2026 (1) TMI 1448 - AT - Customs

Smuggling and burden of proof in customs: release of gold upheld where domestic purchase invoices defeated smuggling allegation.

Burden of proof in customs smuggling proceedings was examined, with the burden shifting to the respondent only upon reasonable belief of smuggled goods; ... Smuggling - Burden of proof in customs proceedings - smuggled nature of the gold - Confiscation of goods - Penalty under customs law - Admissibility and reliance on statement when cross-examination not permitted - Proof of domestic chain of transaction / lawful acquisition - HELD THAT:- From the grounds of appeal, we find that the main ground raised by the Revenue is that the Ld. Commissioner of Customs (Appeals) has failed to appreciate the fact that the burden of proof under Section 123 of the Customs Act, 1962 was not discharged by the Respondent. In this regard, we observe that the burden of proof shifts to the Respondent only when there is a reasonable belief that the gold in question was of smuggled in nature. In the present case, the Revenue has admitted that the gold was originally purchased from M/s. Kundan Care Products Ltd., under tax invoices. Thus, the evidence available on record confirms the purchase of the gold from domestic sources. Thus, we hold that the provisions of Section 123 of the Customs Act, 1962 are not applicable to the facts and circumstances of the present case. Admittedly, the facts regarding the sale of the gold bar itself indicates that the respondent has purchased the same from domestic sources. We also find that the Department has not produced any evidence to substantiate its allegation that the said gold bar no. 151551 is of foreign origin. Therefore, in the absence of any corroborative evidence by the Revenue to establish the smuggled nature of the gold bar in question, we hold that the gold in question cannot be held liable for confiscation. Ld. Commissioner of Customs (Appeals), Custom House, Kolkata has passed the impugned order dated 16.08.2021 setting aside the Order-in-Original dated 05.03.2020 and ordered for unconditional release of the gold bar bearing no. 151551 weighing 999.900 grams in favour of the Respondent. We fully agree with the above findings given by the Ld. Commissioner (Appeals) and do not find any reason to differ with the same. Accordingly, we uphold the impugned order passed by the Ld. Commissioner (Appeals) and reject the appeal filed by the Revenue. Issues: Whether the seized gold bar could be held liable for confiscation under the Customs Act, 1962 having regard to the burden of proof provisions of Section 123 and the evidence on record.Analysis: The record shows that the gold bars originated from domestic suppliers under tax invoices and had circulated within the Domestic Tariff Area; this fact was not disputed by the Revenue. Section 123 shifts the burden to the person in possession only when there is a reasonable belief that the goods are smuggled. The Department failed to produce corroborative evidence to establish foreign origin or forgery of markings on the seized bar. Reliance by the Department on a statement of a witness was undermined by the absence of verifiable investigation into the alleged sale of cut pieces and by the non-allowance of cross-examination; no independent evidence was adduced to controvert the lawful chain of transactions demonstrated by tax invoices. On these facts, the requirements for confiscation and penal consequences were not satisfied.Conclusion: The confiscation cannot be sustained and the seized gold bar must be released; decision is in favour of the Assessee.