TaxTMI 
TaxTMI 
2025 (12) TMI 777
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....ar and Naresh Kumar who were travelling from Chennai to New Delhi in a train were intercepted at Hazrat Nizamuddin Railway Station, New Delhi by officials of the Directorate of Revenue Intelligence [DRI] and a notice under section 102 of the Customs Act was issued to them for search of their luggage. They were then taken for a physical search at the DRI Head Quarters at New Delhi. Thereafter, their statements were recorded at the DRI Office under section 108 of the Customs Act. The search of Manish Kumar and his baggage resulted in recovery and seizure of 7 gold bars, collectively weighing 7000gm, from a blue colour trolley bag which contained a purple colour trolley bag and a black colour bag. Rs. 1,17,590/- of Indian currency was also recovered and seized. Similarly, the search of Naresh Kumar and his baggage resulted in recovery and seizure of 5 gold bars, collectively weighing 5000 gm from a blue colour trolley bag, which contained a brown colour trolley bag and a black colour bag. Rs. 1,19,820/- of Indian currency was also recovered from him and seized. 4. On the same date Subhash Tukaram Karan, an employee of the appellant, who was travelling from Mumbai to New Delhi by tr....
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.... aforesaid Invoice No. SG-460 recovered from Subhash Tukaram Karan, a search of the premises of M/s. Khandelwal Chain and Co., New Delhi was carried out on 19.01.2023. The proprietors of the said shop, Sanjay Khandelwal and Sunil Khandelwal, were present at the shop premises. The search resulted in recovery of gold jewellery, collectively weighing 24626.56 gms, from two safetydeposit lockers and gold chains from folders and some boxes. 19 gold coins/bars were also recovered. Rs. 50,50,000 as opposed to the figure of Rs. 22,92,605.5 in the account was also recovered and detained due to the mismatch in the tally. 7. Based on the statements of Manish Kumar, Naresh Kumar and Subhash Tukaram Karan, a search of the shop premises of M/s. Mahalaxmi Chains, Mumbai (of which the appellant is the proprietor) was also carried out by DRI on 19.01.2023. Pursuant to the search, several documents and a laptop, were recovered and seized. However, nothing incriminating was found at the said shop premises. The shop premises were also sealed by the DRI after the search. 8. The appellant, who claims to have travelled to New Delhi for business and for collecting the assorted gold articles weighing....
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....e same on his instructions. He also stated that the gold seized from Subhash Tukaram Karan and from the premises of M/s. Bikaner Jewellers, New Delhi did belong to him and that he had valid supporting documents. He also stated that the gold jewellery weighing 20756.3 gms recovered from Subhash Tukaram Karan was taken on approval basis for marketing purposes and was manufactured by one M/s. Swamini Creations. 15. On 27.04.2023, the appellant made a request for de-sealing of his shop premises on the ground that he required documents to present them to the DRI. 16. On 03.05.2023, pursuant to the request of the appellant for the de-sealing of his shop premises, DRI Officials in the presence of pancha witnesses removed the seal affixed to the shop premises after the first search. A finding of tampering of the seal was not recorded. It is stated that prior to entry, the DRI Officials also searched the person of the appellant through physical frisking. During the search of the shop premises carried out thereafter, 19 bills, vouchers and delivery/approval challans were found and seized by the DRI, which documents, the DRI alleges, were 'planted' by the appellant. 17. On 18.05.2023....
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....nt for licit possession of smuggled Gold Bars and hence, failed to discharge the burden of Section 123 of The Customs Act, 1962 lying on him to prove that recovered Gold Bars were not smuggled. xxxxxxxxxx 143.7 Thus, in the instant case, Sh. Manish Kumar, Sh. Naresh Kumar and Sh. Bharat Shantilal Shah failed to prove licit possession of 12 Gold bars weighing 12000 Grams. In addition, the 12 Gold Bars had Foreign Marking, hence, the said Gold Bars are of foreign origin and the said Gold Bars can only be imported into India through Smuggling activity as the import of Gold is regulated by Government through Import Policy Regime and Foreign Trade(Development and Regulation) Act and the Noticee Sh. Bharat Shantilal Shah have failed to produce any licit document for the import of the said gold/bars. Therefore, on the basis of above findings, I hold that the 12 Gold Bars collectively weighing 12000 Grams recovered from the possession of Sh. Manish Kumar & Sh. Naresh Kumar and owned by Sh. Bharat Shantilal Shah was smuggled in India. xxxxxxxxxxxx 143.15 Therefore, from the above discussion, I find that 12 Gold Bars weighing 12000 Grams seized from Sh. Ma....
