TaxTMI 
TaxTMI 
2026 (8) TMI 1010
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....know. 2. The facts of the present case are that acting on a special intelligence officers of DRI intercepted Shri Mahesh Kumar Soni S/o Shri Ram Kripal Soni and Shri Gopi Krishna Soni S/o Mangal Prasad Soni, who were supposed to take the Train No.12533 Pushpak Express to Mumbai. During the course of personal search of the trolly bag recovered from Shri Mahesh Kumar Soni, 43 cut pieces of yellow coloured bars, 02 pieces of yellow colour metal and some ornaments were recovered. Indian currency of Rs.68,80,000/- was also recovered from their procession. 3. Samples were drawn from the 43 cut pieces and two pieces of yellow colour metal and ornaments and tested. On testing, the said yellow coloured metal were found to be gold. The details of test report is as under:- S. No. Sample Lab No. Report 1 S-1 CRCL/71/ 753(DRI) Seized goods is composed of mainly Gold, with gold content 99.49% (by wt.) 2 S-2 CRCL/71/ 836(DRI) Seized goods is composed of an alloy containing gold, silver and Copper, with gold content 84.82% (by wt.) 3 S-3 CRCL/71/ 837 (DRI) Seized goods is composed of an alloy containing gold, silver and copper having gold conte....
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....fied the compliance of which is to be observed by the person, who is found in possession of 'Foreign Origin Gold' at the time of its recovery. But, in this case the Respondents failed to comply the said mandatory requirement envisaged under the above statutory provisions, as they failed to produce any documentary evidence regarding transport, possession or accounting of the seized gold. Moreover. 'the Respondents' have violated the provisions of Section 7(1)(b), 7(1) (c), 12, 33, 34, 46, 47 read with Section 123 of the said Act, in respect of smuggled 'Foreign Origin Gold'. Besides, in terms of Section 112 of the Customs Act. 1962, any person who: (a) in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111 or abets the doing or omission of such an act, or (b) 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 of the Customs Act, 1962 is liab....
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.... the gold is smuggled. Under the circumstances the goods have to be held as "prohibited goods....". (vi) Also in the case of Sheikh Mohd. Omer Vs. Collector of Customs. Calcutta and Others [(1970) 2 SCC 7281, It has been held by the Hon'ble Apex Court that: "that any goods which are imported or attempted to be imported contrary to any prohibition imposed by any law for the time being in force in this country" is liable to be confiscated. "Any prohibition" referred to in that section applies to every type of "prohibition". That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression "any prohibition" in Section 111 (d) of the Customs Act. 1962 includes restrictions. Merely, because Section 3 of the Imports and Exports (Control) Act, 1947, uses three different expressions "prohibiting", "restricting" or "otherwise controlling", we cannot cut down the amplitude of the word "any prohibition" in Section 111(d) of the Act. "Any prohibition" means every prohibition. In other words, all types of prohibitions & restrictions are one type of prohibition". (vii) As such, applying the ratio of above judgments, t....
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....d circumstances to establish that the said gold is foreign origin in nature. (x) Shri Mahesh Kumar Soni, Shri Gopi Krishna Soni and Shri Diler Abbas were involved in illegal procurement of sale proceeds of foreign origin smuggled gold into India. They have also failed to produce any documents related to the cash of Rs. 68.80,000/-received from traders to whom he has sold jewellery made from smuggled gold which has been recovered and seized during the search dated 12.12.2023. For this whole act, Shri Gopi Krishna Soni, made arrangements for procuring 'Foreign Origin Gold' smuggled from Nepal from different smugglers. And that on the direction of Shri Shyam Soni (Prop. of M/s. G.S. Gold. Mumbai), they take this smuggled gold to Mumbai from Gorakhpur via Lucknow. CDR analysis revealed that Shri Shyam Soni has been in regular contact over phone with Shri Mahesh Kumar Soni, Shri Gopi Krishna Soni and Shri Diler Abbas during relevant time. (xi) The Commissioner (Appeal) held that statement of co-accused cannot be relied upon without corroboration. It is submitted that statement made under Section 108 of the Customs Act before Gazetted Officer to be admitted as e....
