Revenue wins appeal as tribunal wrongly shifted burden of proof in gold smuggling case under Section 123

HC allowed revenue's appeal against tribunal's order in smuggling case involving seizure of foreign gold, silver granules and Indian currency. Tribunal erroneously shifted burden of proof from respondent to department under Section 123 of the Act. Respondent's plea that gold bars were made from purchased old jewelry was inadequately substantiated without documentary evidence. Tribunal's finding that retracted statement was inadmissible was perverse as it failed to examine validity of retraction. HC restored adjudicating authority's order confirming confiscation and penalties, holding tribunal's conclusions were contrary to statutory scheme and lacked evidentiary basis.

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Issues Involved:
1. Voluntariness and retraction of statements.
2. Claim of gold being melted from old jewellery.
3. Burden of proof u/s 123 of the Customs Act.
4. Purity of gold and its implications.
5. Confiscation of cash as sale proceeds of smuggled gold.
6. Applicability of precedents regarding smuggling and burden of proof.

Summary:

1. Voluntariness and Retraction of Statements:
The revenue questioned the tribunal's decision not holding the statements of the respondent as voluntary. The statements made on 07.08.2018, 08.08.2018, and 25.07.2019 were in the respondent's handwriting and vernacular, suggesting voluntariness. The tribunal erred in not considering the retraction as an afterthought since it was made almost a year later without mentioning any threat or coercion initially.

2. Claim of Gold Being Melted from Old Jewellery:
The tribunal accepted the respondent's claim that the gold was melted from old jewellery, despite no such claim being made during the investigation nor any documentary evidence produced. The tribunal's acceptance of this claim was erroneous as the respondent failed to provide any proof of the gold's origin.

3. Burden of Proof u/s 123 of the Customs Act:
Section 123 places the burden of proof on the person from whose possession the goods are seized to prove they are not smuggled. The tribunal incorrectly shifted this burden to the revenue, despite the respondent failing to discharge it. The adjudicating authority and appellate authority found that the respondent could not produce any documents to support the legal possession of the gold, thus failing to discharge the burden u/s 123.

4. Purity of Gold and Its Implications:
The tribunal held that the gold's purity being 99.5% instead of 99.9% indicated it was not smuggled. However, this conclusion was flawed without proof that the gold came from melted old jewellery. The tribunal's finding that the melting process could be done at home was also without basis, as such a process requires expertise and chemicals.

5. Confiscation of Cash as Sale Proceeds of Smuggled Gold:
The tribunal ruled that the revenue failed to establish the cash seized as sale proceeds of smuggled gold. However, the respondent admitted in statements recorded u/s 108 that the cash was from smuggled gold sales. The adjudicating authority and appellate authority upheld the confiscation of the cash based on these admissions and the lack of documents proving the cash's legal source.

6. Applicability of Precedents Regarding Smuggling and Burden of Proof:
The tribunal did not properly consider precedents like the Supreme Court's decision in Collector of Customs, Madras vs. D. Bhoormul, which states that the burden of proof lies on the person from whom goods are seized if believed to be smuggled. The tribunal's decision was perverse and contrary to the established legal framework.

Conclusion:
The High Court allowed the appeal, setting aside the tribunal's order and restoring the adjudicating authority's order as affirmed by the appellate authority. The substantial questions of law were answered in favor of the revenue.

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