TaxTMI 
TaxTMI 
2026 (7) TMI 182
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....e of Revenue Intelligence (DRI), Kolkata Zonal Unit, that one person, by name, Shri Dinesh Prasad of Ballia, Uttar Pradesh (appellant no. 1 herein) would be carrying a substantial quantity of foreign-origin gold while travelling from Kolkata to Ballia by Train No. 13121 (KOAA-GCT Express) on 17.07.2022. Acting thereupon, the officers of the DRI proceeded to Kolkata Railway Station along with two independent witnesses. The intelligence further indicated that Shri Dinesh Prasad would be travelling in Coach No. S-3, Seat No. 51 of the said train. At about 7:40 p.m. on 17.07.2022, the officers boarded Coach No. S-3 of the train stationed at Platform No. 1 of Kolkata Railway Station and located Shri Dinesh Prasad occupying Seat No. 51. Upon being questioned regarding possession of any contraband articles, he was informed of his legal right to be searched before a Gazetted Officer. At his request, considering that the train was shortly to depart and that the railway platform was not conducive for conducting detailed search proceedings, he was served with summons under Section 108 of the Customs Act, 1962 requiring his presence at the office of the DRI, Kolkata Zonal Unit for completion o....
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....tain invoices relating to melting of gold were produced and a request was also made for provisional release of the seized gold. In the said letter Shri Soni inter alia stated that, the goods seized in the instant case belonged to M/s. R. S. Jewellers and he was the proprietor of M/s. R. S. Jewellers and was actively involved in purchase and sale of gold ornaments/bullion; that they purchase gold in primary form from various authorized parties and send them to different Karigars for crafting the same into ornaments, that Shri Dinesh Prasad was their employee to whom gold was given for the purpose of delivering it to Kolkata for crafting into jewelleries, that the goods so seized had been legally procured by them. To corroborate his claim, he submitted the following documents. i. Stock Summary (1st April 2022 - 23rd July 2022) ii. Stock Item Register (1st April 2022 - 23rd July 2022) iii. Melting Invoice No. 53 dated 14.07.2022 iv. Melting Invoice No. 54 dated 14.07.2022 7.1. Shri Raj Kumar Soni inter alia further stated that, they were in possession of 1932.570 grams of gold in primary form, that in due course of trade the gold was melted and o....
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....nd Section 111(d) of the Customs Act, 1962 together with confiscation of the concealment materials under Section 119 of the said Act. Penalties of Rs. 9,00,000/- each were imposed upon Shri Dinesh Prasad and Shri Raj Kumar Soni under Section 112(a)/(b), besides a further penalty of Rs. 9,00,000/- upon Shri Raj Kumar Soni under Section 114AA ibid. 9.2. Aggrieved thereby, both the noticees preferred appeals before the Ld. Commissioner of Customs (Appeals), Custom House, Kolkata, who, vide common Order-in-Appeal No. KOL/CUS(CCP)/DC/221 & 222/2026 dated 30.03.2026, upheld the findings regarding absolute confiscation of the seized gold under the Customs Act, while reducing the penalties imposed under Section 112 of the Act upon Shri Dinesh Prasad and Shri Raj Kumar Soni to Rs.2,00,000/- and Rs.6,00,000/- respectively and also reducing the penalty imposed under Section 114AA on Shri Raj Kumar Soni to Rs.3,00,000/-. 9.3. Against the said order, the appellants have preferred the instant appeals. Customs Appeal No. 75468 of 2026 has been filed by Shri Dinesh Prasad against the imposition of penalty on him under Section 112 of the Customs Act. Customs Appeal No. 75509 of 2026 has been ....
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....cured the gold and despite undertaking extensive investigation, the Revenue has failed to discover any material conclusively demonstrating illicit importation or smuggled origin of the seized gold. In such circumstances, it was submitted that the burden under Section 123 could not be said to have remained undischarged by the appellants. 10.3. He further argued that the very foundation of the seizure under Section 110 of the Customs Act, 1962 was legally unsustainable inasmuch as the requisite "reasonable belief" regarding the smuggled nature of the goods was absent at the time of seizure. Elaborating the submission, it was contended that the seized gold bars did not bear any foreign markings, inscriptions, refinery stamps or other distinguishing features ordinarily associated with imported gold. The subsequent laboratory report merely confirmed the purity of the seized gold as 99.8%, which, according to the learned Counsel, could not by itself justify an inference of foreign origin. It was argued that internationally traded foreign-marked bullion generally possesses a purity of 99.9% and, therefore, the purity report itself militated against the allegation that the seized gold w....