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....missioner (Appeals) has not considered the fact that in response to DRI's request for conducting necessary follow-up enquiry at the premises of M/s. G.S. Gold, Mumbai situated at Chira Bazar, 1st Floor, 9/11 Poddar Mansion, Sewantilal Somachand Shah Marg. Vanka Mohalla, Mumbai 400002, the Deputy Director. O/o. Directorate of Revenue Intelligence, Mumbai Zonal Unit, vide his letter dated 15.12.2023, forwarded the visit report dated 13.12.2023 vide which it was informed that a team of Officers of DRI, Mumbai Zonal Unit, Mumbai visited the said premises and the same was found locked. On enquiry from the nearby offices, it was revealed that M/s. G.S. Gold rarely opens and also they do not have any idea about the work that was performed at the said premises. Further, another Summon dated 02.01.2024 was issued to Shri Shyam Soni (Prop. M/s. G.S. Gold, Mumbai). However, he deliberately dis-honoured the aforesaid summons and did not join and cooperate in the present investigation. This clearly shows his 'malafide intention' with the sole aim to dodge the investigation and manipulate his stock register and records to give it legitimate look in the eyes of law. (xv) Shri....
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..../s G.S. Gold. 9.3. M/s G.S. Gold has a total turnover (sales) of Rs. 18 Crores for the period from 01/04/2023 to 30/11/2023, on which GST @ 3% amounting to Rs. 53 Lakhs has been paid to the government. All GST returns, tax paid challans, purchase bills, sale bills, and stock registers were duly submitted to the Additional Commissioner at the time of adjudication. 9.4. The stock on hand as on 12/12/2023 was 6731.538 grams valued at approximately Rs. 3.97 Crores, out of which only 5541 grams (valued at Rs. 3.32 Crores) was seized. Thus, the closing stock of the firm exceeded even the quantity seized, clearly establishing legitimate ownership and complete accounting. 9.5. The Customs Act, 1962 has been erroneously applied to goods that are of domestic origin, legitimately owned, and properly accounted. The Department has failed to demonstrate any basis for invoking the Customs Act against the respondent. 10.GROUND 2: THE DEPARTMENT FAILED TO DISCHARGE ITS INITIAL BURDEN OF PROVING THAT THE GOLD IS OF FOREIGN ORIGIN / SMUGGLED 10.1. The DRI /Department has made sweeping assumptions and presumptions that the gold seized was smuggled, without adducing any cogent evidence o....
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....picious circumstances surrounding the recording of such statements, and the manner in which they were prepared (typed, not handwritten), there is sufficient doubt on the veracity of these statements. The Ld. Commissioner (Appeals) has correctly discarded reliance on such statements. 12. GROUND 4: THE GOLD WAS BEING LEGITIMATELY TRANSPORTED FROM MUMBAI TO LUCKNOW FOR SALE - NO IRREGULARITY 12.1. M/s G.S. Gold is a Mumbai-based firm engaged in gold trading. Its office, books of accounts, purchase bills, sale bills, and stock registers are all maintained at its Mumbai office. The gold seized was being carried from Mumbai to Lucknow by Shri Mahesh Soni, Shri Gopi Soni, and Shri Diler Abbas for the purpose of legitimate sale. 12.2. Since all accounting documents were in the Mumbai office, they could not be produced instantly at the time of seizure in Lucknow. This was not an act of evasion, but a practical impossibility, which was adequately explained and substantiated before the adjudicating authority and the Commissioner (Appeals). 12.3. As a natural business requirement, large quantities of gold need to be transported to the place of sale. The mere carrying of a large qua....
