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TaxTMI 
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2026 (4) TMI 85
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.... 1), the proprietor of M/s A.R.P. Ornaments, who asserts lawful ownership of the seized metal. CUSTA 31 of 2025 pertains to Shri Anil Kumar Gaur (Respondent No. 2), the carrier from whose physical possession the bullion was recovered. Since both appeals arise from an identical evidentiary bedrock and involve synchronous questions of law regarding the interpretation of Sections 108 and 123, they are hereby disposed of by this Common Judgment. 2. ADMISSION AND SUBSTANTIAL QUESTIONS OF LAW 2.1. Upon a preliminary perusal of the records and having heard the learned counsel for the Appellant, this Bench admits the appeals on the following substantial questions of law: a. Whether the Learned Tribunal was correct in holding that the Department failed to establish "reasonable belief" for seizure under Section 123 in a town seizure? b. Whether a confessional statement under Section 108, retracted after a period of two years, loses its evidentiary value? c. Whether the production of GST invoices without a documentary nexus to the melting process is sufficient to discharge the reverse burden of proof? 3. FACTUAL MATRIX 3.1 On May 25, 2018, acting on spec....
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....y referred to as Kachcha gold) rarely transcends a purity threshold of 91% to 92%, the seized bars exhibited the 24-carat industrial standard typical of international bullion. Achieving 99.6% requires industrial electrolytic refining. 3.6 Crucially, despite claiming a transformation of scrap into bullion, the Respondents signally failed to produce a single "melting memo," "refinery slip," or "conversion certificate" from a recognized refinery to explain how crude jewellery reached such a high degree of scientific purity. 3.7 The Adjudicating Authority, applying the "Prudent Man" test, found the clandestine concealment and the total lack of industrial documentation to be irreconcilable with a legitimate domestic transaction and accordingly ordered absolute confiscation of the gold along with consequential penalties, noting the CRCL Lab Report indicated a purity of 99.5% to 99.6%-atypical for local melting. 3.8 However, the tide turned at the appellate stage. This order was overturned by the Commissioner (Appeals) and subsequently by the Tribunal. They took the view that this was a "town seizure" far from the international border. 3.9 This decision was subsequently overtu....
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....ier, is sufficient to discharge the heavy onus placed upon them by the legislature. 4. SUBMISSIONS ON BEHALF OF THE APPELLANT (REVENUE) 4.1 Mr. Bhaskar Prasad Banerjee, Learned Counsel appearing for the Revenue, opened his challenge by characterizing the impugned order of the Learned Tribunal as a "legal non-sequitur" that fails to harmonize the clandestine facts of the case with the specialized evidentiary standards of the Customs Act. He contended that the Revenue's case is anchored on a "tripod of evidence"- namely (i) The surreptitious modus operandi of concealment; (ii) The voluntary judicial admissions recorded under Section 108 of the Act, and (iii) The scientific purity of the metal (99.6%) as established by the CRCL Report. All of which were brushed aside by the Tribunal as fundamental evidentiary error. Mr. Banerjee contended that the Tribunal's failure to evaluate these factors cumulatively, rather than in isolation, constitutes a perversity of approach. 4.2 Building on this factual foundation, Mr. Banerjee submitted that the gold in question squarely falls within the ambit of "prohibited goods" as contemplated under Section 2(33) o....
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....Bench rulings in Commissioner of Customs, Airport and Adm. v. Himadri Chakraborty [2023 (386) ELT 418 (Cal)] and Ajay Saraogi v. Union of India [2023 (386) ELT 333 (Cal)], he argued that a stale retraction without contemporaneous evidence of duress cannot diminish the evidentiary sanctity of a statement recorded in a "deemed judicial proceeding." 4.5 Further, Mr. Banerjee contended that the Respondents' defence of "indigenous melting" is a scientific fallacy. Relying on the Kerala High Court in Commissioner of Customs, Cochin v. Om Prakash Khatri [2019 (366) ELT 402 (Ker)] (specifically paragraphs 12, 19-21), he submitted that the 99.6% purity of gold (International Bullion Standard), as confirmed by the CRCL Report, acts as a silent but formidable rebuttal to the claim of crude local refining. The Respondents failed to bridge the "Identity Mismatch"-producing a "paper trail" of GST returns and invoices for 22-carat scrap while possessing 24-carat industrial bullion, but failed to produce a single "melting memo" or "refinery slip" to explain the transformation into 24-carat bullion. 4.6 Addressing the preliminary objection regarding maintainability and monetary limits, Mr. Ba....
