Confiscation of seized gold and penalties under s.112 Customs Act quashed due to involuntary confession, no proof smuggling

CESTAT allowed the appeal and set aside confiscation of six seized gold biscuits, waist belt, newspapers, and waist coat, along with penalties under s.112(a) and (b) of the Customs Act, 1962. The Tribunal held that the alleged confessional statement dated 14.02.2022 was not voluntary, having been recorded late at night under duress, with suspicious drafting and overlap with the panchnama. Relying on the principle that only voluntary confessions are evidentiary, CESTAT rejected reliance on this statement. As no independent evidence established the foreign or smuggled origin of the gold, the statutory burden on the Department was not discharged, rendering confiscation and penalty unsustainable.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the statements recorded under Section 108 of the Customs Act, 1962 were voluntary and could be relied upon as substantive evidence.

1.2 Whether, in absence of a voluntary and reliable confession, there was sufficient evidence to establish that the recovered gold was of foreign origin and smuggled, justifying confiscation under Section 111(b), (d), (p) of the Customs Act, 1962.

1.3 Whether penalty on the appellant under Section 112(b) of the Customs Act, 1962 was sustainable in the absence of independent evidence of knowledge and involvement in smuggling.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Voluntariness and evidentiary value of statements under Section 108 of the Customs Act

Legal framework

2.1 The Commissioner (Appeals) relied on judicial pronouncements holding that statements recorded under Section 108 of the Customs Act are in the nature of substantive evidence and that confessional statements, if found voluntary, can form the sole basis for conviction. Decisions referred to include: K.I. Pavunny, Illias, and Assistant Collector of Central Excise, Rajamundry v. Duncan Agro Industries Ltd., to emphasize that such confessions are admissible and can be relied upon if voluntary and truthful.

Interpretation and reasoning

2.2 The Tribunal examined the circumstances of recording of the appellant's statements dated 14.02.2022 and 15.02.2022, noting:

* Proceedings in the panchnama from 12:30 hrs to 20:30 hrs, followed immediately by recording of the statement from 21:00 hrs to 02:00 hrs at night.

* The statement was typewritten/computer-typed, with only the last paragraph written in the appellant's hand, despite his admitted ability to read and write Hindi, suggesting the statement was dictated and merely signed.

* The contents of the panchnama dated 14.02.2022 and the statement recorded on the same date were "exactly identical", indicating a lack of independent narration by the appellant.

* The overall sequence gives an impression that panch witnesses were present during the interrogation, yet they were not asked to sign the statement.

2.3 The Tribunal further noted that immediately after release on bail the appellant retracted his statement, asserting that the gold was not smuggled but legally procured in India. The appellant sent communications disputing the confessional contents and produced documents to support lawful acquisition.

2.4 It was also recorded that copies of the panchnama, seizure memo, inventory and statement dated 14.02.2022 were not supplied to the appellant until the High Court, by specific order, directed the authorities to provide them, which reinforced the appellant's grievance and the lack of transparency surrounding the recording and use of the statement.

2.5 In a subsequent statement dated 06.06.2022, the appellant again denied smuggling and reiterated that the gold had been legally acquired from jewellers in Bombay, producing supporting documents, which was consistent with his earlier retraction.

2.6 Applying the principle from K.I. Pavunny, the Tribunal observed that a confession can be relied upon only if it is voluntary. On the facts noted-late-night recording, similarity with panchnama, dictated nature of the text, immediate retraction, and subsequent consistent denial-the Tribunal held that the statement dated 14.02.2022 was not voluntary but recorded under duress.

Conclusions

2.7 The Tribunal held that the statements recorded under Section 108, particularly that dated 14.02.2022, could not be treated as voluntary or reliable and, therefore, could not be used as the basis to sustain the charge of smuggling or to justify confiscation and penalty.

Issue 2: Sufficiency of evidence to establish that the recovered gold was smuggled/foreign origin, and validity of confiscation under Section 111(b), (d) & (p)

Interpretation and reasoning

2.8 The Tribunal noted that six pieces of gold biscuits weighing 699.240 grams were recovered from the appellant's waist belt, bearing markings such as "SUISSE, 10 TOLAS, FINE GOLD, 999.9" and "ARG, UAE, 10 TOLAS, 999.0". The marking on the gold created only a "suspicion" about foreign origin.

2.9 The Commissioner (Appeals) had treated the appellant's Section 108 statement, admitting that the gold was smuggled from Bangladesh and that he had no documents, as sufficient to prove that the gold was of foreign origin and smuggled, and thereby justified confiscation under Section 111(b), (d), (p).

2.10 The Tribunal, having discarded the said statement as non-voluntary and unreliable, examined whether any other independent evidence had been produced to establish foreign origin and smuggled nature of the gold. It found:

* No independent material, other than the disputed confession, was brought on record in the Order-in-Original or in the appellate order to prove that the gold was smuggled or of foreign origin.

* The mere presence of foreign markings and purity inscriptions, without more, was not treated as conclusive evidence of smuggling in the circumstances of this case.

* The appellant had produced documents to show legal procurement of gold in India, which were not effectively rebutted or properly verified by the department in the adjudication or appellate proceedings.

2.11 The Tribunal emphasized that, with the confession excluded, the department had not discharged the burden of proving that the gold was smuggled or liable to confiscation under Section 111(b), (d), (p). The findings of smuggling and foreign origin recorded by the lower authorities rested essentially on the impugned confession, which could not be relied upon.

Conclusions

2.12 The Tribunal held that there was no sufficient or independent evidence to establish that the recovered gold was smuggled or of foreign origin so as to attract confiscation under Section 111(b), (d), (p) of the Customs Act, 1962. The order of absolute confiscation of the gold and associated items could not be sustained and lacked merit.

Issue 3: Sustainability of penalty under Section 112(b) of the Customs Act, 1962

Interpretation and reasoning

2.13 The adjudicating authority and the Commissioner (Appeals) had imposed and upheld penalty under Section 112(b) on the premise that the appellant was knowingly transporting smuggled gold and was "in hand in glove" in illicit trade, relying predominantly on the appellant's alleged admission in his Section 108 statement.

2.14 The Tribunal observed that once the alleged confessional statement was found to be non-voluntary and hence unreliable, there remained no acceptable evidence to show that:

* The appellant knew or had reason to believe that the gold was smuggled, or

* He had intentionally dealt with smuggled goods to render them liable to confiscation.

2.15 The Tribunal found that the lower authorities had not brought any independent corroborative material to establish the appellant's knowledge or involvement in smuggling; their conclusion was entirely built upon the impugned confession, which was rejected.

Conclusions

2.16 In the absence of a valid confession and in the absence of independent evidence of knowledge or involvement in smuggling, the imposition of penalty on the appellant under Section 112(b) of the Customs Act, 1962 was held to be unsustainable.

2.17 The Tribunal, therefore, set aside the confiscation and penalty orders as against the appellant and allowed the appeal.

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