2025 (6) TMI 269 - AT - Customs

Gold bars seized from traveler ordered released due to lack of reasonable belief under Section 110 Customs Act

CESTAT Allahabad dismissed revenue's appeal in gold seizure case. Gold bars seized from individual traveling Kolkata to Jaipur were ordered released. ... Town seizure - subject gold bars were seized from Shri Sumit Verma while he was travelling from Kolkata to Jaipur and there were also no foreign markings on the subject gold bars - Confiscation of seized gold bars along with seized packing materials under Section 111(b), (h), (l) & (m) & Section 118 of the Customs Act, 1962 - imposition of penalty on Shri Sumit Verma under Section 112(a) & (b) of the Customs Act, 1962 - HELD THAT:- Section 110 confers powers on the proper officer to seize goods only if he has reasons to believe that the goods are liable for confiscation. Hon'ble Delhi High Court in the case of Shanti Lal Mehta vs. Union of India & Ors. [1982 (11) TMI 56 - HIGH COURT OF DELHI], elaborately dealt with town seizures and the evidences required to have the 'reasonable belief' that the goods are smuggled in nature, in such cases. The seizure was made on the basis of statement of Shri Sumit Verma. On perusal of the statement as reproduced in the SCN, it is found that the fact of smuggling and melting was not stated by Shri Sumit Verma on the basis of his own knowledge but on the basis of what was told to him by Shri Anil Soni. While the revenue is heavily relying on the statement of Shri Sumit Verma and its evidentiary value, we cannot lose sight of the fact that the statement of Shri Sumit Verma, at best, constitutes a hearsay statement, as what was stated by him was only hearsay. At the same time, Shri Anil Soni in his statement nowhere admitted the fact of smuggling or foreign origin of recovered gold bars. In these facts, it was incumbent upon the revenue to bring on record some other corroborative evidence to support the charge of smuggling. However, no further corroboration has been made by the revenue by leading any other evidence to show smuggled nature of subject gold bars. Thus, it is observed that the reason to believe on which the officers presumed that the recovered gold bars were of smuggled nature is not supported by any corroborative evidence. There is no document available on record to establish that gold bars were smuggled into India without payment of customs duty. Hence the statement of Shri Sumit Verma does not establish ‘reason to believe’ that the gold bars were smuggled into India without any valid documents. The objection of the revenue that the tax invoice was issued on 31.01.2023 and not on 26.01.2023 is completely incorrect. In fact, the invoice itself refers to both the dates i.e. 26.01.2023 as the date of issuance of tax invoice and 31.01.2023 as the date on which the tax invoice was acknowledged by IRP. From the FAQ issued by the Board for ‘steps of e-invoicing’, we find that the tax payer is first required to create GST invoices on their own accounting system, thereafter the invoices are reported to any one of the six IRP, on reporting, IRP returns a signed e-invoice with a unique ‘invoice reference number’ along with QR code whereupon the invoice is shared with GST systems for auto-population in the suppliers GSTR-1 return. The entire mechanism to report a tax invoice on IRP and thereafter issuance of e-invoice with a unique ‘invoice reference number’ along with QR code, is to ensure that the details of invoice gets auto-populated in GSTR-1 of the supplier - merely because the tax invoice was reported on 31.01.2023, the same would not dilute the fact of issuance of tax invoice on 26.01.2023 and the objection now taken by the revenue clearly appears to be misconceived. On perusing the records, it is found that neither the said report forms part of SCN nor the said report was part of the adjudication order. The revenue also failed to bring the said report on record before the Appellate Authority. In these circumstances, once this report has been brought on record for the very first time in this appeal, the revenue cannot be allowed to raise this new plea at this stage. Needless to say, this Tribunal cannot sustain the case of the revenue on a ground which was not there in the SCN or in the adjudication order and therefore there are no fruitful purpose to consider the same at this stage. Conclusion - i) The seizure was not based on reasonable belief as required under Section 110 of the Customs Act, 1962. ii) The presumption under Section 123 cannot be invoked in the absence of reasonable belief. iii) The confiscation and penalties imposed were rightly set aside by the Commissioner (Appeals). iii) The confiscation and penalties imposed are rightly set aside by the Commissioner (Appeals). There are no reasons to interfere with the impugned order and accordingly, the same is sustained - appeal of revenue dismissed. 1. ISSUES PRESENTED and CONSIDERED- Whether the seizure of gold bars from the respondent's possession was based on a reasonable belief that the goods were smuggled and liable for confiscation under Section 110 of the Customs Act, 1962.- Whether the presumption under Section 123 of the Customs Act, 1962, regarding smuggled goods, can be invoked in the absence of reasonable belief at the time of seizure.- Whether the seized gold bars were of foreign origin and smuggled into the country without valid documents.- Whether the burden of proof under Section 123 has been discharged by the respondents by producing valid tax invoice/e-invoice and proper accountal of the seized gold bars.- Validity and evidentiary value of the statements recorded under Section 108 of the Customs Act, particularly the statement of Shri Sumit Verma.- Whether the plea regarding discrepancy in the date of issuance of the tax invoice/e-invoice (26.01.2023 vs. 31.01.2023) raised for the first time before the Tribunal is maintainable.