2025 (10) TMI 631 - AT - Customs

Seized gold bars returned after owner proves bona fide purchase; confiscation quashed due to inadequate departmental examination

CESTAT held the appellant proved ownership and bona fide purchase of the seized gold bars, finding the FIR and attendant facts corroborative and the ... Smuggling or not - 28 Gold Bars with ‘Valacambi’ mark which appeared to be it foreign marking - true and real owner - burden to prove legal possession - corroboration of appellant statement - HELD THAT:- The appellant stated that upon discovering that his Gold Bars were missing, he was initially stunned and loss consciousness for a while. After regaining composure, he lodged First Information Report (FIR) at Pune Railway Station. The FIR registered as No. 504/17 under Section 379 of Indian Penal Code on 13.09.2017 at 9.30 A.M. The Department has argued that the FIR was registered at Pune Railway Station, whereas, the theft was discovered in Hyderabad. The appellant has explained that during the journey, he developed an upset stomach and went to the toilet, leaving the concealed gold in his bag. At Lonavala Station, two passengers boarded and sat on the upper berth where his bag was kept. They later got off, which made the appellant suspicious of them. Therefore, he might have lodged the FIR at Pune Railway Station. Furthermore, this was a continuing offence and appellant was entitled to lodged the FIR at any place during the journey. Hence, the department is argument that the FIR should have been lodged at Hyderabad or any other station has no significance. The FIR was lodged as soon as reasonably possible after the occurrence. It is also important to note that the Hyderabad Railway police Station registered a other FIR regarding the recovery of the gold bars on 14.09.2017 at 14.30 hours, being FIR No. 217/17 under Section 41(2) and 102 of the Criminal Procedure Court. The facts corroborates the appellant statement and enhance the credibility of his version. The department has argued that the appellant claimed to have purchased 33 Gold Bars, whereas only 33 Gold Bars were recovered. However, in the FIR lodged by the appellant, the number of the Gold Bars reported stolen was also 33 in number. Moreover, in the representation, which was submitted by him, he had requested to make efforts to recover the remaining Gold Bars. Therefore, if some of the Gold Bars could not be recovered / traced for any reason, the appellant claim regarding the recovered Gold Bars cannot be denied merely on that ground. The appellant has stated that he had purchased 28 Gold Bars of “999 Valcambi Suisse” marks and 5 Gold Bars of “999 Pimpi” marks the statement given by appellant is similar with report of valuation of Jewellary. This fact further, corroborates the appellant is claim. The Department issued the show cause notice dated 16.03.2018 to the person(s) concern/unknown to produce of evidence on which they propose to relay in support of their defence along with the return reply. Appellant had already informed them about the relevant fact including ownership, but department did not issue show cause notice to appellant even though after general notice, appellant submitted reply with documentary evidence. But department failed to examine appellant’s claim of ownership properly. Even at the time of Adjudication as well as appellant stage, they failed to consider appellant’s claim, which was based on credible trust worthy evidence. It is also important to mention that in the show cause notice, it is admitted fact that no other person has approached either Hyderabad Railway Police or the DRI office for claiming the ownership of the said seized Gold Bars. Thereby, no other claimant except appellant has claimed of the recovered Gold Bars. The Department relied on Hon’ble Supreme Court decision Kuldeep Singh and collaborates V/s state of Rajasthan [2000 (4) TMI 857 - SUPREME COURT] in which Hon’ble Supreme Court held that it is well settled principle that in case of circumstantial evidence, when the accused offers an explanation and that explanation is found to be untrue, then the same offers an additional link in the chain of circumstances to complete the chain. Since there is no untrue statement offered in this case, therefore, this case law is distinguished. It is also important to mention that it is not a case which is based on circumstantial evidence. The appellant has successfully proved that the recovered gold is owned by him and same was purchased in a bonafide manner. Therefore, confiscation of gold is not tenable and impugned order also not sustainable. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the appellant proved ownership of the seized gold bars and discharged the burden on a claimant to establish legal possession and bona fides of purchase. 2. Whether the seized gold bars could be treated as smuggled goods under the reasonable belief standard of Section 123 of the Customs Act in absence of positive evidence of illegal importation or non-payment of duty. 3. Whether statutory pre-conditions for confiscation-notice and opportunity under Section 124 of the Customs Act-were complied with in respect of the claimant. 