Possession of Notified Items without Proof of Legal Procurement attracts Section 112(b)

The Hon'ble CESTAT, Eastern Zonal Bench: Kolkata, in Shri Ashish Halder Versus Commissioner of Customs (Preventive), Kolkata - 2026 (4) TMI 677 - CESTAT KOLKATA held that while the absolute confiscation of smuggled gold is justified when the possessor fails to prove its legal source, the penalty under Section 112(b) may be reduced if the individual is earning a small fee.

Facts:

Shri Ashish Halder('The appellant') was intercepted near Sealdah carrying 12 pieces of gold biscuits weighing 1199.570 grams, which bore foreign inscriptions and high purity levels. He failed to produce any documentation supporting legal possession or procurement of the gold. During the investigation, the appellant claimed to be a mere carrier for a person named Md. Latifuddin. However, the mobile number provided was registered to a different individual, Md. Iyar Ali Mondal, who denied ownership and was subsequently exonerated.

The adjudicating authority ordered the absolute confiscation of the gold and imposed a penalty of Rs. 6,00,000/- under Section 112(b) of the Customs Act, 1962, a decision later upheld by the Commissioner (Appeals).

Issues:

Whether the absolute confiscation and the quantum of penalty imposed under Section 112(b) were sustainable?

Held:

The Hon'ble CESTAT, Eastern Zonal Bench: Kolkata, in Shri Ashish Halder Versus Commissioner of Customs (Preventive), Kolkata - 2026 (4) TMI 677 - CESTAT KOLKATAheld as under:

• Observed that gold is a notified item under Section 123 of the Customs Act, 1962. Consequently, the person in possession is legally required to prove the source of procurement, which the appellant failed to do.
• Held that as this was a clear case of smuggling where the appellant lacked any supporting documentation, the absolute confiscation of the gold and the imposition of a penalty under Section 112(b) were legally sound.
• Noted that the appellant was only a carrier earning a small amount for the transportation, the Tribunal reduced the penalty from Rs. 6,00,000/- to Rs. 1,00,000/-

Relevant Sections:

• Section 112(b): Any person (b) who acquires possession of 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, shall be liable,-

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding the value of the goods or five thousand rupees], whichever is the greater;

• Section 123: Burden of proof in certain cases.-

(1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be-

(a) in a case where such seizure is made from the possession of any person,-

(i) on the person from whose possession the goods were seized; and

(ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person;

(b) in any other case, on the person, if any, who claims to be the owner of the goods so seized.]

(2) This section shall apply to gold, [and manufactures thereof], watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify.