2023 (7) TMI 664 - AT - Customs

Tribunal Overturns Confiscation of Gold and Cash; Faults Lack of Evidence in Alleged Foreign Gold Case.

Shri Ajit Bhosle Versus Commissioner of Customs (Preventive), Kolkata

Shri Ajit Bhosle Versus Commissioner of Customs (Preventive), Kolkata - 2023 (386) E.L.T. 283 (Tri. - Kolkata) ISSUES PRESENTED AND CONSIDERED 1. Whether the Department/Revenue had a reasonable belief, supported by corroborative evidence, that the gold seized from the appellant's premises was of foreign origin/smuggled goods so as to justify invocation of provisions enabling confiscation and shifting the burden of proof. 2. Whether seizure and absolute confiscation of the seized gold and Indian currency, and imposition of penalty, were sustainable where the appellant produced documentary and testimonial material asserting licit acquisition and possession. 3. Whether proof of foreign origin can be inferred from isolated markings on one of several seized gold pieces and from the mere location of the premises (non-border urban premises) and from refusal or lack of full cooperation by the person searched. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Reasonable belief that seized gold was smuggled/foreign origin Legal framework: Confiscation provisions and statutory shifting of burden arise only where revenue establishes a reasonable belief that goods are smuggled/foreign origin; once such reasonable belief is shown, statutory provision may place burden on possessor to prove lawful origin. Precedent Treatment: The Tribunal referred to earlier decisions holding that revenue must first establish the existence of a reasonable belief based on facts and investigation before invoking the burden-shifting provision; mere suspicion or isolated indicia are insufficient. Interpretation and reasoning: The Court examined the facts - 12 cut pieces of gold found in a non-border urban workshop, only one piece bearing the marking 'MELTER ASSAYER', no testing or verification reports proving foreign origin, and absence of any corroborative investigation (no enquiries made of persons alleged to have delivered gold, no verification of claim by appellant's mother). The Court held that reliance on a single marked piece to classify all pieces as foreign origin was legally untenable. Further, absence of independent verificatory steps meant revenue failed to establish the foundational reasonable belief required to shift burden. Ratio vs. Obiter: Ratio - Revenue must establish reasonable belief by facts and investigation before invoking burden-shifting; isolated marking on one piece and absence of enquiries cannot constitute reasonable belief. Obiter - observations on ease of obtaining similar markings in domestic market and need for testing where relevant. Conclusion: The Department did not discharge the initial onus of establishing a reasonable belief that the goods were smuggled; therefore statutory burden-shifting provision was not attracted and confiscation on that basis was unsustainable. Issue 2 - Sufficiency of appellant's evidence to rebut smuggling allegation and sustain claim of licit possession Legal framework: When the possessor produces documentary and testimonial evidence of licit acquisition and lawful possession (trade licence, books of accounts, tax returns, asset schedules, statements identifying sources), revenue must undertake reasonable verification to rebut those claims before proceeding to confiscation and penalty. Precedent Treatment: Tribunal precedents recognize that production of purchase bills, business records, statutory filings and credible statements can discharge or substantially meet the possessor's burden in the absence of contrary prima facie proof by revenue; and that confiscation should not be ordered where revenue fails to investigate and rebut such evidence. Interpretation and reasoning: The appellant produced trade licence, profit & loss, balance sheets, fixed asset schedule, income tax returns and gave detailed statements identifying sources of gold (including maternal gift) and history of custom melting business. The Department neither tested the gold to ascertain foreign origin nor verified the appellant's claimed sources or examined the financial records to contradict the claimed cash earnings. The Court found revenue proceeded on assumptions and did not perform minimal enquiries required to displace the documentary evidence produced. Ratio vs. Obiter: Ratio - Production of credible, specific documentary and testimonial material imposes on revenue an obligation to make reasonable enquiries/testing to rebut licit possession; absent such enquiries, confiscation and penalties cannot be sustained. Obiter - remarks on the probative value of specific types of records in varying factual contexts. Conclusion: The appellant's documentary and testimonial material, uncontradicted by verifications or testing by revenue, sufficed to undermine the confiscation/penalty; consequently confiscation and penalty were set aside. Issue 3 - Legitimacy of inferring smuggling from premises location, cooperation level and isolated markings Legal framework: Inferences about smuggling or illicit import require objective indicia and corroborative facts (route, customs-area seizure, provenance, forensic or market enquiries); mere non-border location, lack of perfect cooperation, or an isolated marking do not by themselves meet legal standard. Precedent Treatment: Earlier authorities emphasise that possession in non-border areas or workshops is not dispositive and that markings available in domestic market cannot be treated as conclusive proof of foreign origin without testing/verification and investigation. Interpretation and reasoning: The Court noted the premises were in a metropolitan city (not a border town), and the presence of a single stamped piece labelled 'MELTER ASSAYER' did not establish all pieces were foreign. The Department's failure to test, to make enquiries from alleged consignors or to verify claimed maternal gift or accounting records meant conclusions drawn from location or alleged non-cooperation were speculative. The Court held assumptions about non-cooperation and foreign origin were legally insufficient. Ratio vs. Obiter: Ratio - Isolated indicia (single stamped piece, location) without follow-up verification do not justify confiscation or inference of smuggling. Obiter - comments on investigative steps authorities ought to take (testing, enquiries) when such indicia exist. Conclusion: The factors relied upon by revenue (location, alleged non-cooperation, single marking) were insufficient, in the absence of proper verification, to justify treating the seized gold as smuggled/foreign origin. Final Disposition and Operative Conclusion Because revenue failed to establish reasonable belief of smuggling and did not adequately investigate or rebut the appellant's documentary and testimonial evidence of licit acquisition, the confiscation of the gold and cash and the penalty were set aside. The Appeal was allowed with consequential relief as per law.