TaxTMI 
TaxTMI 
2026 (6) TMI 1432
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....he Customs Act, 1962. 1.2. Customs Appeal Nos. 75220 and 75221 of 2019 have been filed by Shri Suraj Prakash Saraf and Shri Vijay Verma (appellant no. 2 and appellant no. 3 respectively) have challenged the impugned order to the extent it imposed penalties imposed upon them under Section 112(b)(i) ibid. 2. Briefly stated, the facts of the case are that on 27.10.2017, at about 19:00 hours, officers of the Directorate of Revenue Intelligence, Guwahati Zonal Unit, intercepted Shri Vinay Agrawal near City Bus Stop, Pan Bazar, Guwahati and recovered 6 (six) pieces of gold bars collectively weighing 996.020 grams. The said goods were seized under Section 110(1) of the Customs Act, 1962 vide Seizure Case No. 18/CL/IMP/GOLD/DRI/GAU/2017-18 dated 28.10.2017. 3. It was recorded in the Inventory-cum-Seizure List that the seized gold bars bore a "diamond marking of foreign origin", though the alleged inscriptions thereon were stated to have been deliberately defaced. The Inventory-cum-Seizure List was drawn on 27.10.2017. 4. It is the case of the appellants that Shri Vinay Agrawal was detained at the office premises of DRI, Guwahati and statements dated 27.10.2017 and 28.10.2017 ca....
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....ht on record establishing their foreign origin; (iv) the test report pertaining to the seized gold bars indicated purity ranging between 995.9 and 996.5 and, according to the appellants, the same by itself did not establish the foreign origin of the seized gold. 8. Personal hearings were granted and the matter was adjudicated by the Ld. Commissioner of Customs (Preventive), Shillong vide the impugned Order-in-Original No. CCP/NER/12/2019 dated 19.07.2019, the adjudicating authority ordered absolute confiscation of all the 10 (ten) gold bars collectively weighing 1660.240 grams and valued at Rs.50,70,386/- under Sections 111(b) and 111(d) of the Customs Act, 1962. Penalties were also imposed upon the noticees, including a penalty of Rs.3,00,000/- upon Shri Vinay Agrawal Rs.1,50,000/- upon Shri Vijay Verma and Rs.2,00,000/- upon Shri Suraj Prakash Saraf under Section 112(b)(i) of the Customs Act, 1962. 8.1. Being aggrieved by the aforesaid Order-in-Original dated 19.07.2019 and being dissatisfied with the findings and conclusions recorded therein, Shri Vinay Agrawal has come in appeal challenging, inter alia, the order of absolute confiscation in respect of the 6 (six)....
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....tted that the initial statements of Appellant No. 1 as well as Shri Vivek Sethi were recorded at the pre-arrest stage after prolonged detention at the office of DRI, Guwahati and, therefore, do not satisfy the test of voluntariness. Hence, according to him, such statements cannot form the basis of any adverse conclusion in the present case. (ii) It is further submitted that the subsequent recovery allegedly effected from Shri Vivek Sethi was admittedly made on 01.02.2018, i.e., after more than three months from the date of the original seizure. It is contended that such recovery was nevertheless made part of the Seizure Case dated 28.10.2017, even prior to recording of the alleged statements of Shri Vivek Sethi dated 01.02.2018 and 02.02.2018. According to the Learned Counsel, such merger of recoveries into one case is not only bad in law but also mala fide and, therefore, unsustainable. (iii) It is further submitted that, in an attempt to corroborate the allegation of illegal importation of the six gold bars seized from Appellant No. 1, the subsequent recovery from Shri Vivek Sethi and his purported statements were relied upon by the investigating authority. It i....
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....oner of Customs (Preventive), Kolkata v. Bajrang Ingole reported in 2024 (387) E.L.T. 437 (Tri.-Kol.); (c) Shri Naresh Kumar Agarwalla v. Commissioner of Customs (Prev.), Kolkata in Customs Appeal No. 76723 of 2016 vide Final Order Nos. 75643-75645/2025 dated 07.03.2025. 9.3. In view of the above submissions, the Ld. Counsel for the Appellant Shri Vinay Agrawal (appellant no. 1) prays that the order of absolute confiscation in respect of the six pieces of gold bars seized under Inventory dated 28.10.2017, along with the penalty imposed upon Shri Vinay Agrawal, vide the impugned order, be set aside with consequential relief, in accordance with law. The appellant Nos. 2 and 3, namely, Shri Suraj Prakash Saraf and Shri Vijay Verma, while adopting the submissions made on behalf of appellant No. 1 to the extent applicable to them, also prayed for setting aside the penalties imposed on them vide the impugned order. 10. On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order. 11. Heard the parties and considered their submissions. 12. Having gone through the rival submissions advanced on behalf of the parties a....
