2023 (5) TMI 348 - AT - Customs

DRI officers competent under Customs Act. COVID-19 extension valid. Confiscation overturned. Right to cross-examine upheld. Penalties unjustified.

Shri Daleep Kumar Verma Proprietor of M/s. Shreeji Traders & Manufacture, Shri Rohit Kumar Suri and Shri Karan Sehdev Proprietor of M/s. K.S. Traders & Enterprises Versus Commissioner of Customs (Preventive), Shillong

The tribunal held that the DRI officers are competent to initiate proceedings under Section 124 of the Customs Act, 1962. The Show Cause Notice issued ... Confiscation - gold bangles - gold biscuit - no foreign marking found on the seized gold - competence of officers of DRI to initiate the proceedings under Section 124 of Customs Act 1962 - time limit for issuance of SCN - Denial of right to cross examine the Expert who has given the certificate - Burden of proof - Denial of right to cross examine the Expert who has given the certificate - Retraction of statements of Appellant Rohit Kumar Suri and the Noticee Harshit Gatkhar - Penalty imposed under section 112 of the Customs Act 1962. Jurisdiction - competence of officers of DRI to initiate the proceedings under Section 124 of Customs Act 1962 - HELD THAT:- This issue has been settled by the decision of the Hon’ble Madras High Court in the case of M/S. N.C. ALEXENDER VERSUS THE COMMISSIONER OF CUSTOMS, CHENNAI II COMMISSIONERATE, CHENNAI [2022 (6) TMI 723 - MADRAS HIGH COURT] wherein the Hon’ble Madras High Court has held that officers of the DRI were competent to issue Show Cause Notice under Customs Act 1962 after the amendments to Section 3 of Customs Act 1962, by Finance Act, 2022 - Thus, there is no substance in the argument of the Appellant and the Notice issued by DRI in this case is valid and legally sustainable. Time Limitation for issuance of SCN - HELD THAT:- Section 110(2) read with Section 124 stipulates that if no Show Cause Notice issued within 6 months of seizure of goods, the goods shall be returned to the person from whose possession the goods were seized. In the present case, the Adjudicating Authority has given a clear findings on this issue in the Order-in-Original. In the said Order, it is stated the investigation could not be completed within six months as it involved analysis of voluminous records related to smuggling of gold. It was not possible to issue the Show Cause Notice as stipulated under Section 110(2) of the Customs Act, 1962 i.e. within a period of six months from the date of seizure of the goods i.e. 90 Gold pieces of foreign origin and silver bar. Therefore, extension of time by another six months was sought from Commissioner, Customs (Preventive), NER, Shillong vide letter dated 09.11.2019 - the Commissioner of Customs (Prev) NER, Shillong has granted extension of time for issue of the Show Cause Notice for a period of six months from 16/11/2019. The Show Cause Notice in this case was issued on 04.09.2020 . Further, in view of COVID-19, Hon’ble Supreme Court has allowed exclusion of the period from 15/03/2020 to 02/10/21 for computation of the period of limitation for any proceedings, which is applicable to quasijudicial proceedings like issue of Show Cause Notice also. Thus, the Notice issued on 04/09/2020 was not hit by the limitation. Seizure and subsequent confiscation - no foreign marking found on the seized gold - HELD THAT:- The gold bangles seized from Indigo airlines, does not have any foreign markings. They were claimed by Mr Karan Sehdev of KSTE that they have sent the raw gold for job work to M/S STM, Imphal. The gold was purchased by them from indigenous sources, but DRI Officers have not taken into account the evidences submitted by them about their legal purchase in India. The goods were dispatched along with an Invoice raised by the job worker. All these documents indicate that the raw gold was indeed received by M/S STM, Imphal from M/S KSTE, New Delhi for job work and they were dispatched after completion of the job work by M/S STM, Imphal. There is no evidence available on record to prove that the gold were smuggled from Myanmar. Except the statements of the Co Noticces, which were later retracted, there is no other evidence available to establish the smuggled nature of the gold - the gold jewellery which were dispatched under proper Invoice are not liable for confiscation. Burden of proof - HELD THAT:- As per Section 123 of Customs Act, 1962, the burden