CESTAT allows appeal in gold seizure case after finding statements coerced and licit source proven under Section 123

CESTAT Hyderabad allowed the appeal in a gold seizure case involving allegations of smuggling and illicit transport. The tribunal found that seized gold bars of irregular shape and weight lacked foreign refinery markings. Statements recorded from appellants and staff were deemed unreliable as they appeared coerced rather than freely given. The statement under Section 108 was inadmissible due to denial of cross-examination rights under Section 138B. The claimant successfully proved licit source through evidence of converting old gold ornaments via refinery at Narasaraopet, discharging burden under Section 123. The tribunal set aside confiscation and penalties, ordering return of gold or sale proceeds with interest.

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Issues Involved:
1. Legitimacy of the seized gold.
2. Validity of the statements recorded under Section 108.
3. Compliance with Section 123 of the Customs Act regarding the burden of proof.
4. Admissibility of evidence under Section 138B of the Customs Act.
5. Imposition of penalties.

Summary:

1. Legitimacy of the Seized Gold:
The appellants were intercepted carrying gold without purchase documents. They claimed the gold was purchased in Coimbatore, but later retracted their statements. The owner, Mr. PVM Jagannadha Rao, asserted the gold was from melted old jewelry, supported by stock records, GST returns, and Income Tax returns. The Tribunal found no evidence of smuggled nature, noting the irregular shape and lack of foreign markings on the gold bars.

2. Validity of the Statements Recorded Under Section 108:
The statements of Mr. VK Kumar and Mr. TP were recorded under duress and later retracted. The Tribunal noted these statements were not voluntarily given and were dictated by officers. The statement of Mr. B. Suresh of Kubera Bullion also lacked credibility and was not freely given.

3. Compliance with Section 123 of the Customs Act:
The Tribunal found that the appellants discharged the burden of proof under Section 123 by providing business records, including stock registers, delivery challans, and financial returns, which supported their claim that the gold was part of their stock in trade.

4. Admissibility of Evidence Under Section 138B of the Customs Act:
The Tribunal held that the statements recorded under Section 108 were inadmissible due to the denial of cross-examination, thus rejecting them under Section 138B.

5. Imposition of Penalties:
The Tribunal set aside the penalties imposed on the appellants, finding that the evidence led by the appellants was cogent and not disproven by the Revenue.

Conclusion:
The appeals were allowed, and the impugned orders were set aside. Mr. PVM Jagannadha Rao was entitled to receive back the seized gold or its sale proceeds with interest. All penalties were also set aside.

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