2024 (10) TMI 1736 - AT - Customs

Appeal dismissed; s.123 Customs Act supported reasonable belief of smuggling, confiscation and penalties upheld despite procedural lapse

CESTAT upheld confiscation and penalties, dismissing the appeal. The tribunal held authorities had reasonable belief under s.123 Customs Act that ... Smuggling of Gold - Section 123 of the Customs Act, 1962, of reverse burden of proof, rightly invoked or not - existence of reasonable belief that seized goods are smuggled goods - existence or not of evidence on a record proving that the order of confiscation is not sustainable - appellant was provided sufficient opportunities to defend their case or not - cross-examination of witnesses, vitiated. Whether the department has rightly invoked Section 123 of the Customs Act, 1962? - HELD THAT:- In order to attract the provisions of Section 123 of the Customs Act, 1962, it is essential that the intercepting/investigating officers got reasonable belief about goods to be the smuggled goods. The term smuggled goods means goods of foreign origin which have been brought to India through illicit channels/means without payment of applicable duties. Most commonly Foreign Marked Gold in large quantities is being smuggled into India through land, sea and air routes through illicit channels/means, viz; by making payments through Hawala Channels by the smugglers - The reverse burden of proof mandates issue of show cause notice to the person from whose possession the gold was seized/person claims to be the owner of seized gold to discharge the burden of proving that it has been procured through licit channels/means. For invoking Section 123 of the Act, it would be necessary that before any person could be called upon to prove that the goods seized from him were not smuggled goods, that the customs officer making the seizure must proceed upon the foundation of a reasonable belief inspired in him by some definite material by way of some definite information or otherwise so that he could be said to have seized the goods in a reasonable belief that they were smuggled goods as was held in Bapalal v. Collector of Central Excise [1964 (3) TMI 103 - HIGH COURT OF GUJARAT]. There were enough prima-facie grounds with the intercepting officers/DRI Officers to form a reasonable belief that the gold found in possession of the appellants since was concealed as being wrapped in black adhesive tapes in their trolley bags which was not even declared when appellants were trying to cross the customs barrier, is the smuggled gold. Resultantly, the burden of proving that gold was not smuggled had rightly been shifted upon the accused. Whether there is any evidence on a record proving that the order of confiscation is not sustainable? - HELD THAT:- What remains admissible is the appellant’s admission which needs no further proof in terms of Section 52 of Indian Evidence Act. Though the appellant have also reflected their grievance about denial of opportunity to cross-examine but it is observed that present is the case of recovery of concealed undeclared gold at the customs barrier, the document shown at the time of interception was insufficient and incomplete and that no evidence could still be produced by the appellant’s as required under Section 123 of the Customs Act, 1962 - the failure to give the opportunity of cross-examination to the appellants is violative of principles of natural justice. The department has produced enough of evidence to prove that the gold recovered from the appellants in concealed and undeclared form was nothing but the smuggled gold from Myanmar. The appellants could not produce any document of procession of such huge quantity of gold at the time of their interception at the airport. No cogent evidence could have been produced during the entire investigation nor at the time of the adjudication to falsify the voluminous evidence collected by the department against the appellants. Resultantly it is clear that gold seized (foreign origin) would fall under the definition of ‘Prohibited goods’ as per Section 2(33) of the Act; gold being dutiable goods can only be imported on payment of customs duty under the Act; as per the admission of the appellant himself, the transaction in the present case has to be treated as smuggling as defined in Section 2(39) of the Act. Thus, it is not only 8 number of gold bars having foreign markings but all 13+2 number of gold bars (8 gold bars recovered from Praveen Jalan, 5 gold bars recovered from Gautam More when they both were intercepted at airport and 2 gold bars were recovered from the premises of Prabhas jalan during search) have cogently been proved to have entered into India from Myanmar through Imphal/Mizoram by illegal means which the appellants after collecting those from a person from Imphal at a place called Six Miles, Gauhati, were carrying from Guwahati to Delhi after concealing those in black adhesive tapes and without declaring them. Hence the gold in question is the smuggled gold and was rightly seized on right reasonable belief of the officers at the time of interception, to be smuggled and that the appellant had not discharged his burden to show that it was not smuggled gold. There are no infirmity in the order under challenge while absolutely confiscating the said gold and imposing penalty on the appellants. There are no reason to differ from the findings arrived at in the order under challenge. Same is hereby upheld - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether Section 123 of the Customs Act, 1962 (reverse burden of proof in respect of specified goods) was rightly invoked where goods were seized in the domestic airport arrival area on a reasonable belief that they were smuggled goods. 2. Whether the material on record (including admissions, concealment, documentary evidence, call detail records, and corroborative statements) sufficed to sustain the finding of smuggling and justify absolute confiscation and imposition of penalties. 3. Whether retraction of statements and denial of opportunity to cross-examine witnesses vitiated the adjudicatory process or undermined reliance on the recorded admissions and investigative evidence. ISSUE-WISE DETAILED ANALYSIS Issue 1: Invokability of Section 123 - legal framework Legal framework: Section 123 shifts the burden to the person from whose possession specified goods (including gold) were seized to prove that the goods are not smuggled, but this statutory presumption operates only where the seizing officer had a reasonable belief, founded on definite material, that the goods were smuggled. Precedent treatment: The Tribunal follows established authority that the reverse burden arises only after seizure made on reasonable belief; the adjudicating authority must examine whether facts existed that would justify the seizing officer's reasonable belief (drawing on principles in prior decisions interpreting the predecessor provision). Interpretation and reasoning: The Court analyzed the facts known at interception (specific prior intelligence, denial of possession by intercepted persons, concealment of bars in adhesive tape inside