2025 (1) TMI 608 - AT - Customs

Gold smuggling case overturned after importer produced legitimate Bill of Entry with matching serial numbers and bank documentation

CESTAT Ahmedabad allowed the appeal in a gold smuggling case. The appellant produced a Bill of Entry showing legitimate import of foreign-marked gold ... Confiscation - penalties - smuggling of Gold - restricted item or not - onus of proof to establish that the seized gold was not smuggled shifts on Department - HELD THAT:- It is clear that at the relevant time, the foreign marked gold was not the prohibited item it was the rather restricted. This is the reason that the same has been released on payment of redemption fine of Rs. 2,00,000/- along with Customs Duty of Rs. 3,23,163/- and the penalty of Rs. 1,00,000/- imposed on the other appellant. While the appellants are not claiming that the gold was not of the foreign origin but they have produced a Bill of Entry of import, the same by Kotak Mahindra Bank and have claimed the purchase, to be legitimate and also duly indicated the same to be reflected in books of accounts and also in the challan while sending and receiving back the gold biscuits from the job worker who could not do the work due to his workers being not available. Onus to prove - HELD THAT:- This Court has considered the fact that last two numbers were not visible has been held against the party which considered this finding to be based on assumption and presumption. This Court finds that even if the department nurtured a doubt despite the import documents having been produced, it should have at least done some further investigation to linked or otherwise the gold biscuits with the import made by the Kotak Mahindra Bank. Instead of this no statement even of the accused (now appellant) has been recorded in the matter and neither has it been brought on record as to why last two numbers became invisible to the department. There is nothing on record to show if the same was erased with the malicious intention and if so they by whom? It is also not on record as to whether such lack of visibility of last two number was on account of any rubbing or corrosion over a period of time. Further the moment, gold is found accounted for the documents (like) Bill of Entry produced, the onus gets shifted on the department - the production of any documents shifts onus on department. This was correct position in law even at the time, when foreign marked gold was a notified item under Section 123 of the Customs Act, 1962. If the gold biscuit was seized in the form in which it was liable to seizure, then why not at the time of ordering its release the same was directed to be released under supervised melting to prevent the possibility of its being resold the market in the form of smuggled gold is removed? - HELD THAT:- This Court is of the view that the matching of first two digits in figure running in thousand also by preponderance of probability shows that the gold was not smuggled, as not only last two digits of the tens were found (each lacking of visibility) but also the receipt of its import by Kotak Mahindra Bank was matching with the first two numbers. The Biscuit was very much of Credit Suisse and matching in other details. The probability that a smuggler will be able to procure the documents i.e. Bill of Entry of import by scheduled bank and that too of the same agency of credit to easy and that two of the matching in first to important digits out of four from smuggling channels is rather remote. Therefore, the onus was clearly shifted on production of the Bill of Entry on the department which has miserably failed in establishing that the gold biscuit was from smuggling channels and the Bill of Entry despite existence of so many co-related details was not of the seized biscuit. Therefore the submission made by the party that department’s case is based on rather suspicion and is based on assumption and presumption carries weight in the light of factual peculiarities of the case. In COMMISSIONER OF CUSTOMS (PREV) VS. PUNI DHAPA LOKESWARA RAO [2006 (4) TMI 177 - CALCUTTA HIGH COURT], HON’BLE CALCUTTA HIGH COURT held that if the preponderance of probability is not in favour of Customs authorities, the department cannot be said to have proved that gold seized was smuggled into India. In the instant case, therefore, the production of Bill of Entry which in higher probability related to the gold biscuits seized, the non recording of any statement of the relevant persons by the department coupled with finding being based on assumption and presumption makes the confiscation bad in law in the facts of this case. Conclusion - The production of any documents shifts onus on department. This was correct position in law even at the time, when foreign marked gold was a notified item under Section 123 of the Customs Act, 1962. Appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the appellant, M/s. Jyoti Jewellers, successfully discharged the burden of proof under Section 123 of the Customs Act, 1962, to establish that the seized gold was not smuggled.Whether the confiscation of the gold and the imposition of penalties under Sections 111(d), 111(m), and 112(a) and (b) of the Customs Act, 1962, were justified.Whether the evidence presented by the appellant, including the Bill of Entry and other documentation, was sufficient to prove the legal importation of the gold.Whether the lower authorities correctly applied the law and evaluated the evidence, particularly concerning the visibility of the serial numbers on the gold bars.Whether the penalties imposed on the appellants were justified given the circumstances and evidence.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Burden of Proof under Section 123 of the Customs Act, 1962Relevant Legal Framework and Precedents: Section 123 of the Customs Act places the burden of proving that goods are not smuggled on the person in possession or claiming ownership. The appellant argued that once documentation is provided, the burden shifts to the department.Court's Interpretation and Reasoning: The court found that the appellant provided a Bill of Entry and other documents, which should have shifted the burden of proof to the department. The court noted that the department failed to conduct further investigation to substantiate its claims.Key Evidence and Findings: The appellant submitted a Bill of Entry and related documents, but the department questioned their validity due to partial visibility of serial numbers on the gold bars.Application of Law to Facts: The court held that the production of the Bill of Entry and other documents was sufficient to shift the burden of proof to the department, which failed to prove the gold was smuggled.Treatment of Competing Arguments: The court considered the department's reliance on the lack of visible serial numbers but found that this alone was insufficient to prove smuggling.Conclusions: The court concluded that the appellant discharged its burden under Section 123, and the department failed to prove the gold was smuggled.Issue 2: Justification for Confiscation and PenaltiesRelevant Legal Framework and Precedents: Sections 111(d), 111(m), and 112(a) and (b) of the Customs Act deal with confiscation and penalties for improper importation and dealing with smuggled goods.Court's Interpretation and Reasoning: The court found that the confiscation and penalties were based on assumptions and lacked sufficient evidence. The court emphasized the need for concrete evidence rather than suspicion.Key Evidence and Findings: The court noted the absence of statements or evidence proving malicious intent or smuggling.Application of Law to Facts: The court determined that the lack of evidence and reliance on assumptions made the confiscation and penalties unjustified.Treatment of Competing Arguments: The court dismissed the department's arguments, highlighting the lack of investigation and evidence.Conclusions: The court set aside the confiscation and penalties, finding them unjustified in the absence of concrete evidence.Issue 3: Evaluation of Evidence and DocumentationRelevant Legal Framework and Precedents: The court considered precedents that emphasize the importance of evidence and documentation in proving the legality of goods.Court's Interpretation and Reasoning: The court found that the appellant's documentation, including the Bill of Entry, was sufficient to establish the legal importation of the gold.Key Evidence and Findings: The court highlighted the matching details in the documentation and the lack of contrary evidence from the department.Application of Law to Facts: The court applied the principle that documentation shifts the burden of proof to the department, which failed to provide contrary evidence.Treatment of Competing Arguments: The court rejected the department's reliance on assumptions and emphasized the need for evidence.Conclusions: The court concluded that the appellant's documentation was sufficient to establish the legality of the gold.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'The production of any documents shifts onus on department. This was correct position in law even at the time, when foreign marked gold was a notified item under Section 123 of the Customs Act, 1962.'Core Principles Established: The court reinforced the principle that documentation can shift the burden of proof to the department, and assumptions cannot replace concrete evidence in legal proceedings.Final Determinations on Each Issue: The court set aside the confiscation and penalties, allowing the appeals with consequential reliefs. The court emphasized the need for evidence and proper investigation in such cases.