4. Proper evidentiary weight to be accorded to invoices, bank payment records, FIRs/panchanamas, statements of recoverers (porters/auto driver), approved valuer reports and serial numbers vis-à-vis the departmental case that markings indicate foreign origin and invoices lack particulars to link seized bars to purchase invoices. 5. Whether deficiencies in documentary proof of travel (ticket/CCTV/CDR) fatally undermine the claimant's explanation of loss and consequent claim to recovered goods. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Ownership and proof of bona fide purchase Legal framework: A claimant seeking return of seized goods must prove ownership and bona fide purchase; once claimant produces credible documentary and corroborative evidence, burden remains on Customs/DRI to negate lawful purchase and ownership, particularly where seizure arises from abandonment/theft and not direct import investigation. Precedent Treatment: The Court followed principles in a principle-bench decision that the burden to prove smuggling under Section 123 lies on Customs and that mere seizure by railway police does not create a presumption of smuggling. A subsequent tribunal decision supporting release where invoices, payment details and ledgers were not discarded was relied upon. Interpretation and reasoning: The Court examined invoices from the purported supplier, bank payment records, the purchaser's statements, the FIR and panchanama prepared by Hyderabad Railway Police and statements of persons who recovered the bars. The Court found these materials collectively to be credible and mutually corroborative (invoice and bank payment supporting purchase; recovery statements and panchanama corroborating manner and timing of recovery; valuer report and description of package matching claimant's account). The Court rejected the department's narrow focus on absence of markings on invoice and inability to identify bar serial numbers on the supplier's invoice as decisive, holding that where claimant produces reliable documentary and oral evidence of purchase and loss, such lacunae do not automatically negate ownership. Ratio vs. Obiter: Ratio - claimant's standard of proof satisfied by contemporaneous invoice, bank payment and police records such that confiscation was not justified. Obiter - observation that missing invoices particulars are not fatal in every case where other corroboration exists. Conclusions: The Court concluded the claimant successfully proved ownership and bona fide purchase of the recovered gold bars; confiscation was therefore not tenable on the facts. Issue 2 - Application of Section 123 (reasonable belief of smuggling) and onus of proof Legal framework: Section 123 permits seizure/confiscation if the proper officer has reasonable belief that goods are smuggled; however, reasonable belief must be supported by positive evidence and the department bears burden to prove smuggling when claimant offers a plausible explanation with supporting documentation. Precedent Treatment: The Court relied on tribunal authority holding no presumption of smuggling attaches merely because railway police recovered foreign-marked gold; it also considered a Supreme Court exposition cited by the department on circumstantial chains but distinguished it as inapposite where explanation is not shown to be untrue. A decision affirming that reasonable belief as to gold requires only reasonable belief was noted, but it was held that where claimant gives sufficient explanation and evidence, confiscation cannot rest on mere presumption. Interpretation and reasoning: The Court weighed the department's reliance on foreign markings and absence of duty payment against claimant's invoice, bank payment, contemporaneous FIR and railway panchanama. The Court held the department did not produce positive evidence to rebut the claimant's documentary evidence and failed to sufficiently link the seized bars to illegal importation or non-payment of duty. The Court emphasized that reasonable belief cannot be a substitute for positive proof once claimant has produced credible evidence of lawful purchase. Ratio vs. Obiter: Ratio - where claimant produces credible evidence of lawful purchase and possession, department must produce affirmative evidence of smuggling to justify confiscation under Section 123; absence of such proof defeats confiscation. Obiter - remarks on interplay between reasonable belief and evidentiary burden in other factual contexts. Conclusions: The Court held that the department failed to establish smuggling by positive evidence and therefore Section 123 could not sustain confiscation on the record. Issue 3 - Compliance with Section 124 (show cause and hearing) before confiscation Legal framework: Section 124 mandates issuing a written notice with prior approval, opportunity to make representation in writing and opportunity to be heard before confiscation or penalty is ordered; procedural non-compliance may invalidate confiscation. Precedent Treatment: The Court applied statutory requirements directly and compared departmental procedure against the statutory text. Interpretation and