Gold confiscation overturned as customs failed to prove foreign origin under Section 123 of Customs Act 1962

CESTAT Kolkata set aside the confiscation of gold and penalty imposed on appellant. Gold seized from appellant's brother's office premises had no foreign marking and showed 99.5-99.6% purity. In town seizure cases without foreign markings, customs officers must establish reasonable belief of foreign origin before invoking Section 123 of Customs Act, 1962. Since no evidence proved gold was of foreign origin or smuggled, confiscation under Section 111 was unjustified. Suspicion cannot substitute evidence. Appeal allowed.

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Issues Involved:
1. Legitimacy of the confiscation of gold.
2. Imposition of penalty on the appellant.
3. Applicability of Section 123 of the Customs Act, 1962.
4. Determination of the gold's origin (foreign or domestic).

Detailed Analysis:

1. Legitimacy of the Confiscation of Gold:
The appellant contested the absolute confiscation of gold seized from him, arguing that the gold did not have any foreign markings and was of a purity (99.5% to 99.6%) that did not indicate foreign origin. The appellant claimed the gold was obtained from his mother, supported by Wealth Tax Returns and Wealth Assessment documents for the year 2015-16. The appellant cited several precedents to support his contention that the confiscation was unwarranted.

2. Imposition of Penalty on the Appellant:
The adjudicating authority imposed a penalty of Rs. 3,50,000/- on the appellant while releasing the Indian currency and not imposing any penalty on Shri Rahul Malakar. The appellant appealed against this decision, arguing that the penalty was unjustified given the lack of evidence proving the gold was of foreign origin.

3. Applicability of Section 123 of the Customs Act, 1962:
The Tribunal examined whether the provisions of Section 123 of the Customs Act, 1962, which shifts the burden of proof to the person from whose possession goods are seized, were applicable. The Tribunal noted that for Section 123 to apply, there must be a reasonable belief that the goods are of foreign origin. In this case, the absence of foreign markings and the fact that it was a town seizure meant that the reasonable belief requirement was not met.

4. Determination of the Gold's Origin (Foreign or Domestic):
The Tribunal referred to the case of Nand Kishor Sumani, where it was held that gold without foreign markings and with a purity less than 99.99% could not be presumed to be of foreign origin. The Tribunal noted that the purity of the seized gold was 99.5% to 99.6%, and there were no foreign markings. Additionally, the appellant provided purchase bills and statements from the seller confirming the domestic origin of the gold.

Conclusion:
The Tribunal concluded that the confiscation of the gold was not justified as there was no reasonable belief that the gold was of foreign origin. Consequently, the confiscation order was set aside, and the penalty imposed on the appellant was also annulled. The appellant was entitled to claim the gold, and the appeal was allowed with consequential relief.

Final Judgment:
The Tribunal set aside the impugned order regarding the confiscation of gold and the imposition of the penalty on the appellant. The appellant was entitled to the return of the seized gold, and the appeal was allowed with consequential relief. The judgment was pronounced in the open court on 15.07.2024.

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