2025 (10) TMI 1086 - AT - Customs

Seizure Quashed: Customs Cannot Rely on CISF Detention; Appellant Discharged Under s.123 With Verified Documents

CESTAT (Kolkata) allowed the appeal, set aside absolute confiscation of seven gold bars and silver and quashed related penalties. The tribunal found the ... Absolute confiscation of Gold Bars and Silver - levy of penalty u/s 112 (a) & 112(b) of Customs Act, 1962 - appellant could not produce any document for legal purchase of the gold and silver in question on the spot - lawful domestic procurement of the gold bars remains uncontroverted - HELD THAT:- It is found that the appellant was a domestic passenger scheduled to travel by Indigo flight No.6E- 663 on 18-12-2019. At the time of screening of his baggage at the domestic departure terminal of the NSCBI Airport, the CISF personnel recovered 7 pieces of gold biscuits and 1 kg of silver granules from the baggage of the appellant. As the appellant could not produce any document for legal purchase of the gold and silver in question on the spot, the CISF personnel seized the 7 pieces of gold bars and silver granules and handed it over to Customs officers for initiating action under the Customs Act, 1962. Thus, it is agreed with the submission of the appellant there is no legal obligation on the part of the domestic passenger to carry all documents evidencing legal purchase of the gold and silver. In the present case, it is observed that the gold was seized by the personnel CISF from the domestic terminal and later handed over to Customs, meaning that the Customs officers did not act on their independent belief but merely accepted the detention/seizure done by another agency. The Hon’ble Supreme Court in Union of India v. Mohammed Nawaz Khan, [2021 (9) TMI 1054 - SUPREME COURT], held that the authority effecting the seizure must demonstrate a subjective satisfaction based on objective material, failing which the seizure is invalid. Further, it is observed that in Union of India v. Mahesh Raj, the Hon’ble Supreme Court ruled that the burden under Section 123 arises only if there is prima facie evidence indicating foreign origin, which is entirely absent in this case. In the instant case, it is observed that CISF personnel has recovered the 7 bars gold from the procession of appellant solely on the suspicion that it was smuggled and later handed it over to Customs. However, instead of conducting an independent verification or forming their own reasonable belief based on credible evidence, the Customs officers proceeded with the seizure under the Customs Act without exercising due diligence. They failed to assess whether a reasonable belief of smuggling genuinely existed, as required by law, and merely acted on the presumption created by CISF personnel. This lack of independent application of mind renders the seizure arbitrary and legally unsustainable - thus, there was no ‘reasonable belief’ in this case for seizure of the gold in question in terms of Section 110(1) of the Customs Act, 1962. Regarding domestic procurement of the gold, it is observed that later during the course of investigation, the appellant gave all documents evidencing domestic procurement/ conversion of the gold and silver - the documents produced clearly establish that the 7 pieces of gold were made by melting his old jewellery. I find that the investigation officers verified all the documents submitted by the appellant and found that all documents were genuine. The appellant has discharged the burden cast upon him as per section 123 of the Customs Act, 1962 that the gold in question were his own property and the gold bars were obtained by melting of his old jewellery. It is also found that the department has not brought in any evidence to substantiate the allegation that the gold in question was of smuggled in nature. Thus, it is a settled law that even foreign markings on gold bars do not, by themselves, establish the smuggled nature of the gold. The place of seizure in this case is the domestic terminal of NSCBI airport. Thus, the additional evidence is therefore required to prove that the gold was illegally imported, which is not available in this case. Regarding the markings 'Suisse' available in one piece of gold, it is found that it was found to be gold of 99.7% purity and not 999.9% purity, which is normally associated with imported 24 carat gold. Thus, the one gold bar with 'Suisse' marking mentioned in the seizure list dated 05-12- 2020, cannot be considered to be of foreign origin as evidenced form the test report. Regarding the remaining 6 bars, it is also found that there are no specific findings in the impugned order to prove that 'BAUNLEE CHOMPOO' is a foreign marking. It is seen that 'BAUNLEE CHOMPOO' is neither an internationally recognized brand nor a certified hallmark or refinery marking associated with any established gold manufacturer. In the absence of any official certification, industry recognition, or conclusive evidence linking 'BAUNLEE CHOMPOO' to a specific foreign source, such markings, if they even existed at seizure cannot be relied upon to establish the foreign origin of the gold. There is no factual or legal basis to conclude that such markings, even if present, prove illicit importation. The order confiscating the 7 pieces of gold bars set aside. As the confiscation of the gold bars is not sustained, imposing penalty on the appellant for the alleged offence is also not sustainable and hence the same is set aside. The impugned order is set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED Whether seizure of goods under Section 110(1) of the Customs Act was lawful when effected after CISF detention at a domestic terminal and without the seizing/receiving Customs officer forming an independent 'reasonable belief' that the goods were liable to confiscation. Whether the burden under Section 123 of the Customs Act to prove lawful ownership and domestic provenance of seized gold shifts to the owner where prima facie evidence of foreign origin is absent, and whether documentary and oral evidence of domestic melting/refining suffices to discharge that burden. Whether markings on gold bars and partial chemical testing (one sample tested, one not tested) suffice to establish foreign origin and smuggled nature of the gold. Whether penalty under Sections 112(a) and 112(b) is sustainable where confiscation is not sustained. