2025 (4) TMI 189 - AT - Customs

Gold confiscation overturned after Department fails to prove smuggling despite foreign markings under Section 123

CESTAT Kolkata set aside confiscation of gold bars bearing foreign markings after finding Department failed to provide corroborative evidence of ... Confiscation of Gold Bars bearing foreign markings - Smuggling - burden to prove as per Section 123 of the Customs Act, 1962 - allegation of the Department is that the appellant was not having any valid documents evidencing legal procurement/possession of the said gold bars at the time of the search - penalties - Principles of natural justice. HELD THAT:- The Department has not brought in any corroborative evidence to substantiate the allegation that the gold bars in question were smuggled in nature. Failure to produce documents in respect of the goods available in the shop at the time of search does not ipso facto prove that the said goods are contraband in nature. The allegation of smuggling needs to be proved with cogent reasoning and corroborative evidence thereof. Subsequently, if the appellant could produce documents for its legal purchase, the same cannot be ignored to conclude that the gold is of smuggled in nature. Just because the gold bars in question bear foreign markings, it cannot be presumed that the gold bars were smuggled in nature. This view is supported by the decision in the case of Commissioner of Customs (Prev.), Shillong versus Sri Sangpuia, [2005 (1) TMI 263 - CESTAT, KOLKATA] wherein it has been held that 'In the present case there is no such notification shown to us under these provisions of the Customs Act, 1962. The absence of documents, therefore, does not induce us to share the views of the Commissioner (Preventive) that the goods are of foreign origin and are of smuggled nature. The present appeal made on grounds as in para 2 above cannot be upheld. This Tribunal has to enforce liability as it is written and cannot go into the pleas as made in certain grounds taken by Commissioner (Preventive) in this appeal.' The ld. adjudicating authority has absolutely confiscated the gold without any concrete evidence to establish the smuggled nature of the gold bars. Having foreign markings on the gold bars alone not sufficient to conclude that the gold bars in question have been illegally imported into India without payment of applicable customs duties. This view is supported by the decision in the case of Commissioner of Customs (prev.), Shillong versus Manisha Devi Jain [2019 (5) TMI 1356 - CESTAT KOLKATA]. Burden of prove - HELD THAT:- The appellant has recorded the legal procurement and possession of the gold bars in question in their books of account. In these circumstances, the appellant has produced evidence as required under Section 123 of the Customs Act, 1962 for legal procurement/possession of the said two gold bars. Thus, the gold bars in question are not liable for confiscation and accordingly, the confiscation of gold bars ordered in the impugned order set aside. Principles of natural justice - HELD THAT:- The Ld. Addl. Commissioner has not supplied the Relied Upon Documents (RUDs) to the appellant and thereby deprived his right to defend himself, which is in violation of the basic principles of natural justice. It is also found that the Ld. Commissioner (Appeals) has not followed the principles of natural justice and passed the impugned order without giving adequate opportunity to the appellant to put forth his defence effectively. Thus, the impugned order is liable to be set aside on this ground alone. Penalty - HELD THAT:- As the confiscation of the two gold bars collectively weighing 100 grams, is not sustainable, no penalty is imposable on the appellant under Section 112(a) and 112(b) of the Customs Act, 1962. Accordingly, the penalty imposed on the appellant in the impugned order is set aside. Conclusion - The absence of documents, therefore, does not induce us to share the views of the Commissioner (Preventive) that the goods are of foreign origin and are of smuggled nature. The impugned order set aside - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment were:a. Legality of Confiscation: Whether the confiscation of the gold bars weighing 100 grams was justified under the Customs Act, 1962, given the appellant's claim of legal procurement.b. Admissibility of Evidence: Whether the statement of Shri Amit Kumar Verma could be used as evidence against the appellant, considering the procedural requirements under Section 138B of the Customs Act, 1962.c. Principles of Natural Justice: Whether the appellant was denied a fair opportunity to defend himself due to the non-provision of relied upon documents and the denial of cross-examination of key witnesses.2. ISSUE-WISE DETAILED ANALYSISa. Legality of ConfiscationRelevant Legal Framework and Precedents: The confiscation was challenged under the provisions of Section 123 of the Customs Act, 1962, which places the burden of proof on the possessor of goods with foreign markings to establish legal procurement. The Tribunal considered precedents such as Commissioner of Customs (Prev.), Shillong versus Sri Sangpuia and Manisha Devi Jain, which emphasize the need for concrete evidence to establish smuggling.Court's Interpretation and Reasoning: The Tribunal found that the mere presence of foreign markings on the gold bars was insufficient to presume smuggling. The absence of corroborative evidence from the Department to substantiate the smuggling allegation was a critical factor.Key Evidence and Findings: The appellant provided evidence of the gold bars being recorded in their balance sheet for the Financial Year 2021-22, suggesting legal procurement. The Department failed to verify the appellant's claim that the gold was purchased from Shri Saheb Santra.Application of Law to Facts: The Tribunal applied the principle that the absence of documents at the time of search does not automatically prove smuggling. The appellant's documentation in their financial records was deemed sufficient under Section 123 of the Customs Act.Treatment of Competing Arguments: The Tribunal rejected the Department's reliance on assumptions of smuggling based solely on foreign markings, siding with the appellant's argument of legal procurement.Conclusions: The Tribunal concluded that the confiscation was unjustified due to the lack of evidence proving the smuggled nature of the gold bars.b. Admissibility of EvidenceRelevant Legal Framework: Section 138B of the Customs Act, 1962, requires that statements used as evidence must allow for cross-examination of the person who made the statement.Court's Interpretation and Reasoning: The Tribunal noted that the appellant was not allowed to cross-examine Shri Amit Kumar Verma, whose statement was pivotal to the Department's case. Without cross-examination, the statement lacked evidentiary value.Key Evidence and Findings: The statement of Shri Amit Kumar Verma was deemed inadmissible as evidence against the appellant due to procedural failures.Application of Law to Facts: The Tribunal applied Section 138B, emphasizing the necessity of cross-examination for statements to be admissible.Treatment of Competing Arguments: The Tribunal dismissed the Department's reliance on the statement due to the procedural oversight, supporting the appellant's contention.Conclusions: The statement was not admissible, weakening the Department's case against the appellant.c. Principles of Natural JusticeRelevant Legal Framework: The principles of natural justice require that parties be given a fair opportunity to present their case, including access to relied upon documents and the ability to cross-examine witnesses.Court's Interpretation and Reasoning: The Tribunal found that the appellant's rights were violated due to the non-provision of critical documents and the denial of cross-examination.Key Evidence and Findings: The Tribunal noted the lack of provision of Relied Upon Documents (RUDs) and the denial of cross-examination as significant procedural lapses.Application of Law to Facts: The Tribunal applied the principles of natural justice, finding that the appellant was denied a fair hearing.Treatment of Competing Arguments: The Tribunal sided with the appellant, emphasizing the procedural failures of the Department.Conclusions: The Tribunal concluded that the procedural lapses were sufficient to set aside the impugned order.3. SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning: 'The absence of documents, therefore, does not induce us to share the views of the Commissioner (Preventive) that the goods are of foreign origin and are of smuggled nature.'Core Principles Established: The presence of foreign markings on goods alone is inadequate to prove smuggling; procedural fairness and adherence to natural justice principles are paramount.Final Determinations on Each Issue: The Tribunal set aside the confiscation and penalties, ruling in favor of the appellant due to the lack of evidence of smuggling, procedural failures, and violation of natural justice principles.