trolleys, failure to declare, absence of licit documentation, and appraisal of gold purity) and concluded these amounted to definite material inspiring a reasonable belief. The Tribunal emphasized that the reasonable-belief prerequisite is assessed by reference to the factual matrix before the seizing officers at the time of seizure and that those facts were placed before the adjudicating authority. Ratio vs. Obiter: Ratio - Section 123 was rightly invoked because the seizing officers had definite material to form a reasonable belief that the goods were smuggled; this justified shifting the burden to the appellants. (Observations on how smuggling mechanisms operate and why reverse burden is necessary are explanatory.) Conclusion: The reverse burden under Section 123 was properly applied; the statutory condition of 'reasonable belief' was satisfied by prima facie material available at the time of seizure. Issue 2: Sufficiency of evidence to sustain confiscation and penalty Legal framework: Confiscation under the Customs Act requires proof that the goods are smuggled/prohibited; where Section 123 applies, the person in possession must discharge the burden to prove licit acquisition. Adjudication must consider admissions, documentary records, physical concealment, expert appraisal, corroborative statements, and admissible electronic evidence. Precedent treatment: The Tribunal applied settled principles that admissions recorded under statutory provisions are admissible and that documentary and circumstantial evidence, including certified call records under Section 65B (as applied procedurally), can corroborate investigations. Interpretation and reasoning: The Tribunal considered multiple strands: (a) voluntary admissions by intercepted persons that the bars were smuggled from Myanmar via Imphal and were melted/recast to remove foreign markings and that fake documents were prepared; (b) recovery of 13 bars at airport and 2 bars during searches, concealed in adhesive tape; (c) absence or falsity of documents purporting to show licit ownership (letterheads with blank particulars, denials by alleged suppliers); (d) appellant's documentary evidence from 2007-08 found insufficient to prove continued ownership up to 2016 or lawful transfer to the Guwahati firm; (e) call detail records and certified telecom certificates showing communications linking appellants to persons in Myanmar and to an intermediary in Guwahati; (f) corroborative statements of other persons and travel-agent/third-party evidence; and (g) possession of multiple SIMs in false names. The Tribunal found these elements formed a coherent chain of direct and circumstantial proof that the seized gold was of foreign origin smuggled into India and that the appellants had failed to discharge the reverse burden. The Tribunal also accepted expert appraisal evidence of purity and market value as relevant to identity and value of seized goods. Ratio vs. Obiter: Ratio - The aggregated evidence (admissions, concealment, falsified/absent documentation, corroborative witness statements, and telecom records) sufficed to prove smuggling and to sustain absolute confiscation and penalties where Section 123 applies and the possession-holder fails to rebut the statutory presumption. (Remarks about common smuggling practices and melting to remove markings are explanatory/contextual.) Conclusion: The record contained convincing and corroborated evidence that the goods were smuggled; appellants did not discharge the burden under Section 123; confiscation and penalty were correctly confirmed. Issue 3: Retraction of statements and denial of opportunity to cross-examine - effect on admissibility and fairness Legal framework: Admissions recorded under statutory provisions (e.g., statements under the Customs Act) are admissible; a subsequent retraction may be considered but must be made before the same authority to be effective. Principles of natural justice require opportunity for cross-examination where appropriate, but evidentiary admissibility of seizure-stage material and documentary proof is not always negated by lack of cross-examination where statutory and factual circumstances justify reliance on recorded evidence. Precedent treatment: The Tribunal relied on precedents holding that retraction not made before the same officer does not negate the original admission and that procedural irregularity in refusal of cross-examination can amount to violation of natural justice, which may require scrutiny of whether prejudice resulted. Interpretation and reasoning: The Tribunal found that the alleged retractions were not specific as to the admissions relied upon and were not recorded before the same officer; hence they did not effectively negate the earlier confessional admissions. On cross-examination, the Tribunal acknowledged that denial of opportunity to cross-examine was a violation of natural justice but examined whether that procedural lapse rendered the outcome unsafe. Given the weight of independent and corroborative evidence (documents, third-party denials, call records certified under admissibility provisions, physical concealment, expert appraisal, and other statements), the Tribunal concluded that the violation did not undermine the factual foundation for confiscation. The Tribunal expressly held that the admissible admissions remained probative under Section 52 of the Indian Evidence Act and that corroboration eliminated any undue prejudice from the cross-examination omission. Ratio vs. Obiter: Ratio - Retraction not made before the recording officer did not nullify the original admissions; while denial of cross-examination is a procedural defect, where overwhelming independent and corroborative evidence exists, such defect does not necessarily vitiate the order. (Observation that retractions must be addressed to the same authority is a statement of law applied to facts.) Conclusion: The purported retractions were ineffective; although denial of cross-examination amounted to a procedural lapse, the comprehensive corroborative evidence rendered the adjudicatory conclusion on smuggling and confiscation sustainable. Cross-references and integrated findings 1. The Court's finding on Issue 1 (invokability of Section 123) is integrated with Issue 2: once the reverse burden lawfully shifted, the appellants' failure to produce cogent proof of licit acquisition was decisive. 2. Issue 3 (procedural fairness) was considered in light of the sufficiency of substantive evidence; the Tribunal balanced the natural-justice defect against the totality of corroborative material and found no prejudice sufficient to overturn the substantive findings. Final Conclusion (Tribunal's dispositive hold) The materials before the Tribunal established a reasonable belief at the time of seizure, justified invocation of Section 123, and, given the appellants' failure to discharge the shifted burden together with robust corroborative evidence (admissions, concealment, false/absent documents, third-party statements, expert appraisal, and certified call records), the order of absolute confiscation and penalty was sustained; appeals were dismissed.