TaxTMI 
TaxTMI 
2026 (2) TMI 445
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....the Customs Act] 2. It is stated on 20.03.2021, the Directorate of Revenue Intelligence [DRI] conducted a search of a vehicle and recovered 6900 grams of gold bars. As the person was unable to produce invoice or supporting documentation at the time of interception, the investigating authority proceeded to seize the gold bars under section 110 of the Customs Act. 3. On 21.03.2021, statements of Ajay Kumar Jain, an employee of the appellant and Mohammad Nisar Mew, driver of the vehicle, and the appellant were recorded under section 108 of the Customs Act. They stated that they took delivery of the gold bars from M/s. S.R. & Co. located at Ahmedabad against cash payment. 4. The investigating officers then searched the premises of M/s. S.R. & Co. and seized the purchase documents, ledgers of GST sales and purchase, cash ledgers, note books and DVR under a Panchnama dated 21.03.2021. 5. Statement of Mitul Kumar Patel, partner of M/s. S.R. & Co., was also recorded on 21.03.2021. He stated that the gold bars were sold against cash to the appellant. 6. The appellant claims to have purchased the disputed gold bars from S.R. & Co. located at Ahmedabad on 20.03.2021 and had sen....
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....ed over cash towards payment of the gold bars. 12. The Additional Commissioner, by an order dated 09.09.2022, ordered for absolute confiscation of the 69 gold bars under sections 111(d) and 111(h) of the Customs Act and imposed penalties on the appellant under sections 112(b)(i) and 114AA of the Customs Act. 13. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals). By an order dated 11.10.2023, the Commissioner (Appeals) upheld the order passed by the Additional Commissioner and rejected the appeal filed by the appellant. 14. The Commissioner (Appeals) rejected the contention advanced on behalf of the appellant that it had discharged the burden by showing legitimate purchase of gold and that Mitul Kumar Patel, partner of M/s. S.R. & Co., though had admitted in the statement made under section 108 of the Customs Act that the gold bars seized were of foreign origin, but this statement was subsequently retracted. The Commissioner (Appeals) found that the case was based on 69 gold bars found in the car without any documents and the facts admitted by the appellants and the statements recorded under section 108 of the Customs Act were corroborated b....
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.... 2021 decided on 25.06.2025 (Tri.-Kol.)] and the judgment of Delhi High Court in Shantilal Mehta vs. Union of India and others [1983 (14) E.L.T. 1715 (Del.)]; (iv) The seizure of gold bars under section 110 of the Customs Act is bad in law as there was no reasonable belief that the gold bars were of foreign origin; (v) Statements of witnesses made under section 108 of the Customs Act cannot be relied upon as the procedure contemplated under section 138B of the Customs Act was not followed; (vi) The documentary evidence necessarily prevails over the oral evidence; and (vii) Penalties could not have been imposed on the appellant under sections 112(b)(i) and 114AA of the Customs Act. 17. Shri Nikhil Mohan Goyal, learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions: (i) Section 123 of the Customs Act is clearly applicable to the facts of the present case and the burden was on the appellant to prove that the gold bars that were seized were not smuggled gold. In support of this contention, learned authorized representative placed reliance upon the following ....
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.... In this connection, the Commissioner (Appeals) placed reliance upon the statement made by the appellant under section 108 of the Customs Act as also the statements of the owner of the car garage and the goldsmith who melted the gold in his shop. 22. Statements made under section 108 of the Customs Act cannot be relied upon if the procedure contemplated under section 138B of the Customs Act is not followed. 23. Section 108 of the Customs Act deals with power to summon persons to give evidence and produce documents. It provides that any Gazetted Officer of customs shall have the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under the Customs Act. 24. 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 ....
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.... should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain. 26. In the case of M/s Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [Excise Appeal No. 51148 of 2020 decided on 01.04.2025] a Division Bench of this Tribunal examined the provisions of section 108 and 138B of the Customs Act as also the provisions of section 9D and 14 of the Central Excise Act, 1944, which are similar to the provisions of section 108 and 138B of the Customs Act, and the observations are: "28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections....
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....olds that in adjudication proceedings, the stage of relevance of a statement recorded before Officers would arise only after the statement is admitted in evidence by the adjudicating authority in accordance with the procedure contemplated in section 9D(1)(b) of the Central Excise Act. The judgment also highlights the reason why such an elaborative procedure has been provided in section 9D(1) of the Central Excise Act. It notes that a statement recorded during inquiry/investigation by an Officer of the department has a possibility of having been recorded under coercion or compulsion and it is in order to neutralize this possibility that the statement of the witness has to be recorded before the adjudicating authority. The relevant portions of the judgment are reproduced below: "15. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein.....
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.... 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 clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion tha....
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....ngs under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice. 9.4 The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee are not subjected to demand, penalty interest on the basis of certain admissions recorded during investigation which may have been obtained under the police power of the Investigating authorities by coercion or undue influence. 9.5 ***** The provision....