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....Tariff value as Rs. 5,98,48,560/- and Rs. 2,37,410/- seized from the possession of Sh. Manish Kumar and Sh. Naresh Kumar which pertained to Sh. Bharat Shantilal Shah is liable for confiscation under Section 111(b) and 111(d) of the Customs Act, 1962 and Section 121 of The Customs Act, 1962 respectively." (emphasis supplied) 26. In respect of gold jewellery weighing 20756.3 gms seized from Subhash Tukaram Karan, the Commissioner considered the statements made by Subhash Tukaram Karan and the appellant under section 108 of the Customs Act, the reply submitted by the appellant with Appendix 'A' containing the breakup of Jewellery received from job workers, and observed: "149.12 xxxxxxxxx. I hold that Sh. Bharat Shantilal Shah and Sh. Anand Dasmal Shah were hand in glove in the business of manufacture/dale of Gold Jewellery covered under Invoice no. SG0460 dated 17.01.2023 used to cover up the other Gold Jewellery is also liable for confiscation under Section 119 of The Customs Act, 1962. xxxxxxxxxxx 149.14.1 Therefore, I hold for confiscation of Gold Jewellery weighing 18035.26 grams recovered from the possession of Sh. Subhash Tukaram Karan and ....
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....of of gold bars / coins or gold jewellery / articles made with smuggled foreign origin gold, Sh. Bharat Shantilal Shah is liable for penalty under Section 112(b)(i) of the Customs Act, 1962. 156.3 I also find that Sh. Bharat Shantilal Shah was also involved knowingly and intentionally in arranging tickets for the carriers, concealment, planting forged documents, managing coordinating the smuggling of gold and converting foreign gold bars into jewellery/articles. I also find that Sh. Bharat Shantilal Shah managed forged/ fraudulent documents and fradulent deposition certificates with the help of other persons involved in the trade of Gold and Gold Jewellery and submitted the same during the reply of SCN for proving licit possession of Gold Jewellery, therefore I hold that Sh. Bharat Shantilal Shah is also liable for penal action under Section 114AA of the Customs Act, 1962." (emphasis supplied) 28. Accordingly, a penalty of Rs. 1.50 crores was imposed on the appellant under section 112(b)(i) of the Customs Act and a further penalty of Rs. 1.5 crores was imposed on the appellant under section 114AA of the Customs Act. 29. Shri Rupesh Kumar, learned senior coun....
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.... held in the impugned order that they were owned by the appellant. To support this case, the appellant had produced various documents and affidavits, which affidavits have been rejected for arbitrary reasons; (vii) In any view of the matter, it is not the case of the department that the said gold jewellery/ornaments were imported by the appellant. They could not, therefore, have been confiscated under any of the clauses of section 111 of the Customs Act. The Commissioner, therefore, committed an error in extending the scope of section 111 of the Customs Act to the goods manufactured in India; (viii) The provisions of section 120 of the Customs Act have neither been invoked in the present proceedings nor the same could have been invoked as there is nothing on the record to show that it was the appellant who had smuggled the gold bars out of which the seized gold jewellery/ornaments had been manufactured; (ix) The appellant had placed on record charts as Appendix 'A', 'B' and 'C' showing the ownership and records pertaining to the gold jewellery/ornaments/cut pieces but they have not been considered; (x) The allegation that the appellant had tried ....
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....t], read with Rule 55 of the CGST Act; (iv) Additionally, during search of the premises of M/s. Bikaner Jewellers, located in Chandni Chowk, 2818.05 gms of gold and 11,224 gms of gold jewellery were recovered. Some of these items bore foreign-origin markings. When questioned, Pawan Soni could not provide any licit documents for the gold items, further reinforcing the suspicion of illegal acquisition. Similarly, during the search of M/s. Khandelwal Chain Co., also in Chandni Chowk, 19 gold coins/bars and unaccounted cash amounting to Rs. 50,50,000 were seized; (v) The fact that all the recovered gold and jewellery lacked valid documentation and were connected to Bharat Shantilal Shah (either through employees or business associates) raises a presumption that these goods were smuggled; (vi) The retraction of statements made by Bharat Shantilal Shah and his employees does not diminish the strength of the case. The retraction is indicative of an attempt to build false stories to evade liability; (vii) The ingredients under section 111 of the Customs Act have been met in this case. The seized goods, being prohibited goods under section 2(33) of the Cu....
