AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 270
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to confiscate the seized Gold under the provisions of Customs, Act, 1962; subsequently, search of residential premises of Girish Mitruka and Harish Mitruka, conducted on 06.07.2021, resulted in recovery of 7770.410 gm of silver valued at Rs. 3,20,738/- and cash amounting Rs. 16,50,000; in absence of any licit document about recovery of goods as mentioned, the same were seized under relevant provisions of Customs Act, 1962 and a supplementary show cause notice dated 22.11.2021was issued. It was alleged that smuggling of foreign origin gold into India from Myanmar was planned and executed by way of conspiracy by S/Sh. (i) Girish Mitruka (ii) Harish Mitruka (iii) Abhishek Kumar and (iv) Ritesh Kumar; Girish Mitruka & Harish Mitruka made arrangements for procuring foreign origin gold from Myanmar; as per instruction of Shri Girish Mitruka & Shi Harish Mitruka, Shri Abhishek Kumar and Shri Ritesh Kumar went to Guwahati, Assam, on 29.01.2021 & 02.02.2021 respectively; they took delivery of foreign origin gold and handed over the same to Shri Girish Mitruka & Shri Harish Mitruka in Katihar; Shri Harish Mitruka & Shri Girish Mitruka got the said gold melted to remove foreign marks on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... intercepted and seized 3499.750 gm of gold from both the employees Abhishek and Ritesh on Lucknow-Ayodhya Highway, while they were under transit for delivering the gold to the purchaser; Harish Mitruka has filed his written reply 30.03.21 before the DRI Patna, stating the same. * the statement of both the employees Ritesh and Abhishek has been recorded by the DRI officials under coercion; both the employees Abhishek Kumar and Ritesh Kumar retraction of their statements dated 13.02.21, on 18.02.21 at the first opportunity, before the special CJM (Customs), Lucknow; they have also submitted in their replies dated 25.05.21, to the Show Cause Notice that they were the employees of Harish Mitruka and have requested for the release of gold; statements recorded under coercion having been retracted immediately, cannot be used or relied upon against the assessee * In his statement dated 06.07.21, Shri Girish Mitruka stated that the silver seized from the house is the old family property which has been melted the profit and partitioned amongst the family members. It has been further stated that the cash seized of Rs. 16,50,000/- belonged to various family members out of which 5 family m....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., when duly reflected in the GSTR-2A return, cannot be said by any stretch of imagination to be fake and manipulated; it is evident that the seller cannot deny the issuance of the invoices; it appears that the statement of the sellers have been recorded under coercion behind the back of the appellant; no opportunity of cross-examination of the sellers was given to the appellant, which is clear violation of principles of natural justice; * Learned Commissioner, in the impugned order, has failed to categorically conclude that the present case falls within the exceptions provided under Section 138B and therefore the impugned order is liable to be set aside on this very ground itself; Section 122A of the Customs Act, 1962 makes the principles of natural Justice applicable to an adjudication proceeding undertaken under the Act of 1962 4. The appellants relied on the cases in the grounds of appeal and submit as follows: (i). K.I. PAVUNNY versus Assistant Collector, reported in 1997 (90) ELT 241 (SC) to submit that if a statement is retracted, it must first be tested whether confession is voluntary and truthful inculpating the accused in the commission of the crime. (ii). New India....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tosh Kumar, Learned authorised representative for the Revenue, reiterates the findings and the impugned order and submits as follows: * Shri Abhishek Kumar and Shri Ritesh Kumar failed to provide any licit documents in respect of gold recovered from them at the time of interception, on 13.02.2021;burden of proof under section 123 of Customs Act, 1962 has not been discharged; both the persons intercepted by the DRI, in their statements admitted that gold was of smuggled through Myanmar into India via Guwahati to Katihar (Bihar) and then delivered to different places; statements of both the persons, are corroborative to each other and with the other factual circumstances; appellants had never been able to produce any valid documents in support of their claim of the seized gold and silver; the gold is a notified item under Section 123 of the Act; therefore, in absence of any valid documents, the recovered gold will be considered as foreign origin gold and thus the absolute confiscation is legal and proper.; he relies on Rajendra Kumar Damani @ Raju Damani 2024 (389) E.L.T. 444 (Cal.) and Anurag Jalan 2022 (382) E.L.T. 532 (Tri. - Kolkata); * Shri Girish Mitruka and Shri Harish Mit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion conducted by the DRI, proved that the said invoices were fake and manipulated. He submits that the plea that statements of Shri Abhishek Kumar and Shri Ritesh Kumar were recorded by