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, 1962. The invoices submitted were rejected as evidence since they showed lower purity than the seized gold and lacked details. The tribunal found no violation of natural justice despite denial of cross-examination, as statements relied upon were not decisive. Penalties imposed on the main appellant for submitting forged documents and on co-appellants for their roles were affirmed. The appeal was dismissed and the impugned order upheld in all respects.

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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.

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