of proving that the goods are not smuggled, lies on the person from whose possession the goods were seized - The gold bangles 4960.090 grams sent vide invoice No. J0037 dt. 17.05.2019 to M/S KSTE by M/s. STM was seized by DRI on 17.05.2019. Thus, it reveals that this is not the first time M/S STM are processing the gold and returning the same back to M/S KSTE. On many occasions earlier M/s KSTE have sent gold to M/S STM and received them back after the job work. It cannot be presumed that all the gold jewellery sent after job work on earlier occasions were also made out of smuggled gold. The present consignment covered by Invoice no. J 0037 dated 17/05/2019 was part of the gold received earlier and returned back now after job work. The documents submitted by the Appellants clearly indicate that the gold were purchased from indigenous sources. The provisions of section 123 are not applicable to indigenously procured gold. The Appellants also relied upon the decision in the case of Balanagu Naga Venkata Raghavendra vs CC Vijayawada [2021 (2) TMI 612 - CESTAT HYDERABAD], where in it has been held that the burden under section 123 will not shift on the Appellants when the seizure of gold without foreign markings are seized from city. Thus, the burden under Section 123 of Customs Act, to prove that the gold is not smuggled one, does not lie on the Appellants, in this case. Denial of right to cross examine the Expert who has given the certificate - HELD THAT:- The purity of silver cannot be the basis to construe that the gold is of foreign origin. The claim of the Appellants is agreed upon. The purity of the gold alone cannot be a determining factor whether the gold is of foreign origin or not. As discussed in para 19 above, the Appellant has produced evidence to the effect that the gold were procured from domestic sources. Hence, we hold that no weightage can be given for the certificate of purity issued by the Expert, to establish its foreign origin. Retraction of statements of Appellant Rohit Kumar Suri and the Noticee Harshit Gatkhar - HELD THAT:- The Impugned Order mainly relied upon the statements of Rohit Kumar Suri and the Harshit Gatkhar to establish the foreign origin nature of the gold. Other than the statements, there is no other evidence available on record to show that the gold were smuggled into the country from Myanmar. The silver bar is of Indian origin. It is incorrect to rely only on the statements of the co-accused without any corroboration, to prove the smuggled nature of the gold. It is a settled law that the statement of the co-accused cannot be relied without any independent corroboration. The Tribunal in the cases of PR. COMMISSIONER OF CUSTOMS (PREV.) DELHI VERSUS SH. AHAMED MUJJABA KHALEEFA [2018 (5) TMI 1681 - CESTAT NEW DELHI] dismissed the appeal of Revenue holding that jewellery not bearing any foreign marking – other than statement of passenger no other proof produced by Revenue to substantiate the claim that jewellery were smuggled into India. Thus, the gold and silver bar cannot be confiscated based on the retracted statements alone. Penalty imposed under section 112 of the Customs Act 1962 - HELD THAT:- The Appellants stated that the gold was purchased from indigenous sources against statutory invoices. There is no evidence on record to show that the 90 gold bangles and silver bar were of foreign origin and smuggled into the country. In the absence of any evidence to establish that the gold and silver bar were smuggled ones, no penalty is imposable under Section 112 of the Customs Act 1962. Penalty under section 112(b)(i) of Customs Act, 1962 on various persons - HELD THAT:- Under section 112(b)(i) penalty is imposable when the person is found to be dealing with goods for which prohibition is in force. The gold bangles and the silver bar dealt by the Appellants were established to be of Indian origin and hence not prohibited goods. Rohit Kumar Suri and Harshit Gatkhar are employees of the Appellant STM. They have carried out the job work as directed by their employer Daleep Kumar Verma. The penalty provisions invoked against M/s. KSTE and its proprietor M/s. Karan Sehdev is legally not sustainable, as they have established that the gold sent by them to STM for job work was purchased from indigenous sources. There is no documentary evidence available on record to establish the role of Daleep Kumar Verma - penalty is not imposable