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....eventive) v. Daleep Kumar Verma & Ors. [Cus App No. 1/2024, dated 22.10.2024] and the Manipur High Court in Commissioner of Customs (Preventive) Shillong v. R.K. Swami Singh [2025 (35) Centax 262 (Manipur)], he contended that the subject matter relates to valuation and is hit by the monetary limits prescribed in the Revenue's own Instruction No. 390/Misc./30/2023-JC dated 02.11.2023, which precludes appeals where the amount is below Rs. 1 Crore. He further fortified this stance by invoking the Constitution Bench in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries [(2002) 2 SCC 127] and the Madras High Court in Commissioner of Central Excise, Chennai-IV v. Sundaram Fasteners Limited [2014 (304) ELT 7 (Mad)], asserting that departmental instructions are mandatory commands that the Revenue cannot bypass at its convenience, thereby creating an "estoppel by circular." 5.3. Inextricably linked to this procedural bar, Mr. Chakraborti argued that the entire proceedings are vitiated by the lack of a valid "Reasonable Belief" at the inception of the seizure. Drawing support from the Gujarat High Court in Union of India v. Abdulkadar Abdulgani Hasmani [1991 (55) ELT 497 ....
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....ner of Customs (Preventive) v. Shri Prahlad Kumar Das [Cus Ref 2/2025, dated 13.10.25], Mr. Chakraborti asserted that once purchase invoices and GST returns for "old ornaments" are produced, the Department cannot discard them in favour of a presumed "identity mismatch." 5.7. He submitted that the purity of 99.6, in itself, would not be a sole ground for holding the presumption of smuggled gold bar. He further underscored that the minor difference in weight (1,999.900g vs 2000g) is an artefact of scale calibration rather than any criminal intent. Referring the above facts he argued that any minor discrepancy in weight or purity is merely a "technical or venial" breach as per the ratio held in Hindustan Steel Ltd. v. State of Orissa [1969 (2) SCC 627], which does not warrant the draconian measure of absolute confiscation. 5.8. Mr. Chakraborti underscored that the Respondents successfully discharged their onus validly by producing documentary evidence, including GST returns and purchase invoices. Therefore, he prayed for dismissal of the Revenue's appeal at the threshold and the affirmation of the Tribunal's order, was seeking total exoneration and the release of the seized gold....
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....lebrated ratio decidendi of Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs [1993 (68) E.L.T. 3 (S.C.)], which clarifies that determining whether goods are liable to confiscation is a question of statutory violation, not an arithmetic exercise of tax quantification. "The determination of a question relating to the rate of duty or the value of goods for the purposes of assessment... does not include a question of whether the goods are liable to confiscation or whether a penalty is imposable." (Paragraph 11) 7.4. Parallel to this statutory objection, the Respondents invoke the policy bar, contending that the appeal is precluded by the Rs. 1 Crore threshold. While departmental circulars are binding on the Revenue, they do not act as an absolute ouster of judicial review, as observed by the Constitution Bench in Dhiren Chemical Industries (supra). The parent Circular No. 390/Misc./163/2010-JC dated August 17, 2011, identifies "threshold-neutral" scenarios where an appeal must be filed regardless of the amount. Specifically, cases involving the interpretation of a statutory provision (such as Section 123) or those of a recurring legal nature are exempt from m....
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..... 1.02 Crores) satisfy both the monetary and legal thresholds for this Court's intervention. The sheer volume of the metal and its concentration into high-purity bars elevate this matter beyond a routine commercial dispute into the realm of a grave statutory violation under the Act. 8.3. Regarding the first evidentiary pillar-the clandestine manner of transport-it is an admitted fact that the gold was found neither in a briefcase, nor a commercial parcel, nor even personal baggage. It was found secreted within a specially stitched cotton waist belt worn by Respondent No. 2 beneath his garments. The Learned Tribunal characterized this as a "technicality" of transport; however, we find this characterization to be legally fragile. Applying the "Prudent Man" test as envisaged under Section 123, the choice of a hidden waist belt for transporting high-value bullion is a potent indicator of an intent to evade detection-a quintessential hallmark of illicit transit that warrants the formation of "Reasonable Belief." 8.4. The second, and perhaps most scientifically damning pillar, is the purity of the metal. The Respondents' defense rests on the claim that they melted "old ornaments" (....