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....ion of Section 114AA were wholly absent and the penalty imposed thereunder was liable to be set aside. 10.7. In support of the aforesaid submissions, learned Counsel placed reliance upon the following judicial pronouncements: - i. Om Sai Trading Company v. Union of India [2020 (372) E.L.T. 542 (Pat.)]; ii. Madhukar Sonaba Bhagat v. Commissioner of Customs (Prev.), West Bengal [2019 (368) E.L.T. 990 (Tri. - Kol.)] iii. V.K. Jain & Sons v. Commissioner of Customs [2003 (160) E.L.T 910 (T.)]; iv. Samir Kumar Roy & ors. v. Commissioner of Customs (Prev.), West Bengal [2001 (135) E.L.T. 1036 (T.)]; v. Geetanshu Aggarwala, M/s. Dharmender Kumar Jha & anr. v. Commissioner of Customs (Preventive) [2025 (2) TMI 1291 - CESTAT, Kolkata]; vi. Vikram Kumar Kabra v. Pr. Commissioner of Customs, Hyderabad [2025 (5) TMI 587 - CESTAT, Hyderabad]; vii. Om Prakash Shah. Director of M/s. Quilon Trade Commerce Pvt. Ltd. & ors. v. Commissioner of Customs (Prev.), Kolkata [2025 (5) TMI 1623 - CESTAT, Kolkata] 10.8. In view of the foregoing submissions, the Ld. Counsel for the appellants prayed for setting aside the impugned order in its....
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....er and the materials placed before us. Upon such consideration, in our considered view, the following issues arise for determination: (I) Whether, in the facts and circumstances of the present case, the Revenue had entertained a valid and reasonable belief that the seized gold was of smuggled origin so as to justify the seizure and consequent invocation of the statutory presumption under Section 123 of the Customs Act, 1962, or not. (II) Whether the statements recorded during investigation, forming the principal basis of the Revenue's case, are legally admissible and sufficiently corroborated so as to sustain the findings of confiscation and penal liability against the appellants, or not. Issue No. (I): Reasonable belief and burden of proof under Section 123 of the Customs Act, 1962 14. The principal plank of the Revenue's case rests upon the applicability of Section 123 of the Customs Act, 1962, whereby the burden of proving that the seized gold was not smuggled is sought to be shifted upon the appellants. Before such statutory burden can operate, however, the jurisdictional requirement contained in the provision itself must first stand satisfied, n....
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....toms area. More importantly, the impugned gold bars admittedly bore no foreign inscriptions, refinery marks, serial numbers or any other identifying feature suggestive of foreign origin. The Chemical Examiner's report merely certifies the purity of the seized gold as 99.8%, which, by itself, cannot constitute conclusive evidence of foreign origin, particularly when no material has been brought on record to establish that such purity is exclusively attributable to imported or smuggled gold. In absence of any intrinsic characteristic connecting the seized gold with a foreign source, the mere quantity of gold recovered or the circumstances of possession cannot, by themselves, furnish the reasonable belief contemplated under Section 123 of the Act. 14.2.1. Even assuming for the sake of argument that the initial burden under Section 123 had validly shifted upon the appellants, we find that the said burden stood sufficiently discharged by the claimant/appellant no. 2, namely, Shri Raj Kumar Soni, by placing on record the Registration Certificate, GST documents, stock registers, stock summaries and the melting invoices, thereby furnishing a prima facie explanation regarding the lic....
