Circumstantial evidence can sustain confiscation of foreign-marked gold even without Section 123 presumption; penalty may still be moderated.

Confiscation of foreign-marked gold was sustained on circumstantial evidence despite non-invocation of the Section 123 presumption under the Customs Act, 1962, because contradictory explanations, a false source claim, absence of duty-paying documents, and failure to give a consistent lawful account supported the inference of smuggled origin. A retracted statement was not treated as inherently unreliable, and the burden remained on the possessor to explain lawful possession. The penalty was found warranted but excessive and was reduced.

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Issues: (i) whether the confiscation of 30 gold bars with foreign markings was sustainable on the basis of the evidence and the appellant's conduct, and (ii) whether the penalty imposed on the appellant required interference.

Issue (i): whether the confiscation of 30 gold bars with foreign markings was sustainable on the basis of the evidence and the appellant's conduct.

Analysis: The gold was initially seized by the police and handed over to Customs, so the statutory presumption under Section 123 of the Customs Act, 1962 was not invoked. Even so, the department was entitled to establish smuggling on the basis of available evidence and surrounding circumstances. The appellant first gave one version naming a different person as the source of the gold and furnishing a wrong telephone number, and later retracted that version and advanced another claim. The initial statement, the absence of duty-paying documents, the false explanation regarding the source of the gold, and the failure to produce a satisfactory and consistent account were treated as relevant circumstances. A retracted confession was held not to be automatically unreliable, and the evidentiary burden shifted to the appellant to explain the possession of foreign-marked gold in a lawful manner.

Conclusion: The confiscation of the gold was upheld.

Issue (ii): whether the penalty imposed on the appellant required interference.

Analysis: The evidence was found sufficient to sustain liability for smuggled gold, but the quantum of penalty was considered excessive in the circumstances. The appellant's conduct justified penal action, yet the amount could be moderated.

Conclusion: The penalty was reduced to Rs. 4 lakhs.

Final Conclusion: The confiscation was confirmed, the appellant obtained only limited relief by way of reduction of penalty, and the connected claim of the second appellant was rejected.

Ratio Decidendi: Where a person is found in possession of gold with foreign markings and the surrounding circumstances, including contradictory statements and lack of lawful documents, reasonably indicate illicit origin, confiscation may be sustained on circumstantial evidence even without the statutory presumption under Section 123 of the Customs Act, 1962, and a retracted statement remains admissible unless coercion is affirmatively established.

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