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....any other thing in any inquiry which such officer is making under the Customs Act. 36. Section 138B of the Customs Act deals with relevancy of statements under certain circumstances and it is reproduced below: "138B. Relevancy of statements under certain circumstances. (1) A statement made and signed by a person before any Gazetted Officer of customs during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provisions of sub-sectio....
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....section 138B of the Customs Act and section 9D of the Central Excise Act. 40. In Ambika International vs. Union of India [2018 (361) E.L.T. 90 (P&H)] decided on 17.06.2016, the Punjab and Haryana High Court examined the provisions of section 9D of the Central Excise Act. The show cause notices that had been issued primarily relied upon statements made under section 14 of the Central Excise Act. It was sought to be contended by the Writ Petitioners that the demand had been confirmed in flagrant violation of the mandatory provisions of section 9D of the Central Excise Act. The High Court held that if none of the circumstances contemplated by clause (a) of section 9D(1) exist, then clause (b) of section 9D(1) comes into operation and this provides for two steps to be followed. The first is that the person who made the statement has to be examined as a witness before the adjudicating authority. In the second stage, the adjudicating authority has to form an opinion, having regard to the circumstances of the case, whether the statement should be admitted in evidence in the interests of justice. The judgment further holds that in adjudication proceedings, the stage of relevance of a st....
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....ndatory. 24. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudication authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 25. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in....
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.... Act, before treating a statement recorded under section 108 of the Customs Act as relevant. 42. In Hi Tech Abrasives Ltd. vs. Commissioner of C. Ex. & Cus., Raipur [2018 (362) E.L.T. 961 (Chhattisgarh)] decided on 04.07.2018, the Chhattisgarh High Court also examined the provisions of section 9D of the Central Excise Act. The allegation against the appellant was regarding clandestine removal of goods without payment of duty and for this purpose reliance was placed on the statement of the Director of the Company who is said to have admitted clandestine removal of goods. The contention of the appellant before the High Court was that the statement of the Director could be admitted in evidence only in accordance with the provisions of section 9D of the Central Excise Act. After examining the provisions of subsections (1) and (2) of section 9D of the Central Excise Act, and after placing reliance on the judgment of the Punjab and Haryana High Court in Ambika International, the Chhattisgarh High Court held: "9.3 A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry....
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....cating authority, if at all, it was inclined to take into consideration the statement recorded earlier during investigation by the Investigation officers. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, the statement recorded by the Investigation Officer would not constitute the relevant and admissible evidence/material at all and has to be ignored. We have no hesitation to hold that the adjudicating officer as well as Customs, Excise and Service Tax Appellate Tribunal committed illegality in placing reliance upon the statement of Director Narayan Prasad Tekriwal which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana." (emphasis supplied) 43. In Additional Director General (Adjudication) vs. Its My Name Pvt. Ltd [2021 (375) E.L.T. 545 (Del.)]. decided on 01.06.202....
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....teel P. Ltd. vs. Commissioner, Customs, Central Excise & Service Tax, Raipur [Excise Appeal No. 52612 of 2018 decided on 30.10.2023] decided on 30.10.2023, a Division Bench of the Tribunal examined the provisions of section 9D of the Central Excise Act and after placing reliance upon the decision of the Punjab and Haryana High Court in Jindal Drugs, observed that if the mandatory provisions of section 9D(1)(b) of the Central Excise Act are not followed, the statements cannot be used as evidence in proceedings under Central Excise Act. The relevant portions of the decision of the Tribunal are reproduced below: "14. Evidently, the statements will be relevant under certain circumstances and these are given in clauses (a) and (b) of subsection (1). There is no assertion by either side that the circumstances indicated in (a) existed in the case. It leaves us with (b) which requires the court or the adjudicating authority to first examine the person who made the statement and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence. Of course, the party adversely affected by the statement will have to be given an opportuni....