the DRI under coercion and have been retracted is unfounded; mere retraction does not make the statements involuntary or unlawfully obtained and non-reliable; he relies on the following cases: * Vinod Solanki 2009 (233) ELT 157 (SC) * Rajendra Kumar Damani @ Raju Damani 2024 (389) ELT 444 (Cal.) * Zaki Ishrati2013 (291) ELT 161 (All.) * Surjeet Singh Chhabra 1997-89-ELT-646-SC * KTMS Mohammed AIR 1992 SC 1831 * D. Bhoormull 1983(13) ELT 1546 (SC) 7. Heard both sides and perused the records of the case. Brief issues that require our consideration in the instant case is to see as to whether (i). Whether the Department could establish the 'Reasonable belief' to seize 3499.750gm of alleged foreign origin gold, valued at Rs.1,73,93,757, on 13.02.2021, from the possession of Shri Abhishek Kumar & Shri Ritesh Kumar. (ii). Whether evidences available on record prove that the seized gold bars were smuggled into India from Myanmar without any legal documents? (iii) Under the facts and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plus 19,00,000 on 06.03.2021; payments of 38,40,000on 22.02.2021 and 17,12,818on 10.03.2021 were made to Maruti Ornaments. They submit that these sellers have duly filed their returns under the GST; on the filing of GSTR-1 return by the sellers, on the portal of GST, invoices are auto populated and its duly reflected in the GSTR-2A return of the firms; these facts evidence that the gold seized is of Indian origin and is a legal purchase by M/s Mitruka Traders and that it is incorrect to allege that the invoices are fabricated. They submit that they were not allowed to cross-examine Shri Abhishek Kumar and Shri Ritesh Kumar and the said investigation report was not supplied to the appellants enabling them to defend themselves, in violation of the principles of Natural justice. 10. We find it would be beneficial to have a look at the provisions of the Act. 10.1. Section 111 of the Customs Act, 1962 empowers the officers to confiscate goods. It reads as under. Confiscation of imported goods, etc. improperly The following goods brought from a place outside India shall be liable to confiscation: - (a) .... (b) any goods imported by land or inland water through any route other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lief, then the goods would not be liable to be seized in the first place. Wrong invocation of Section 110, leaves no scope to invoke section 123. It would then be incumbent on the Customs authorities to prove that the seized goods are liable for confiscation. In the event of failure to prove so, there is no question of confiscation and penalty. * If Revenue is able to prove reasonable belief, then the seizure under 110 is proper and Section 123 sets in. If the person from whom goods were siezed is able to prove that the goods in question were not smuggled, then the onus under Section 123 stands discharged. 12. In view of the above, it is clear that it would be incumbent on the Customs authorities to prove that the seized goods are subject to confiscation. In the event of failure to prove so, there would be no question of confiscation and penalty. It gives an understanding that the Sections 111(b) and 111(d) are applicable only when it is established that the goods are of foreign origin and smuggled into the country without payment of applicable customs duties. We find that in the instant case, 3499.750 gm of gold was seized after intercepting the persons on Lucknow-Ayodhya Highw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Babulal Amthalal Mehta v. Collector of Customs, AIR 1957 S.C. 877, while considering the provisions of Section 178A of the Sea Customs Act, 1878, it was observed; "Though the word 'smuggling' is not defined in the Act, it must be understood as having the ordinary dictionary meaning, namely, carrying of goods clandestinely into a country." Where Section 123 cannot be invoked it would be for the customs authorities to prove that the goods were imported after the restrictions against import were imposed. (Amba Lal v. Union of India, AIR 1961 S.C. 264. In Pukhraj v. D.R. Kohli, AIR 1962 S.C. 1559 the Supreme Court said that when the court was dealing with the question as to whether the belief in the mind of the officer who effected a seizure, was reasonable or not, the court was not sitting in appeal over the decision of the said officer. All that it could consider was whether there was any ground which prima facie justified a reasonable belief. That the officer had reasonable belief must be stated in the notice to show cause. It must be adjudicated upon by the authorities under the Act. At the stage of appeal or revision from the orders of the officer adjudging confiscation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion is raised and the fact to be proved, so that whatever other constitutional infirmity might attach to the impugned provision, the lack of rational connection is not one of them." It would be necessary, therefore, before any person could be called upon to prove that the goods seized from him were not smuggled goods, that the customs officer making the seizure must proceed upon the foundation of a reasonable belief inspired in him by some definite material by way of some definite information or otherwise so that he could