is left to the appellate authority to formulate its own rules as to what circumstances are relevant. But that it has exercised its discretion must appear in the order. If the complaint is that there has been an absolutely arbitrary exercise it is liable to be subjected to judicial review. The order must indicate that it is the product of relevant considerations. That will be possible only if the order indicates the reason for the decision. If it does not indicate this and the order does not show that the mind of the appellate authority has been exercised in any way and if judicial review is possible then the order cannot afford much assistance in such review. I am referring to this, only because it is not unusual to find orders such as Ext. P-5 in this case. I am referring to this, only because it is not unusual to find orders such as Ext. P-5 in this case. The application was filed under the proviso to section 129 (1) to dispense with penalty and it was urged that the petitioner was not in a position to pay penalty. Of course, on that it was open to the appellate authority to come to some decision or other and normally no court in exercise of the jurisdiction under Article 226 would sit in appeal against the decision so reached, though the court will not hesitate to interfere with the order if it is shown to be the result of considerations which are foreign to the matter which the appellate authority is expected to consider. Sri Retna Singh, the learned counsel appearing for the Customs authorities and the Central Government mentions that though the orders passed and communicated to parties may not normally disclose reasons, such reasons are very often found in the file and what is indicated in the communication is only the result. That is not a desirable practice. The person affected is the party concerned and he is interested in knowing why the discretion which the appellate authority should exercise has not been exercised in his favour or why any particular condition has been imposed. When an appellant pleads that he is unable to pay the duty or penalty normally he is not expected to substantiate the plea at the time of filing the petition and possibly he may be able to do this if an opportunity is given. But when without adequate reasons the appellate authority declines the request or insists on deposit that is not a proper exercise at all. The appellate authority will do well when exercising discretion under section 129 (1) to consider the application properly and communicate its decision to the appellants. 7. In view of the fact that in Ext. P-5 order the appellate authority does not appear to have properly considered the prayer for dispensing with the deposit of the penalty I think the proper course is to direct the appellate authority to go into the matter, afresh. The revisional authority also did not look into the matter and the complaint of the petitioner does not appear to have been properly understood. In these circumstances, I quash Exts. The revisional authority also did not look into the matter and the complaint of the petitioner does not appear to have been properly understood. In these circumstances, I quash Exts. P-5 and P-7 orders and direct the appellate authority whom the appeal against Ext. P-3 order was filed to consider the question of depositing the penalty. It will exercise the discretion properly under section 129 (1) of the Customs Act, 1962, and pass appropriate orders thereafter. To that extent the original petition is allowed. But I make it clear that the only question which the appellate authority need concern itself with is the imposition of penalty of Rs. 35,000. As to the question of confiscation of the Indian currency I have already directed that it should be returned forthwith. The original petition is allowed to the above extent and in circumstances I direct both the parties to suffer costs.