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....th mere suspicion or conjecture. Such belief must be founded upon some tangible material and objective circumstances available with the proper officer at the time of seizure. The existence of reasonable belief is a condition precedent for exercise of powers under Section 110 and cannot be founded on surmises or assumptions alone. 12.4 In the facts of the present case, apart from the statements recorded during investigation, which have been dealt with separately elsewhere in this order, we do not find any contemporaneous material indicating that the six gold bars recovered from appellant No. 1 bore identifiable foreign markings or possessed any distinctive characteristics so as to prima facie establish their foreign origin. We further find that the purity indicated in the Test Report, namely between 995.9 and 996.5, by itself cannot constitute a determinative circumstance for entertaining a belief regarding the foreign character of the gold, particularly when gold of comparable purity is also available in the domestic market. 12.5 Therefore, we are of the considered view that the mere absence of explanation regarding possession, coupled with the purity of the metal, cannot, ip....
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....62 did not exist at the time of seizure. Mere suspicion, however grave, cannot substitute the statutory requirement of reasonable belief founded upon objective material. Once the very foundation for seizure under Section 110 is found to be lacking, the burden contemplated under Section 123 of the Customs Act, 1962 cannot be shifted upon the person from whose possession the goods were recovered. In other words, in the absence of a valid and reasonable belief regarding the smuggled character of the goods, the provisions of Section 123 would have no application to the facts of the present case. 12.10. In this regard, we find that a similar view has been expressed by the Tribunal, Kolkata in Customs Commissioner of Cus (Prev.), Patna v. Lalit Krishna Agarwal [Final Order No. 77506 of 2023 dated 08.11.2023 in Customs Appeal No. 75499 of 2022 - CESTAT, Kolkata], wherein it was observed as under:- "6. In fact, during the course of investigation, it is a fact on record that boondi silver and silver jewellary were recovered from the shop of the respondent. So, the question arises that in the absence of any seizure of Port or Airport or not having any foreign markings on the good....
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....e gist of the order is reproduced below: Smuggling Burden of proof Retracted confessional statements of co-accused No efforts made to prove that confessional statements were voluntary Accused were not examined during adjudication - HELD: Confiscation and penalty order based only on retracted statements of accused persons were not sustainable - It was contrary to settled legal position, illegal, arbitrary and liable to be set aside Sections 108, 111, 112 and 123 of Customs Act, 1962. (paras 22, 25, 26] Evidence Confessional statement of co-accused - It is not substantive evidence against another co-accused- It can at best be used for assurance to Court In absence of any substantive evidence, it was inappropriate to base conviction of accused on statements of co-accused Section 108 of Customs Act, 1962. [para 25] 31.2 The Tribunal in the cases of Principal Commissioner of Customs (Prev.), Delhi Vs. Ahmed Mujjaba Khaleefa [2019 (366) ELT 337 (T) dismissed the appeal of Revenue holding that jewellery not bearing any foreign marking other than statement of passenger no other proof produced by Revenue to substantiate the claim that jewellery were smuggled into ....
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....ts of others ie the person supposed to have handed over the same to the appellant for transporting and the person who was supposed to receive. The burden of proof has not been discharged by the department. It has been proved that there was a violation of principles of natural justice by not allowing cross examination. Respectfully following the ratio of the Hon'ble Supreme Court in M/s. Oudh Sugar Mills Vs. UOI, I am constrained to set aside the order of the adjudicating authority confiscating the impugned gold and imposing penalty on the appellant. It is ordered to release the two crude gold bars weighing 3.097 kg to the appellant Mohammed Ali Jinnah 39. After appreciating the facts and evidence discussed above, we are of the opinion that the view arrived by the Commissioner (Appeals) is legal and proper and does not require any interference. The issue on merits is found against the appellant / Revenue and in favour of the respondent. We make it clear that in this appeal we have not addressed the issue as to whether the Show Cause Notice issued by DRI is valid and proper." 12.15. By relying on the decisions cited supra, we hold that the Department has failed in est....
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....nts are heavily relied upon by the Revenue, is himself a co-noticee and a person against whom penal consequences have been visited under the impugned order. Being a co-accused, his statements, in the absence of independent corroboration, cannot be treated as conclusive against the present appellants. 13.4. More importantly, we find that the mandatory requirements prescribed under Section 138B of the Customs Act, 1962 have not been complied with during adjudication. There is nothing on record to indicate that the procedure contemplated under the said provision was followed before treating the statements as relevant evidence in the proceedings. It is now well settled that a statement recorded during investigation does not automatically acquire the character of substantive evidence unless the conditions stipulated under Section 138B of the Customs Act, 1962 are duly satisfied. In the absence of compliance with the said provision, such statements lose much of their evidentiary significance and cannot, by themselves, constitute the sole foundation for sustaining serious consequences such as confiscation and imposition of penalties. 13.5. Therefore, we are of the considered view th....
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....Customs Act, 1962. In this connection, it would be appropriate to reproduce Section 112(b)(i) of the Customs Act, 1962, insofar as relevant: - "112. Penalty for improper importation of goods, etc. Any person, - (a) ... (b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable,- (i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater" 15.1. A plain reading of the above provision reveals that three essential ingredients are required to be satisfied before any penalty can be imposed thereunder. Firstly, the goods concerned must themselves be liable to confiscation under Section 111 of the Customs Act, 1962. Secondly, the person sought to be penalized must have acquired possession of or otherwise dealt with such goods in any of t....