be said to have seized the goods in a reasonable belief that they were smuggled goods. (Bapalal v. Collector of Central Excise, AIR 1965 Gujarat 135). The question is whether the record before me shows that there was a reasonable belief in the mind of the seizing officer that the goods were smuggled goods. It does not appear to me that he had entertained any reasonable belief at the time of seizure. Neither the board on appeal, nor the Central Government applied their mind to this question. Two reasons: 57. Applying the principles of these cases to the facts of the present case what do we find? Two reasons were given in support of the reasonable belief. One ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se two packets of diamonds are described as "appearing to be diamonds". This shows that the customs officer did not believe them to be diamonds on any reasonable ground. The ornaments had no foreign label or making. They were ordinary ornaments as are worn in this country. There was nothing peculiar about them. Nothing extraordinary. On this material could any reasonable man entertain a belief that these were smuggled goods? 59. The belief must be such as any reasonable man in the circumstances of the case would entertain about the existence or non-existence of a thing. Simply because the goods were not accounted for at that time does not necessarily mean that the goods were smuggled goods. Unaccounted goods may be stolen goods. Reasonable belief could be entertained either on the basis of some external indicia or on the basis of some internal information that the goods had been illegally imported into India from Nepal or some other foreign country either without payment of duty or in contravention of any restriction or prohibition imposed by statute. There was nothing to suggest the foreign origin of the goods. There was nothing to suggest the illegal importation of the goods in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sumption could be raised under Section 123. There was no obligation on the petitioner to prove that the goods were not smuggled. The burden of proof was wrongly cast on him. The entire inquiry was vitiated. 64. For these reasons the writ petition is allowed. The order of confiscation of the goods is set aside. The order of the Addl. Collector of Customs dated 14-08-1968 the order of the Central Board of Excise and Customs dated 18-9-1971 and the order of the Central Government dated 30-5-1972 are quashed. The respondents are directed to return to the petitioner items 6 to 11 and 16 of the search lists forthwith. The parties are left to bear their own costs. ... 14. We further find that The Hon'ble High Court of Bombay in the case of Union of India Vs. ImtiazIqbal Pothiawala reported in 2019 (365) ELT 167 (Bom.), held as under: "7. Secondly, the questions which arise for our consideration in this case is in the context of the application of Section 123 of the Act in respect of the goods notified therein. Gold is an item which is notified under Section 123 of the Act and it provides that burden of proof in case of notified goods, would be upon the person from whose possession and/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned the meaning of the word 'reason to believe' as under: - "reason to believe" by opining it to be not the subjective satisfaction of the officer concerned, for "such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with their strains imposed by law" and that such belief must be that of an honest and reasonable person based upon reasonable grounds. Further, if the authority would be acting without jurisdiction or there is no existence of any material or conditions leading to the belief, it would be open for the Court to examine the same, though sufficiency of the reasons for the belief cannot be investigated. 16. We find that Tribunal in the case of Balanagu Naga Venkata Raghavendra Vs CC Vijayawada 2021 (378) ELT 493 (Tri-Hyd) held that the burden under section 123 will not shift on the Appellants when the seizure of gold without foreign markings are seized from city. Tribunal held as follows. "14. The confiscation of the gold by the adjudicating authority was set aside by the Tribunal and on appeal by the Revenue the Hon'ble High Court of Kerala, in the above factual matrix, has overturned the decision of the Tribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led with these statements was the fact the gold of very high purity. The ratio of this judgment does not apply to the present case and the facts are quite different. 15. In view of the above, we find that the officers of the Department had no reasonable belief that the gold was smuggled and therefore they have not discharged their responsibility of forming reasonable belief under Section 123 without which the burden of proof will not shift to the person from whom the gold is seized." 