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Lawfulness of seizure under Section 110(1) where Customs acted on CISF detention at a domestic terminal Legal framework: Section 110(1) permits seizure where the proper officer has reason to believe goods are liable to confiscation; seizure requires subjective satisfaction grounded in objective material. Precedent treatment: Followed and applied Union of India v. Mohammed Nawaz Khan (subjective satisfaction based on objective material); Gian Chand v. State of Punjab (mere suspicion insufficient); D. Bhoormull (suspicion not substitute for evidence); Mahesh Raj (burden under s.123 arises only where prima facie evidence indicates foreign origin). Interpretation and reasoning: The Customs officers accepted CISF detention without independently forming or recording a reasonable belief based on objective material linking the goods to illegal importation. The seizure inventory lacked cogent positive evidence of foreign origin or smuggling. The place of seizure - domestic departure terminal - heightens requirement for independent and demonstrable basis to form a reasonable belief. Ratio vs. Obiter: Ratio - seizure is invalid where the seizing/receiving Customs officer does not independently form subjective satisfaction supported by objective material; reliance on another agency's mere suspicion is legally insufficient. (Followed precedents form binding/relevant ratio.) Conclusion: Seizure was arbitrary and legally unsustainable for want of independent reasonable belief under Section 110(1); therefore confiscation predicated on that seizure cannot stand. Issue 2 - Whether claimant discharged burden under Section 123 by documentary and oral evidence of domestic melting/refining Legal framework: Section 123 places on the owner/persons claiming goods the burden to prove lawful ownership and domestic origin once certain factual foundation exists (but burden shifts only where prima facie evidence indicating foreign origin is produced by Revenue). Precedent treatment: Applied Mahesh Raj, Umrao Lal, and Tribunal decisions recognizing that s.123 arises only if Revenue adduces prima facie evidence of foreign origin; Rajesh Kumar and other Tribunal precedents hold that possession of foreign-marked gold without corroborative chain is insufficient. Interpretation and reasoning: The appellant produced contemporaneous vouchers/challans, invoices from a melter/refiner and silver supplier, statement of the melter confirming melting/refining and marking at customer's request, and historical accounting showing prior holdings of old jewellery. Investigating officers verified genuineness of documents. No credible evidence was produced by Revenue to show foreign origin or illicit importation. Where Revenue failed to produce prima facie evidence of foreign origin, the claimant's documentary and oral proof sufficed to discharge the burden under Section 123. Ratio vs. Obiter: Ratio - where Revenue fails to produce prima facie evidence of foreign origin, validated documentary and corroborative oral evidence from the melter/refiner establishes lawful domestic provenance and discharges s.123 burden. (Tribunal's application of established legal test is ratio.) Conclusion: The claimant discharged the burden under s.123; the evidence established domestic melting/refining and ownership, undermining any claim of smuggling. Issue 3 - Sufficiency of markings and partial chemical testing to prove foreign origin Legal framework: Foreign markings and hallmarks are evidentiary, not conclusive; chemical purity testing can be relevant but must be properly conducted and produced for all relevant samples; chain-of-custody and corroborative evidence required to infer foreign importation. Precedent treatment: Followed Bombay High Court (Prithviraj Pokhraj Jain) and Tribunal decisions (Rajesh Kumar) that markings alone do not establish foreign origin; D. Bhoormull and related authorities caution against presumptions from markings without evidentiary link. Interpretation and reasoning: Only one sample (A1) was chemically tested and found to be 99.7% purity (not 99.9% normally associated with imported 24-carat bullion); no test report exists for the A2 sample or the remaining bars. The marking 'Suisse' on one bar therefore was not corroborated by purity or chain evidence as indicative of foreign origin; the marking 'BAUNLEE CHOMPOO' had no recognized international association or certification establishing foreign provenance. Absent tests and corroboration for all bars and absent evidence tying markings to a foreign refinery, markings cannot support confiscation. Ratio vs. Obiter: Ratio - markings and partial chemical testing are insufficient to prove foreign origin; comprehensive testing and corroborative provenance evidence are required before inferring smuggling. (This is applied as binding evidentiary principle.) Conclusion: Markings and incomplete chemical testing do not establish foreign origin or smuggling; Revenue failed to produce adequate scientific or documentary proof to the contrary. Issue 4 - Liability for penalty where confiscation is set aside Legal framework: Penalty under Sections 112(a) and 112(b) is predicated on commission of the prohibited act (e.g., illegal importation/possession liable to confiscation); if foundational finding of confiscation is unsustainable, penalty cannot be maintained. Precedent treatment: Consistent with Tribunal practice that penalty flows from the primary substantive finding; if confiscation is set aside, consequential penalty is liable to be set aside. Interpretation and reasoning: Since confiscation was found legally unsustainable (no reasonable belief, no proof of foreign origin, claimant discharged s.123 burden), the imposition and enhancement of penalty lack foundation. Ratio vs. Obiter: Ratio - penalty cannot be sustained where the substantive confiscation is set aside for want of evidence; penalty is consequential and requires the underlying violation to be established. (Ratio applied.) Conclusion: Penalty imposed under Sections 112(a) and 112(b) is unsustainable and is set aside along with confiscation. Overall Disposition The confiscation of the seven gold bars and the penalty imposed were set aside: seizure lacked independent reasonable belief by Customs officers; claimant's documentary and oral evidence discharged the burden under Section 123; markings and partial testing failed to establish foreign origin; consequent penalty could not stand. These conclusions follow the cited authorities and established evidentiary principles regarding seizure, marking, testing and burden of proof.