2025 (8) TMI 341 - AT - Customs

CESTAT Upholds Absolute Confiscation of Gold Under Section 123 Customs Act for Failure to Prove Licit Procurement

The CESTAT upheld the absolute confiscation of seized gold due to failure of appellants to prove licit procurement under Section 123 of the Customs Act, ... Confiscation of the seized gold - smuggling of Gold - submission of forged documents - levy of penalties u/s 112(b) / Section 114AA of the Act, 1962 - appellants have failed to discharge the onus of procuring the gold - Non-granting of cross-examination of the witnesses, whose statements were relied upon - violation of principles of natural justice - HELD THAT:- It is found that the purity of the gold in the said invoices is shown as “99.5” per cent. The numbers / pieces of gold is also not mentioned in the said invoices. Further, it is a fact on record that the claim of the appellant no. 3 is that he had sent the said gold from Guwahati to Kolkata through M/s. Trackon Courier Pvt. vide receipt bearing No. 319514554 on which Rs.14,000/- has apparently been paid as courier charges. It is also the claim of the appellant no. 3 that they had booked the said consignment on 26.02.2013 and the said gold was to be delivered to them on 01.03.2013. However, when the said consignment of gold had not reached there and it was intimated that the said consignment has been seized on the belief that the said gold is a smuggled one, the appellant, namely, Shri Raju Arora, who claims to be the owner of the said gold, did not approach the DRI authorities with licit documents of procurement of the said gold, but intimated only through his letter dated 15.03.2013, which was received in the Office of the DRI on 25.03.2013. As the facts of the case are very much clear, that the gold in question is of a purity of 99.93% to 99.96%, therefore, there was a reasonable belief that the same is a smuggled one. In these circumstances, in terms of Section 123 of the Customs Act, 1962, the onus lies on the person who was carrying the gold or the person claiming ownership of the gold, to prove that the said gold has been procured through licit means - the said invoices cannot be relied upon as evidence of licit procurement of the gold in question. Therefore, the invoices produced as defence / evidence by the claimant/appellant, namely, Shri Raju Arora, are discarded. In terms of Section 123 of the Customs Act, the appellants have failed to discharge their onus of procuring the gold in question, that it has been procured through licit means. Hence, the authorities below have rightly absolutely confiscated the gold in question. Accordingly, the order of absolute confiscation of the gold in question is upheld. Non-granting of cross-examination of the witnesses, whose statements were relied upon - violation of principles of natural justice - HELD THAT:- The facts of the case are very much clear that the gold in question is having a purity of 99.93% to 99.96% and the invoices produced are of gold having 99.5% purity and hence, the statements recorded during the course of investigation are not at all relied upon by this Tribunal to hold that the gold in question is liable for confiscation. Therefore, the denial of an opportunity of cross-examination to the appellants will not vitiate the proceedings. Imposition of penalties on appellant no. 3 - HELD THAT:- The appellant no. 3 has produced fake evidence in support of procurement of the gold in question, thus, penalty has been rightly imposed on Shri Raju Arora. Penalties imposed on the co-appellants - HELD THAT:- The penalties have been rightly imposed by the ld. adjudicating authority in the impugned order in this matter as their roles are self-explanatory in this case. There are no infirmity in the impugned order and accordingly, the same is upheld - appeal dismissed. ISSUES: Whether the seized gold bars/biscuits are liable for confiscation under Section 111(b) of the Customs Act, 1962 on the ground of smuggling through unauthorized routes without payment of duties.Whether the appellants are liable for penalties under Section 112(b) and Section 114AA of the Customs Act, 1962 for involvement in smuggling or for submitting forged/fabricated documents.Whether the burden of proof under Section 123 of the Customs Act, 1962 to show licit procurement of the seized gold was discharged by the claimants.Whether denial of the appellants' statutory right to cross-examination of witnesses under Section 138B of the Customs Act vitiates the adjudication proceedings.Whether statements of co-accused persons can be relied upon as substantive evidence to impose penalties on other appellants.Whether the documentary evidence produced by the claimants regarding lawful purchase and transportation of gold bars is credible and sufficient.Whether the imposition of exemplary penalties in the quantum and manner adopted is justified under the Customs Act, 1962. RULINGS / HOLDINGS: The seized 12.504 kgs of gold bars/biscuits, having purity in the range of 99.93% to 99.96%, were held liable for absolute confiscation under Section 111(b) of the Customs Act, 1962, as the appellants failed to discharge the onus under Section 123 to prove licit procurement; the invoices produced showing 99.5% purity and lacking details of individual pieces were discarded.Penalties under Section 112(b) and Section 114AA were upheld against the appellants actively involved in smuggling activities and those submitting forged/fabricated documents, as their roles were established by investigation and statements.The denial of cross-examination opportunity under Section 138B was held not to vitiate the proceedings since the confiscation was not based solely on statements but on material facts such as purity and seizure circumstances.Statements of co-accused persons were not relied upon as substantive evidence for imposing penalties on other appellants; the adjudicating authority erred in relying on such statements without corroborative independent evidence.The documentary evidence produced by the claimant appellant to prove lawful purchase and transportation was found to be fabricated, inconsistent, and insufficient to discharge the burden of proof under Section 123.The imposition of exemplary penalties was justified on the facts, given the involvement of appellants in smuggling and fabrication of documents, and the quantum of penalty was in accordance with the provisions of the Customs Act, 1962. RATIONALE: The Court applied the statutory framework under the Customs Act, 1962, particularly Sections 111(b), 112(b), 114AA, 123, and 138B, and relevant case law on burden of proof and admissibility of evidence.The Court emphasized that the burden under Section 123 lies on the claimant to prove licit procurement once a reasonable belief of smuggling arises; mere statements or suspicions without credible documentary evidence do not suffice.Regarding cross-examination under Section 138B, the Court noted that denial of cross-examination is a violation of natural justice only if the order relies solely on such statements; here, confiscation rested on material facts and chemical examination reports.The Court distinguished between reliance on statements of co-accused persons and independent evidence, holding that co-accused statements cannot alone establish guilt of others without corroboration.The Court found discrepancies and fabrications in the documentary evidence, including inconsistencies in VAT invoices, purity levels, and courier receipts, undermining the claim of lawful acquisition.Penalties were imposed following established legal principles that knowledge or reason to believe the goods are liable to confiscation is essential for penalty under Section 112(b), and fabrication or misleading investigation attracts penalty under Section 114AA.The Court referred to precedents including State of Gujarat vs. Mohanlal Jitamalji Porwal, Om Prakash Khatri vs. Commissioner, and Sampad Narayan Mukherjee v. UOI, among others, to support its conclusions on burden of proof, confiscation, and procedural fairness.