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....nue has not placed any technical or scientific material demonstrating that such purity, by itself, is indicative of foreign origin or that it constitutes a distinguishing characteristic of smuggled gold. In the absence of any foreign markings or corroborative scientific evidence connecting the seized gold with any foreign source, mere purity of the gold cannot by itself furnish the reasonable belief contemplated under Section 123 of the Act. 14.5. The allegation that the present seizure formed part of a larger organised syndicate engaged in smuggling gold from Bangladesh undoubtedly constitutes a serious charge. However, the gravity of an allegation cannot substitute the legal requirement of proof. Except for the statements recorded during investigation, no contemporaneous material, call data analysis, financial trail, or any other independent evidence has been brought on record to substantiate such allegation. Serious allegations necessarily require equally cogent proof; they cannot be sustained merely on conjecture or investigative suspicion. 14.5.1. In this connection, we find it relevant to refer to the decision of the Hon'ble Patna High Court in the case of Om Sai Tradin....
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.... there was reasonable belief. In this case, we find that the seizure was based on the information that they had received and that the documents pertaining to the gold, were not found in shop at the time of seizure. There is nothing on record to suggest that the pieces which were seized had any foreign markings. Under these circumstances, we find that there was no reasonable belief for the seizure. Further, we find that the appellant had produced various documents to show how he came in the possession of gold and these documents, on investigation, were found to be genuine. It is for this reason that the Ld. Commissioner has refrained from imposing any penalty upon the appellant under Section 114AA of the Customs Act, 1962. Under the circumstances, we find that not only was there no reasonable belief for seizure of the gold and the Currency in the first place, but also that the appellant has satisfactorily explained that the gold and currency which were in his possession. The confiscation of gold and the currency and imposition of penalty upon the appellant under Section 112 of the Customs Act, 1962, are, therefore, not sustainable and the impugned order needs to be set aside and we ....
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....cted below: - 14.7.2. More importantly, the melting process is stated to have culminated in two gold bars weighing 937.220 grams and 821.170 grams respectively, which precisely correspond to the individual weights of the two gold bars recovered and seized by the officers. The aggregate weight reflected in the melting invoices, namely 1758.390 grams, exactly matches the collective weight of the seized gold. Such mathematical correspondence between the contemporaneous commercial records and the seized goods constitutes a relevant circumstance lending prima facie support to the appellants' explanation, which, in our considered view, cannot be ignored. The said invoices are reproduced below for ease of reference: - 14.8. The Revenue has sought to question the authenticity of the documents furnished by the appellants on the ground that the purity reflected in the purchase invoices allegedly differs from the purity of the seized gold. We are, however, unable to accept such contention as conclusive. The explanation consistently advanced by the appellants is that the gold procured from M/s. Brij Jewellery and M/s. Mahalaxmi Dharamkanta was subsequently subjected to melting before....
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.... (ii) the statements of the proprietors/owners of M/s. Priyansh Hallmarking & Gold Tunch Centre, M/s. Brij Jewellery and M/s. Mahalaxmi Dharamkanta, recorded during investigation, which have been relied upon to contend that the documents submitted by appellant No.2 are forged/fake. The evidentiary worth of these statements, therefore, assumes considerable significance. 15.1. We find considerable substance in the grievance of the appellants that the statements of the proprietors of the aforesaid firms have been relied upon without adherence to the mandatory statutory safeguards prescribed under Section 138B of the Customs Act, 1962, which is in pari materia with Section 9D of the Central Excise Act, 1944. The legislative scheme does not contemplate automatic admission of statements recorded during investigation as substantive evidence against a noticee. The adjudicating authority is first required to examine the maker of such statement as a witness, record its satisfaction regarding admissibility and thereafter afford the affected noticee an effective opportunity to test such evidence through cross-examination. These safeguards are not empty formalities but constitute su....
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....t the statement was electronically typed by the investigating officers and appellant No.1 was merely directed to append his signature without being afforded an opportunity to meaningfully verify its contents, which submission has been recorded at page 28 of the Order-in-Original dated 21.03.2025. Although the said statement could be relied upon in the instant proceedings, the fact remains that once its voluntariness stood seriously disputed, prudence demanded that the Department substantiate the same by leading independent corroborative evidence before placing exclusive reliance thereon. No such corroboration is forthcoming from the record. Therefore, in the peculiar facts and circumstances of the case, we are of the opinion that the said statement of Shri Dinesh Prasad cannot be relied upon so as to conclude as to the foreign character or smuggled nature of the gold in question. 15.6. It is therefore observed that the Revenue's case rests predominantly upon untested statements recorded during investigation, which are not supported by independent documentary or scientific evidence capable of withstanding judicial scrutiny. The documentary evidence relied upon by the appellan....