17. We further find that the Tribunal in the case of Principal Commissioner of Customs (Prev.), Delhi Vs. Ahmed Mujjaba Khaleefa [2019 (366) ELT 337 (T) dismissed the appeal of Revenue on the grounds that jewelry was not bearing any foreign marking and in the absence of any evidence other than statement of passenger. From the above discussion, we observe that in the absence of any evidence other than the statements of Shri Abhishek Kumar & Shri Ritesh Kumar, which were later refracted, the officers of DRI could not establish that there are sufficient grounds to establish that the 'reasonable belief' as contemplated in Section 110 of the Customs, Act, existed in the case. It is further fortif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the seized goods are liable for confiscation under Section 111 nor the persons involved are liable for penalty under Section 112. The provisions of Section 123 are not attracted. 19. The next issue to be seen is as to whether in the facts and circumstances of the case, the appellants have discharged the Burden of Proof as envisaged under Section 123 of Customs Act,1962. Though, in view of our discussion as above, we are of the considered opinion that the reasonable belief under Section 110 not being established, Section 123 is not attracted, it would be in the interest of Justice to analyse the same assuming that the provisions of Section 123 are attracted. Revenue alleges that the appellants have failed to discharge their burden under section 123 of the Customs, Act 1962. We find that though Shri Abhishek Kumar & Shri Ritesh Kumar, in their initial statements on 13.02.2021 admitted that the gold was smuggled, have retracted the statements before magistrate on 18.02.2021. We find that the appellants have claimed licit procurement of the goods in question; they claim that payment was made to all the parties by banking channels; bank statement was annexed with reply to Show Cause No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce that burden is discharged by that person, it is to be rebutted or proved wrong by the Revenue. Account details, financial transactions and GSTN returns cited by the appellants could have been easily corroborated and verified. Revenue has not done the same. Instead, they rely on an investigation said to have conducted by DRI, at the back of the appellants and copy of which is neither given to the appellant nor part of the proceedings. Therefore, we are of the considered opinion that not only the claim of the appellant is not negated but also the principles of natural justice have been violated. 21. We find that Learned Counsel for the appellants submits that the Commissioner did not follow the provisions of Section 138B of the Customs Act, 1962 in as much as he did not examine Shri Abhishek Kumar & Shri Ritesh Kumar and did not accord permission to cross examine them. We find that this is more relevant in the case as the entire case is built on the statements of the above two persons. We find that Tribunal, in the case of Flamingo DFS Pvt Ltd., Vs. Commissioner of Customs, Visakhapatnam reported in 2018 (363) ELT 450 (Tri-Hyderabad), held that if Revenue chooses not to examine a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the appellant in the crime in question. We are thus left with only one piece of material that is the confessional statements of the co-accused as stated above. On the touchstone of law laid down by this Court such a confessional statement of a co-accused cannot by itself be taken as a substantive piece of evidence against another co accused and can at best be used or utilized in order to lend assurance to the Court. In the absence of any substantive evidence, it would be inappropriate to base the conviction of the appellant purely on the statements of co-accused. The Appellant is therefore entitled to be acquitted of the charges levelled against him." 23. The reliability of the statements of the co-accused becomes weak for the reason that the persons making those statements were not examined following the provisions of Section 138 B of the Customs Act, 1962. It is further weakened as Cross-examination is not allowed. Hon'ble Madras High Court observed, in the case of Vijayaraj Surana Vs. Commissioner of Customs, Chennai-III reported in 2016 (340) ELT 308 (Mad.), that it has to be noted that each case has to be decided on its peculiar facts. Admittedly, statements have been rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot been complied with and therefore, the sanctity of the statement recorded under section 108 has been lost and consequently, it cannot be conclusively relied upon. 25. In view of the above discussion we find that in the instant case, presence of reasonable belief is not established as the seizure took place at a place not specified under a Section 111(H), as notified under Section 6 of the Customs, Act,1962; there were no foreign markings on the gold pieces seized and that the purity was only 98.52% and 96.73% by weight Therefore, the claim of reasonable belief is nothing but a presumption that the gold bars/pieces were of smuggled nature. It is not supported by any corroborative evidence. It appears that Revenue attempts to bring in reasonable belief that the goods are liable for confiscation, after the goods are seized, basing solely on the statements of the persons and brushing aside the submissions of the appellants on the licit procurement of the gold in the domestic market. This is not acceptable. Reasonable belief contemplated in Section 110 of Customs Act, 1962, should exist to the satisfaction of the officers and any authority at least to an extent wherein the same does ....