2026 (2) TMI 193 - AT - Customs

Smuggling of gold and customs adjudication: remanded for fresh proceedings allowing crossexamination and full defence rights

Charge concerns clandestine importation of gold alleged as smuggling, with reverse burden of proof and penalties for confiscation and fine. The ... Reverse burden of proof - presumption u/s 123 - confiscation u/s 111(d) - penalty u/s 112(a) - natural justice - right to cross-examination - procedure u/s 138B - admissibility of statements u/s 108 - proper officer - Proof of illicit importation - HELD THAT:- The appeal in this case relates to the charge of smuggling of gold, which is nothing but importing goods clandestinely, without payment of duty. Such goods fall within the definition of “prohibited goods”, under Section 2(33) of the Customs Act. These activities threaten national economic interests. There is seen to be a non-adherence of the principles of natural justice in this case, more so in a case involving reverse burden of proof. However, this is a curable defect. Considering the gravity of the charge and the need for the appellant to defend himself, it is hence felt necessary that the matter should be remanded to the file of the Original Authority to follow the procedure set out in section 138B of the Customs Act 1962. He should afford an opportunity to the appellant, in terms of the section, to cross examine the remaining persons whose statements were relied upon in the SCN and had been requested by the appellant for cross-examination but were not permitted by the Ld. A.A.. This view is also supported by the recent judgment of the Hon’ble Allahabad High Court in Commissioner Of Customs (Preventive) Lucknow Vs Shri Sarad Chand Agrahari @ Sharad Chand Agrahari [2026 (1) TMI 1496 - ALLAHABAD HIGH COURT], that set aside a CESTAT order which had invalidated customs adjudication proceedings on the ground that cross-examination under Section 138B of the Customs Act was not provided. We hence remand the matter to the Original Authority to decide the issue afresh in denovo proceedings after following the procedure set out in section 138B of the Customs Act 1962. The appellant is at liberty to advance arguments both orally and in writing on the merits of the case. All contentions are left open. The appellant should also cooperate with the adjudicating authority in completing the process expeditiously and in any case within ninety days of receipt of this order. The appeal is disposed of accordingly. Issues: Whether denial of the opportunity to cross-examine witnesses whose statements were relied upon, contrary to the procedure under Section 138B of the Customs Act, 1962, vitiates the adjudication and requires remand for fresh adjudication.Analysis: The matter involves allegations of smuggling of gold and application of the reverse burden under Section 123 of the Customs Act, 1962. Statements recorded under the Act were relied upon by the adjudicating authority, and the appellant had sought cross-examination of certain witnesses which was not permitted. Judicial precedents recognise that admissible statements may nonetheless require testing by cross-examination to assess probative value, and the procedure in Section 138B is the mechanism to permit cross-examination where relied upon material and requests are made. Denial of cross-examination in a case attracting reverse burden of proof can prejudice the noticee's ability to defend and is a curable procedural defect that may necessitate fresh consideration depending on facts and prejudice.Conclusion: The matter is remitted to the original adjudicating authority for de novo adjudication after following the procedure laid down in Section 138B of the Customs Act, 1962 and affording the appellant the opportunity to cross-examine the witnesses whose statements were relied upon. All contentions are left open.