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....Pvt. Ltd. vs. Principal Commissoner, CGST, Raipur [Excise Appeal No. 51148 of 2020 decided on 01.04.2025] followed the aforesaid decisions of the High Courts. 47. It is, therefore, not possible to accept the submission made by the learned special counsel for the department that the statements made by the appellant, Manish Kumar and Naresh Kumar should be considered and that the retraction of these statements would have no impact on the admissions made in the statements given under section 108 of the Customs Act. 48. It has, therefore, to be held that the Commissioner could not have drawn a conclusion from the statements made by the appellant, Manish Kumar and Naresh Kumar under section 108 of the Customs Act that the appellant was the owner of the 12 gold bars. It also needs to be noted that the appellant, Manish Kumar and Naresh Kumar had retracted their earlier statements on 30.01.2023 in the letter submitted to the Chief Metropolitan Magistrate, while they was in judicial custody. The appellant also, in reply to the show cause notice, categorically stated that he was not the owner of the 12 gold bars. In the statement made by the appellant on 07.02.2023 before DRI officers....
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....basis for marketing purpose either by himself or by other jewellery manufacturers namely M/s. Swamini Creations, M/s. Falcon Gold House Pvt. Ltd., M/s. Anand Shah Jewels LLP, Khandelwal Chain Co. and R.K. Jewellers. All the said jewellery was manufactured out of gold bars purchased from bullion dealers based in Mumbai. 55. The appellant had produced Invoice No. SG-160 dated 18.01.2023 (covering gold jewellery weighing 745.250 gms) by the M/s. Mahalaxmi Chains & Jewellery (a firm of the appellant) in the name of M/s. Khandelwal Chain Co., Delhi, Invoice No. SG-460 dated 17.01.2023 (covering gold jewellery weighing 1975.79 gms) and Invoice No. SG-465 & 466 both dated 18.01.2023 (covering gold jewellery weighing 4145.190 gms) in the name of Vikash Chain Jewellery, Delhi by M/s. Anand Shah Jewellers, which pertains to the gold jewellery/ornaments forming part of the seizure from Subhash Tukaram Karan. These three invoices were rejected by the Commissioner only on assumptions and presumptions. Each the invoices were on record and the department could have checked and verified the authenticity, but that was not done. 56. Similarly, it is also the case of the appellant that the gold....
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....or the appellant deserves to be accepted in view of the judgment of the Bombay High Court in Subhash Chandarnishat vs. Union of India and Another [1979 (4) E.L.T. (J 212) (Bom.)]. The relevant observation of the High Court are as follows: "10. xxxxxxxxxxx. Coming to the question as to how these products were known in trade or commerce parlance, in my view, the most important evidence is furnished by the affidavits produced by the petitioner before respondent No. 2. xxxxxxxxxxx. There is no finding that the correctness of these affidavits has not been accepted by respondent No. 2. It appears very doubtful as to whether respondent No. 2 could have rejected these affidavits without calling upon the Petitioners to produce the deponents for being cross examined or without the correctness of the affidavits being tested in some other manner. In this regard it may be pointed out that a somewhat similar question arose in M. Parikh & Co. v. I.T. Commissioner (AIR 1956 S.C. 554). The observations of the Supreme Court in paragraph 13 of the aforesaid report clearly suggest that where affidavits are filed before an officer, normally speaking, if he desires to challenge the correctness ....
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....was absolutely no material before Respondent 3 on which he could have come to a finding that the petitioner had imported the said gold." (emphasis supplied) 62. Neither the show cause notice nor the impugned order hold that the appellant had any connection with the importation of the gold bars/ gold prior to the actual imports. It was for the department to have established conclusively, without shifting burden on the appellant, that the imported goods were smuggled or had been manufactured out of smuggled imported gold. The case of the department is based on the statements made under section 108 of the Customs Act, which statements, as noticed above, cannot be considered as relevant as the procedure contemplated under section 138B of the Customs Act had not been followed. 63. It also needs to be remembered that it is not the case of the department that the gold jewellery/ornaments were imported by the appellant. The said gold jewellery/ornaments cannot, therefore, be confiscated under section 111 of the Customs Act, which section is applicable to goods brought from a place outside India. The Commissioner could not have held that the jewellery was manufactured out of ....