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....ved in M.L. Dey (supra) that reasonable belief is more than mere suspicion; it is a belief reached by a prudent man applying his mind judicially to the facts. 9.3 We find that the Tribunal's reliance on a "town seizure" doctrine creates an artificial evidentiary barrier that ignores the realities of modern smuggling. Under settled law, the validity of a seizure under Section 110 must be tested against the Standard of Prudence, not a Standard of Location. The "Reasonable Belief" mandated by statute is not a final conviction of guilt, but a prima facie satisfaction derived from the totality of the circumstances. 9.4 In the instant case, the "belief" was not anchored in the mere possession of gold, but in the highly surreptitious conduct of Respondent No. 2. Two kilograms of bullion were not transported through transparent commercial channels; they were bound to the carrier's person in a specially stitched cotton waist belt-a quintessential hallmark of clandestine movement. To hold that such a modus operandi does not constitute "material" for reasonable belief is to substitute judicial reality with clinical isolation. 9.5 Furthermore, the absence of foreign markings does ....
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.... sense, rendering the shield of Article 20(3) unavailable. 10.3. The core controversy here lies in the evidentiary weight attached to a retracted statement. For a retraction to be legally potent, it must be contemporaneous. We are guided by the ratio in K.I. Pavunny v. Asst. Collector (HQ), Central Excise Collectorate, Cochin [1997 (3) SCC 721], wherein the Supreme Court held: "It is the duty of the court to look into the facts and circumstances of each case to find whether the confession was voluntary... If the court is satisfied that the confession was voluntary and true, it can form the basis of conviction." 10.4. As held in Ciabro Alemao (supra) and reaffirmed by this Court in Ajay Saraogi (supra), the failure to complain of duress before a Magistrate at the first available opportunity is fatal to a plea of coercion. In the present case, Respondent No. 2 (Shri Gaur) appeared before the authorities a full year after the initial seizure and voluntarily reaffirmed his statement. 10.5. The silence of the Respondents for over two years, followed by a retraction-a staggering 850 days later-only upon the receipt of a Show Cause Notice, marks it as a "calculated after....
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....nical errors where there is no contumacious conduct. However, the total failure to prove the legal origin of two kilograms of industrial-grade bullion is a foundational failure of proof, not a technicality. As observed in Merino Panel Product Ltd. (supra), the protection of "technical breaches" cannot be extended to shield conduct fundamentally designed to circumvent the rigors of Section 123. 11.5 Applying the "Prudent Man" test, we hold that a legitimate trader would neither transport high-value bullion concealed in a waist belt nor lack the essential refinery documentation required to verify its transformation. The cumulative weight of the scientific purity matching international standards, the absence of payment particulars in the ledgers, and the lack of refinery records satisfy us that the Respondents signally failed to discharge their statutory burden. The Tribunal's finding that these discrepancies were merely "technical mistakes" is perverse and cannot be sustained. 12. CONCLUSION AND FINAL DETERMINATION 12.1. In adjudicating the merits of these consolidated appeals, we find a fundamental subversion of the "Reverse Burden of Proof" at the Tribunal level. Following....
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.... jewellery alloys and 99.6% pure international-standard bullion. The transition from scrap to 24-carat bullion requires industrial electrolytic refinement, not rudimentary local melting. The failure to produce "Melting Memos" or "Refinery Slips" is fatal to the discharge of the reverse burden of proof. 13. CONSEQUENTIAL ORDERS AND DIRECTION 13.1 Accordingly, the Substantial Questions of Law are answered in the affirmative, in favour of the Revenue. The impugned order of the Learned Tribunal dated November 22, 2024, is found to be legally unsustainable and perverse. We, therefore, pass the following orders and directions: i. CUSTA 30 of 2025 and CUSTA 31 of 2025 are hereby allowed. ii. The common Final Order Nos. 77590-77591 of 2024 dated November 22, 2024 passed by the Learned CESTAT, Eastern Zonal Bench, Kolkata, is hereby set aside for being perverse and contrary to the settled principles of the Customs Act. iii. The Order-in-Original No. 59/ADC(P)/CUS/ WB/2020-21 dated November 12, 2020, passed by the Adjudicating Authority, directing the absolute confiscation of the 1,999.90 grams of gold and imposing consequential penalties on Respondent No. 1 ....