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....Court examined the provisions of sections 108 and 138B of the Customs Act. The department placed reliance upon the statements recorded under section 108 of the Customs Act. The Delhi High Court held that the procedure contemplated under section 138B(1)(b) has to be followed before the statements recorded under section 108 of the Customs Act can be considered as relevant. The relevant paragraphs of the judgment of the Delhi High Court are reproduced below: "76. We are not persuaded to change our view, on the basis of the various statements, recorded under Section 108 of the Act, on which the Learned ASG sought to rely. Statements, under Section 108 of the Act, we may note, though admissible in evidence, acquire relevance only when they are, in fact, admitted in evidence, by the adjudicating authority and, if the affected assessee so chooses, tested by cross-examination. We may, in this context, reproduce, for ready reference, Section 138B of the Act, thus:***** A Division Bench of this Court has, speaking through A.K. Sikri, J. (as he then was) held, in J & K Cigarettes Ltd. v. Collector of Central Excise [2009 (242) E.L.T. 189 (Del.)] that, by virtue of sub-sectio....
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....e first place, after examination by the adjudicating authority, admitted in evidence. This has not been done in respect of any of the 35 statements. Therefore, all the statements are not relevant to the proceedings. 15. It has been held in a catena of judgments including Jindal Drugs Pvt. Ltd. versus Union Of India [2016 (340) E.L.T. 67 (P&H)] that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. ***** 16. Therefore, the 35 statements relied upon in the SCN are not relevant and hence also not admissible." (emphasis supplied) 31. Thus, the statements made by various persons under section 108 of the Customs Act could not have been relied upon by the Commissioner (Appeals) to record a finding that the appellant had smuggled 69 gold bars of foreign origin. 32. The Commissioner (Appeals) also rejected the documents produced by the appellant to show legitimate purchase of gold bars for the reason that if the invoices had been issued by M/s. Ariplutus Metals Pvt. Ltd. to M/s. S.R. & Co. or by M/s. S.R. & Co. to M/s. Pulak Ornaments LLP, ....
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.... not lie on the appellant. This is what was also held by the Tribunal in Balwant Raj Soni. 36. In Kapildeo Prasad vs. Commissioner of Customs (Prev.), Patna [2002 (142) E.L.T. 668 (Tri.-Kolkata)] same observations were made by the Tribunal and they are reproduced below: "7. Referring to the reasoning adopted by the adjudicating authority, Shri Chattopadhyay, learned Consultant submitted that the Commissioner has wrongly dismissed the documentary evidence produced by the appellants on the ground that the same was not produced at the time of interception and as such, was an after-thought. He submitted that apart from the fact that Shri Awadesh Kumar Thakur produced the sale voucher of M/s. Shree Jewellers at the time of interception which was not taken note of by the Customs, there is no requirement to accompany the gold biscuits of foreign origin with the legal covering documents at all times. He submits that no rule of law requires that the transportation of the gold biscuits should always be under the cover of the documents showing legal acquisition and possession of the same. As such, the rejection of the documents produced by the appellants on the ground that the sam....
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.... Customs Act, 1962. Moreover, the Appellant No.(4) has claimed to be the owner of the gold in question and the said owner has shown the invoices for procurement of the said gold by producing his profit and loss account, balance sheet, income tax return and payment of GST on the said gold in question. In that circumstances, the gold in question is not liable for confiscation. 7. In view of this, we hold that the confiscation of gold in question is not sustainable. As we hold that the gold in question is not liable for confiscation and the same is to be released to the Appellant No.(4). Further, as the gold in question is not liable for confiscation, no penalties are imposable on the Appellants. Hence, the vehicle in question is also required to be released to the Appellant No.(1)." (emphasis supplied) 39. The Commissioner (Appeals) should have appreciated that the provisions of section 123 of the Customs Act could not have been applied in the present case considering the fact that the gold bars did not contain foreign marking and did not have the requisite purity of gold. 40. Section 110 of the Customs Act provides that if a proper officer has reason to believe tha....
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....ggler or a dealer in smuggled goods. If there was such information with the customs, they ought to have disclosed it. The goods themselves did not suggest any illicit importation. Nor was there any inscription on the goods which could be the basis of the reasonable belief that the goods were of foreign origin. There was nothing in the appearance of the goods to suggest that they had been newly manufactured and brought into this country very recently from another country. In a word there was nothing absolutely from which inferences about their origin or recent import could arise. It was not a case where large quantity of gold with foreign markings was found hidden in the trousers of the accused as happened in Hukma v. State of Rajasthan, AIR 1965 S.C. 476. ***** 62. The customs officer merely thought that as the goods had not been accounted for these are smuggled goods. At the time of seizure what happened was this. The petitioner was present at the shop. He told the customs officer that they were duly entered in his account books but his accountant had gone to the income tax officer. The officer did not wait for the man to arrive to explain the entries to him. He ....