TaxTMI 
TaxTMI 
The Hon'ble CESTAT, Allahabad Bench, in Shri Shyam Kishore Johari, Shri Roop Kishore Johari Versus Commissioner of Customs (Preventive) Lucknow - 2026 (6) TMI 405 - CESTAT ALLAHABAD held that a penalty under Section 112(b) of the Customs Act, 1962 cannot be sustained based on mere presumptions or uncorroborated statements. The Tribunal emphasised that the Department must provide clinching evidence of foreign origin and conscious knowledge of smuggling to establish penal liability.
Facts:
- On March 21, 2023, DRI officers of the Lucknow Zonal Unit intercepted a Toyota Urban Cruiser with 2,485 grams of gold and 8.5 kg of silver ornaments in which the appellants were travelling. The Department alleged that the gold bore the mark 'AL ETIHAD' (a bullion refinery based in Dubai, UAE) and was smuggled into India from Nepal.
- The appellants did not claim ownership of the seized metals but contested the imposition of penalties, explaining that they were simply returning from a religious trip to Deoghar (Jharkhand) where they had gone for the darshan of Baba Baidyanath. They stated that they had never visited Nepal and that their statements were obtained under coercion by the DRI officers.
- Consequently, the lower authorities confirmed and upheld a penalty of Rs. 8 lakhs each on both the appellants under Section 112(b) of the Customs Act, 1962. Aggrieved by this, the appellants filed appeals before the Tribunal.
Issues:
- Whether the Department is legally justified in imposing penalties under Section 112(b) of the Customs Act, 1962?
Held:
The Hon'ble CESTAT, Allahabad Bench in Shri Shyam Kishore Johari, Shri Roop Kishore Johari Versus Commissioner of Customs (Preventive) Lucknow - 2026 (6) TMI 405 - CESTAT ALLAHABAD, allowed the appeals and held as under:
- observed that to sustain a penalty under Section 112(b) in town-seizure cases, the Department must conclusively establish three essential elements: clinching evidence of foreign origin and illicit importation, proof that the person had conscious knowledge that the goods were smuggled, and a concrete physical nexus linking the individual to the handling or transporting of the offending goods.
- The Central Revenue's Control Laboratory (CRCL) test report indicated that the gold purity was 98.15% by weight, which suggested the gold contained silver. The Tribunal noted that imported foreign gold ordinarily possesses a purity exceeding 99.9%, meaning the investigation failed to conclusively establish the foreign origin or smuggling from Nepal.
- Held that the entire case of the Revenue was built on assumptions, presumptions, and uncorroborated confessional statements. It was also held that a mere confessional statement, without independent and credible corroborative evidence, is insufficient to sustain penal proceedings.
- Observed that any established physical connection or transportation of the goods (nexus) loses its legal significance in the absolute absence of satisfactory proof regarding the foreign origin and actual smuggling of the goods.
Hence, set aside the penalties of Rs. 8 lakhs each and allowed the appeals with consequential relief.
Relevant Sections:
Section 112(b) of the Customs Act, 1962: Penalty for improper importation of goods, etc.-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;
[(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher: