2024 (10) TMI 19 - AT - Customs

Appeal partially allowed: 7 gold bars with foreign markings confiscated under Section 111(d), 3 unmarked bars released

Kamal Kant Kulthia Versus Principal Commissioner of Customs-New Delhi (Prev.)

CESTAT New Delhi partially allowed appeal challenging confiscation of 10 gold bars under Customs Act, 1962. Court held that Section 123 burden of proof ... Confiscation - penalties under Section 112 and 114 AA of the Customs Act, 1962 - 10kg of gold (10 gold bars of one kg each) with the blue colour suitcase which was used to conceal the said gold along with cash - admission of smuggling - invocation of Section 123 of the Customs Act, 1962 - existence of evidence on a record proving that the order of confiscation is not sustainable, or not. Whether the department has rightly invoked Section 123 of the Customs Act, 1962? - HELD THAT:- For invoking Section 123 of the Act, it would be necessary, 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] - in the present case, there was reasonable belief with the DRI officers about the impugned gold to have been the smuggled one. However, since there were no foreign markings on three out of 10 seized gold bars and Shri Dharmender Kumar had stated about those to be melted out of old gold jewellery. The very basis of ‘reasonable belief’ of smuggling i.e. the foreign origin of the 3 bars is missing. In the light of this discussion Hence, there are no infirmity when section 123 has been invoked by the investigation agencies. with respect of 7 gold bars having foreign markings for remaining three gold bars the burden was on the department to prove that those are also of foreign origin. Whether there is any evidence on a record proving that the order of confiscation is not sustainable? - HELD THAT:- Having come to the conclusion that the gold seized of which the appellant claimed to be the owner if fails to prove by any valid documents of its purchase, gold has to be treated as 'prohibited goods' and gold falls under the category of 'dutiable goods' and if the liability to pay the customs duty is not discharged by necessary implication the seized gold becomes 'smuggled goods', are liable for confiscation under Section 111(d). Also absolute confiscation shall be justified where the trail of the events show that the possessor or owner of such gold is engaged in procuring gold of foreign origin in illegal. manner and the multiple stands taken by him on the face of it were false. Reverting to the facts of the present case, the burden of proof with respect to 10 gold bars seized from Shri Dharmendra Kumar employee of the appellant has already been bifurcated. It has been held above that with respect to 7 bars having foreign markings the burden of proof is upon the appellant in terms of section 123 of the Act to prove that 7 of those were not smuggled gold. Whereas for the remaining three bars since there was nothing except those were also found with 7 foreign marked bars, it has been held that there was no circumstance to reasonably believe that 3 gold bars were also the smuggled gold. The burden of proof rest upon the department itself to prove that 3 gold bars were also smuggled. There is sufficient corroboration to the appellant’s testimony about 3 out of 10 gold bars were not procured from outside the country but got melted out of old jewellery with the appellants being in business of sale and purchase of gold ornaments as well. Department could not produce any evidence to falsify the said testimony on a record. No evidence has been produced by the department to show that 3 gold bars were also of foreign origin and the foreign markings as well as the serial numbers got defaced from these bars by the appellant. On the contrary appellant has successfully established that 3 gold bars were plain with no process of alleged tampering. In the show cause notice also no tampering has been alleged vis-àvis 3 bars weighing 1000 gms each as apparent from the table given in the Para 2.1 of the showcase notice. Resultantly, we hold that department has failed to discharge their burden to prove these three bars to be smuggled gold. Thus, these 3 bars cannot be called as smuggled gold. The order confiscating these 3 bars is therefore not sustainable. Same is hereby set aside. Penalty - HELD THAT:- Since the confiscation of 7 gold bars of foreign origin upheld and confiscation of 3 gold bars is set aside, the penalty imposed under Section 112 is reduced to Rs.7 Lakhs and penalty under Section 114AA reduced to Rs.7 Lakhs. Consequent to entire above discussion, the order under challenge is modified by setting aside confiscation of 3 gold bars which has no foreign markings. The penalty is also reduced under Section 112 to Rs.7 Lakhs and also under Section 114AA to Rs.7 Lakhs. Rest of the impugned order, is hereby upheld. The department shall release the 3 gold bars within 15 days of receiving the present order. The appeal is partly allowed. Issues Involved:1. Invocation of Section 123 of the Customs Act, 1962.2. Evidence supporting the order of confiscation.Issue-wise Detailed Analysis:Issue 1: Invocation of Section 123 of the Customs Act, 1962The primary question here is whether the department rightly invoked Section 123 of the Customs Act, 1962. Section 123 shifts the burden of proving that goods are not smuggled onto the person from whose possession the goods were seized or who claims ownership. The section applies to gold, watches, and other goods specified by the Central Government.For Section 123 to be invoked, the intercepting officers must have a reasonable belief that the goods are smuggled. This belief can be based on observation or other material evidence. In this case, the Directorate of Revenue Intelligence (DRI) had specific information about an individual carrying smuggled gold. Upon search, 10 gold bars were found concealed in a suitcase. Seven bars had foreign markings with defaced serial numbers, and three were plain. The individual admitted the gold was smuggled, and no valid import documents were provided, only self-made stock vouchers.The court found that the DRI officers had a reasonable belief that the gold was smuggled, justifying the invocation of Section 123 for the seven bars with foreign markings. However, for the three plain bars, the court held that the burden was on the department to prove they were also of foreign origin.Issue 2: Evidence Supporting the Order of ConfiscationSection 111 of the Customs Act provides for the confiscation of improperly imported goods. The court examined whether the evidence supported the confiscation under Section 111(b) and 111(d).For the seven gold bars with foreign markings, the court found sufficient evidence of smuggling. The individual carrying the gold admitted it was smuggled, and the stock transfer vouchers were deemed manipulative. The court upheld the confiscation of these seven bars, stating that the appellant failed to prove licit possession.For the three plain bars, the court found no evidence of foreign origin or tampering. Statements from the appellant's job worker and accountant corroborated that these bars were melted from old jewelry. The department failed to prove these three bars were smuggled. Therefore, the court set aside the confiscation of these three bars.Penalties:Given the findings, the court reduced the penalties under Section 112 and 114AA to Rs. 7 Lakhs each. The order was modified to release the three gold bars without foreign markings within 15 days, while the rest of the order was upheld. The appeal was partly allowed.Conclusion:The court upheld the invocation of Section 123 for seven gold bars with foreign markings but required the department to prove the smuggled nature of the three plain bars. The confiscation of the seven bars was upheld, while the confiscation of the three plain bars was set aside. Penalties were reduced accordingly.