on them under section 1129B)(i) of Customs Act, 1962. Since, the violations as alleged in the Show Cause Notice are not established, the confiscation of the above said items are not sustainable - the confiscation of 90 gold strips and silver bar are not sustainable. The confiscation of TVS Scooter, one lap top and some other items as mentioned in Sl. No 34,35 and 36 of the OIO, not sustainable. The penalties imposed on the Appellants as mentioned in Sl No 38, 39,40 and 41 of the OIO, not sustainable. Appeal allowed. Issues Involved:1. Competence of DRI officers to initiate proceedings under Section 124 of Customs Act, 1962.2. Validity of the Show Cause Notice issued beyond the prescribed time limit.3. Legality of confiscation of gold bangles and silver bar.4. Burden of proof under Section 123 of Customs Act, 1962.5. Right to cross-examine the expert who provided the opinion on the gold's origin.6. Reliance on retracted statements of co-accused.7. Imposition of penalties under Section 112 of the Customs Act, 1962.Summary:Competence of DRI Officers:The appellants argued that DRI officers are not competent to initiate proceedings under Section 124 of the Customs Act, 1962. They cited the case of Canon India Pvt. Ltd. v. Commissioner of Customs. However, the tribunal referred to the decision of the Hon'ble Madras High Court in N. C. Alexender Vs Commissioner of Customs, which held that DRI officers are recognized as Officers of Customs post the amendments to Section 3 of the Customs Act, 1962 by the Finance Act, 2022. Thus, the tribunal held that the Notice issued by DRI is valid and legally sustainable.Validity of Show Cause Notice:The appellants contended that the Show Cause Notice was issued beyond the six-month period stipulated under Section 110 of the Customs Act, 1962. The tribunal found that the Commissioner of Customs (Prev) NER, Shillong had granted an extension for issuing the Show Cause Notice. Additionally, the Supreme Court allowed the exclusion of the period from 15/03/2020 to 02/10/21 for computation of the limitation period due to COVID-19. Therefore, the notice issued on 04/09/2020 was not hit by limitation.Legality of Confiscation:The appellants argued that the seized gold bangles and silver bar had no foreign markings and were of Indian origin. They provided evidence that the gold was sent for job work and purchased from the Indian market. The tribunal found merit in this argument, noting that there was no evidence to prove the gold was smuggled from Myanmar. The tribunal relied on precedents which held that Indian origin gold cannot be confiscated without proof of smuggling. Thus, the confiscation of the gold bangles and silver bar was not sustainable.Burden of Proof:Under Section 123 of the Customs Act, the burden of proving that the goods are not smuggled lies on the person from whose possession the goods were seized. The appellants provided evidence that the gold was procured from indigenous sources. The tribunal held that the burden of proof under Section 123 does not apply to indigenously procured gold, and thus, the appellants had discharged their burden.Right to Cross-Examine:The appellants were denied the right to cross-examine the expert who certified the gold as of foreign origin based on its purity. The tribunal agreed with the appellants that purity alone cannot determine the foreign origin of gold. The tribunal held that the expert's certificate did not hold weight in establishing the gold's foreign origin.Reliance on Retracted Statements:The tribunal noted that the retracted statements of the co-accused were the primary evidence relied upon by the department to prove the foreign origin of the gold. The tribunal held that retracted statements without independent corroboration cannot be relied upon. Therefore, the confiscation based on these statements was not sustainable.Imposition of Penalties:The appellants argued that penalties under Section 112 of the Customs Act were not justified as the gold was of Indian origin. The tribunal found no evidence to establish that the gold and silver bar were smuggled. Thus, penalties imposed under Section 112 were not sustainable.Conclusion:The tribunal set aside the Impugned Order passed by the Commissioner (Appeals) and allowed the appeals filed by the appellants, holding that the confiscation of the gold bangles and silver bar, as well as the penalties imposed, were not sustainable.