reasoning: The Court noted that the departmental show cause notice was issued to 'person(s) concerned/unknown' and not directly to the claimant despite the claimant having informed authorities and submitted documentary proof. The Court found the department failed to issue the notice in accordance with Section 124 to the claimant as owner and did not properly consider the claimant's representations, thereby failing a statutory pre-condition for confiscation. Ratio vs. Obiter: Ratio - failure to issue show cause to identified owner and to give effective hearing as per Section 124 is a material procedural lapse that vitiates confiscation. Obiter - none beyond statutory interpretation. Conclusions: The Court concluded that statutory requirements of Section 124 were not satisfied vis-à-vis the claimant, which weighed against sustaining confiscation. Issue 4 - Evidentiary weight of documents, panchanama, valuer report and serial numbers Legal framework: Evaluation of competing documentary and oral evidence requires assessment of contemporaneity, internal consistency and corroboration by independent records (police panchanama, bank records, recovery witnesses); marking/serial numbers may be probative but do not alone displace contemporaneous proof of purchase and loss. Precedent Treatment: The Court relied on tribunal authority where invoices, payments and stock records accepted as corroborative and departmental failure to discredit them meant release of goods. Interpretation and reasoning: The Court accepted the invoice and bank payment as credible proof of purchase for the 3,300 grams, and placed significant weight on the railway panchanama and recovery statements (including serial numbers) which corroborated the mode of concealment and timing. While acknowledging that some supplier invoices did not carry serial numbers linking specific bars, the Court found supplier testimony and tracing of supply-chain documents showing Valcambi-sourced consignments supported the claimant's account. The department's reliance on the absence of MMTC-Pamp marked bars among seized items and discrepancies in marking was not found sufficient to prove claimant's purchase claim false given the other corroborative evidence and the fact that missing bars could have not been recovered. Ratio vs. Obiter: Ratio - contemporaneous police recovery records and purchaser's original invoices plus bank payments together can establish ownership even when supplier invoices lack bar serials, absent positive departmental proof to the contrary. Obiter - observations on ideal investigational steps such as examination of CCTV/CDR which department failed to pursue. Conclusions: The Court held the documentary and oral evidence in claimant's favour carried sufficient weight to establish ownership and bona fides; departmental emphasis on serial-number linking in supplier invoices was insufficient to overcome claimant's proof. Issue 5 - Effect of absence of travel ticket/CCTV/CDR on claimant's credibility Legal framework: Lack of a travel ticket or independent travel record can be a factor in credibility assessment but is not conclusive where other contemporaneous evidence (FIR, panchanama, recovery statements) corroborates claimant's account; investigating agency is expected to seek corroborative sources such as CCTV/CDR. Precedent Treatment: The Court relied on common-sense evidentiary principles and prior tribunal approach that missing travel proof does not automatically discredit a claimant when other corroborative evidence exists. Interpretation and reasoning: The Court noted the department produced a certificate that the train had no scheduled halt at the station but held that unscheduled halts and practical travel realities can explain alighting at an unscheduled stop. The Court accepted the claimant's explanation for loss of ticket and observed the department failed to verify CCTV/CDR despite requests. Given timely FIR and recovery at the relevant station, the Court found the absence of ticket insufficient to discredit the claimant's case. Ratio vs. Obiter: Ratio - absence of ticket/CCTV/CDR is not fatal where other contemporaneous and corroborative evidence supports the claimant; procedural failure by department to investigate such sources weakens its case. Obiter - recommendation that department ought to have obtained CCTV/CDR evidence. Conclusions: The Court held the deficiencies in travel proof did not negate claimant's credibility or entitlement to the recovered gold bars in the circumstances. Overall Conclusion and Order The Court concluded that the claimant proved ownership and bona fide purchase of the recovered gold bars; the department failed to produce positive evidence of smuggling under Section 123, and procedural requirements under Section 124 were not properly observed as to the claimant. Consequently, confiscation was unsustainable and the appeal was allowed with consequential relief. (Ratio of the decision: release where claimant's credible documentary and contemporaneous police recovery evidence is unrebutted by positive departmental proof of smuggling and where statutory notice/hearing requirements are not complied with.)