- Whether the CRCL report submitted by the Revenue for the first time in appeal can be considered.2. ISSUE-WISE DETAILED ANALYSISReasonable Belief for Seizure under Section 110The Court extensively examined the legal framework governing seizure under Section 110 of the Customs Act, 1962, with particular reference to the requirement of 'reasonable belief' that the goods are liable for confiscation. The Court relied on the authoritative precedent elucidated by the Hon'ble Delhi High Court in Shanti Lal Mehta vs. Union of India & Ors., which clarified that reasonable belief must exist at the time of seizure based on definite material or information. Mere suspicion or vague information is insufficient to justify seizure. The Court highlighted that the seizing officer must have some definite information or material to form a reasonable belief that the goods are smuggled, and this belief must be reflected in the show cause notice and adjudicated upon by the authorities.Applying these principles, the Court found that the seizure in the present case was primarily based on the statement of Shri Sumit Verma, which was hearsay in nature as it relayed what was told to him by Shri Anil Soni. Shri Anil Soni did not admit to smuggling or foreign origin of the gold bars. No other corroborative evidence was produced by the Revenue to substantiate the charge of smuggling. The Court observed that the gold bars bore no foreign markings and were seized in a town seizure scenario, which demands a higher degree of proof. Consequently, the Court concluded that the Revenue failed to establish a reasonable belief at the time of seizure, rendering invocation of Section 123 presumptions impermissible.Presumption under Section 123 and Burden of ProofThe Court emphasized that the presumption under Section 123 arises only if the goods are seized by an officer who entertains a reasonable belief that the goods are smuggled. Without such reasonable belief, the statutory presumption does not apply, and the burden remains on the Revenue to prove smuggling. The Court noted that the adjudicating authority and the Commissioner (Appeals) examined the evidence and found that the respondents discharged the burden under Section 123 by producing a valid tax invoice/e-invoice (No. RAMJ/50/22-23 dated 26.01.2023) and proper stock accounting records. The invoice confirmed the transportation of the gold bars with Shri Sumit Verma from Kolkata to Jaipur, and the stock register duly recorded the transaction. The Revenue did not challenge this finding before the Tribunal, effectively conceding that the burden of proof was discharged and the gold bars were not smuggled.Validity and Evidentiary Value of Statements under Section 108The Revenue heavily relied on the statement of Shri Sumit Verma recorded under Section 108 of the Customs Act, which admitted absence of licit documents at the time of seizure and alleged smuggling based on information from Shri Anil Soni. The Court treated this statement as hearsay and insufficient to establish smuggling. Shri Anil Soni's own statement did not corroborate smuggling. The Court held that reliance solely on such hearsay evidence without corroboration is inadequate to sustain confiscation and penalties.Town Seizure and Requirement of ProofThe Court agreed with the Commissioner (Appeals) that the case involved a town seizure where no foreign markings were found on the gold bars. Town seizures require more cogent evidence to establish smuggling. The Court found no such evidence on record, reinforcing the conclusion that the seizure was not based on reasonable belief.Objection Regarding Date Discrepancy in Tax Invoice/E-invoiceThe Revenue raised a new plea before the Tribunal that the QR code on the tax invoice/e-invoice indicated issuance on 31.01.2023, not 26.01.2023 as stated. The Court noted this objection was not raised before the Adjudicating Authority or Commissioner (Appeals) and was thus a new plea at the appellate stage. Nonetheless, the Court considered the plea in the interest of justice and accepted the explanation provided by the respondents. The Court explained the GST e-invoicing process where the tax invoice is issued on one date and subsequently reported to the Invoice Registration Portal (IRP) on a later date, which generates the e-invoice acknowledgment with QR code. The Court held that the date of reporting to IRP does not alter the original invoice date. The invoice itself mentioned both dates clearly, and the tax charged was undisputed and deposited. Therefore, the plea was found to be misconceived and rejected.CRCL Report Submitted for the First Time in AppealThe Revenue also submitted a CRCL report indicating the gold content of 99.76% for the first time during the appeal. The Court observed that this report was neither part of the Show Cause Notice nor the adjudication or appellate records. The Court declined to admit this new evidence at the appellate stage, underscoring that the Tribunal cannot sustain the Revenue's case on grounds not raised earlier or included in the record. Consequently, this plea was not entertained.3. SIGNIFICANT HOLDINGS'The seizing officer either by his own evidence or other materials placed before the adjudicating authority, has to prove to its satisfaction that there was ground for him to reasonably believe that the goods were smuggled goods, that is to say that the goods were imported into the country and imported at a time and place when they were restricted or prohibited from being imported.''The words 'reasonable belief' used in Section 110(1) are intended to check the exercise of the powers given to the customs officers arbitrarily and without any foundation at all, to the harassment of the general public. The customs officer must have some definite materials by way of some definite information to form the foundation of his reasonable belief.''In the absence of any corroborative evidence, the statement of Shri Sumit Verma, which is hearsay, does not establish 'reason to believe' that the gold bars were smuggled into India without any valid documents.''The burden under Section 123 stands discharged by the respondents by producing valid tax invoice/e-invoice and proper accountal in the stock register, which has not been challenged by the Revenue.''The objection regarding the date discrepancy in the tax invoice/e-invoice raised for the first time before the Tribunal is misconceived and rejected, as the GST e-invoicing process involves issuance of invoice on one date and reporting to IRP on a later date without altering the original invoice date.''New evidence such as the CRCL report not forming part of the original record cannot be admitted at the appellate stage.'Final determinations:- The seizure was not based on reasonable belief as required under Section 110 of the Customs Act, 1962.- The presumption under Section 123 cannot be invoked in the absence of reasonable belief.- The respondents discharged the burden of proof under Section 123 by producing valid tax invoice/e-invoice and proper accountal.- The statement relied upon by the Revenue is hearsay and insufficient to establish smuggling.- The plea regarding invoice date discrepancy is rejected as misconceived.- The CRCL report submitted for the first time in appeal is inadmissible.- Consequently, the confiscation and penalties imposed were rightly set aside by the Commissioner (Appeals), and the Tribunal upheld the appellate order, dismissing the Revenue's appeals.