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....evenue to establish the requisite element of conscious knowledge and deliberate falsity by cogent and convincing evidence. In the present case, however, the allegation that the documents relied upon by appellant No.2, including the melting invoices and other supporting records, were forged or fabricated, has itself not been established by any independent evidence. As discussed hereinbefore, the Revenue has principally relied upon uncorroborated statements recorded during investigation, nor has any forensic, expert or other objective evidence been brought on record to conclusively establish fabrication of the documents in question. In such circumstances, the essential ingredients necessary for invoking Section 114AA remain unproved. 17.2. Viewed thus, we are of the considered opinion that the Revenue has failed to establish the necessary jurisdictional facts for sustaining the penalties imposed under Sections 112 and 114AA of the Customs Act, 1962. The impugned penalties, therefore, cannot be sustained and are liable to be set aside. 18. In the result, we hold that the order of confiscation of the seized 02 (two) pieces of gold bars collectively weighing 1758.390 grams and the....
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....e Thousand Five Hundred Thirty Eight Only Declaration We declare that tals Invoice shows the actual price of the goods described and that all particulars are tru and correct. Goodss covered have been delivered by us al BALLIA to the buyer and the sale Is completed and concluded on delevery post Delavery, the seller I respect and the buyer is fully responsible In all respects Including the subsequent movements of goods Goods Received By राज कà¥à¤² देवी Cabfed that the particulars given above are true and comd for MAHALAXMI DHARAMKANTA RATAN Dgoly dmned by AATAN CỨUAT LONI Date 2017.05.11 221451 40550 KUMAR SONI Authorised Signalory GANESH MARKET BALLIA BALLIA This Is a Computer Generated Involey TAX INVOICE MAHALAXMI DHARAMKANTA CHOWK STATION ROAD GANESH MARKET BALLIA GSTIN No 09AWGPS6504D1ZH IRN Na 172:53 8- 2015/7@d &EidSffe 4714c47fb18498mld5c5d 0039c000974.9227adfeld BIS No : Invoice: No. : TAX2 Invoice Date : 12-Apr-2022 ACK No 142211187487820 ACK Date 2022-04-12 21:59:00 Date of Supply : 12-Apr-2022 Place of Supply Uttar Pradesh Details of Receiver | Bill To MIS R.S. JWELLERS OKDENGAN....
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.... Gross Pegi .kriry 0145 Opening Balance x 241,9900 gram 1143038.56 42 1999⑈ 11.10.25 OH AD 221Cash Sales 7 9. 5000 gram +4975.71 <014.71 4026.00 IO7 10.71 mexcyr 1101503 CS:62: 22 Cash Sales L 1.6200 gram 4017231 160-0,27 4332.04 % 3Ry 106nom, in COM. ES Cash Sales 14 7,6300 gram 40372.31 3500.27 4332.04 10.7.1 % 10.71 %; 71210 71 1000 06-Apr-22 Cash Sales 18 7,6300 gram 40372.31 36040.27 4332.04 2".5000 *** ¥1472.05 12-47 22 Cash Sales 76 8, 5000 gram 44375.71 42143.71 4826.00 10.7.9 %1 12-Apr-22 Cash Sales 27 76300 gram 47372.31 30040.27 4332 04 10.71%! 12-Apr-27 Cash Sales 20 7.5300 gram 40072.11 16040.27 4332.0-4 10.71% 13: 3400 JI 802537.41 15-Apr-22 Cash Sales 36 0.5000 gram 44075.71 40149.71 4025.00 10.1:% I'9 3400 g 942320 17-Apr-22 Cash Sales 43 7.6300 gram 40372,31 36040.27 4332.04 10,75%7 10713 :* 8063-47,33 19-Apr-22 Cash Sales 54 8.5000 gram 44075.71 40149.71 4825.00 10.71% 15-Apr.22 Cash Sales 55 7.6300 gram 40372.31 36040.27 4332,04 10,7 1 % 154 5000, gra 730157,08 20-Ap :- 22 Cash Sales 60 8. 5000 gram 4-4375.71 40142.71 4325.00 10.71% 145 050℃ gram 690008.15 Z1-Apr-22 Cash Satos 66 4, 5000 gram 443....