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....e Ld. Commissioner (Appeals) has correctly appreciated this fact. 17. GROUND 9: THE ORDER OF THE COMMISSIONER (APPEALS) IS WELL-REASONED AND DESERVES TO BE UPHELD 17.1. The Ld. Commissioner (Appeals) has carefully considered all documentary evidence, including purchase bills, sale bills, stock registers, cash book, GST returns, tax paid challans, and the supporting judgements cited by the Respondents and has rightly passed the order in favour of M/s G.S. Gold. 17.2. The Additional Commissioner erred in not appreciating the voluminous documentary evidence adduced by the Respondents. The Commissioner (Appeals) has correctly remedied this error and the order passed by the Ld. Commissioner (Appeals) does not call for any interference. 17.3. The Department's appeal is devoid of any new facts or legal grounds. Accordingly, the Respondents prayed for upholding the impugned Order passed by the Commissioner (Appeals) and reject the appeal filed by the Revenue. 18. Heard both sides and perused the appeal documents. 19. We have carefully considered the rival submissions advanced by both sides, perused the records of the case, the impugned order and the materials placed b....
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....materials brought on record are conspicuously silent as to the existence of any foreign markings upon the seized gold. Yet, the seizure records proceed to describe the country of origin as "Nepal". Save and except such recital, no independent material has been brought on record explaining the basis upon which the investigating authority could, at the very inception, attribute such an origin to the seized gold. Such a conclusion, unsupported by any contemporaneous objective material, appears to rest more on assumption than demonstrable evidence. 20.2. Before the statutory presumption embodied under Section 123 of the Customs Act, 1962 can be pressed into service, the Revenue is first required to establish the foundational fact, namely, that the goods were seized under a 'reasonable belief' that they were smuggled goods. Such reasonable belief cannot be founded upon conjectures, assumptions or mere suspicion, but must be supported by objective circumstances existing at the time of seizure itself. It is only upon the existence of such foundational facts that the reverse burden contemplated under Section 123 becomes operative. Conversely, where the very foundation of such belief is ....
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....on hand as on 12/12/2023 was 6731.538 grams valued at approximately Rs. 3.97 Crores, out of which only 5541 grams (valued at Rs. 3.32 Crores) was seized. Thus, the closing stock of the firm exceeded even the quantity seized, clearly establishing legitimate ownership and complete accounting. Once such documentary evidence was produced, the burden necessarily shifted back upon the Revenue to affirmatively establish that the said documents were fabricated, forged or otherwise unrelated to the seized goods. In the present case, the Revenue has merely relied upon uncorroborated statements recorded during the course of investigation instead of leading independent and legally admissible evidence. Though reliance has been placed upon the statements of the Respondents recorded at the time of initial seizure of the gold, such assertions were negated by the documentary evidences submitted later. We observe that the investigation has not culminated in any forensic examination, expert opinion, prosecution for forger to question the genuineness of the documents produced by the Respondents. We find that the material evidences submitted by M/s. G.S. Gold conclusively demonstrate that the GST recor....
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....e authority to do so. When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an affidavit or otherwise, for a bad order, with the passage of time, and supplementing the reasons would become good, which is not how the authorities are required to function, more so, in a case of confiscatory legislation. But assuming hypothetically, accepting the reasons furnished by the officer, even then it is nothing more than a mere suspicion. A general practice in trade cannot be, ipso facto, applied and adopted to the instant case, for unless it is shown that the act and the conduct of the petitioner makes him to be a part and parcel of the trading community, based in the area or dealing with the illegal activities of such like nature. There is no track record of past history of the instant petitioners." 20.7. In Madhukar Sonaba Bhagat v. Commissioner of Customs (Prev.), West Bengal [2019 (368) E.L.T. 990 (Tri. - Kol.)], this Tribunal has held that: - "11. The allegation is that the appellant has smuggled gold, which is liable for confiscation under Secti....
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....nt case before us. 20.10. Viewed cumulatively, the absence of foreign markings on the seized gold, the fact that the seizure was effected in the course of a town interception, the absence of any scientific or technical material connecting the seized gold with a foreign source, the production of contemporaneous commercial records by the claimant, and the absence of any independent evidence dislodging the authenticity of those documents, collectively create a substantial doubt as to whether the foundational requirement of a 'reasonable belief' stood satisfied at the time of seizure. Consequently, we are of the considered opinion that, in the peculiar facts obtaining in the present case, the invocation of the statutory presumption under Section 123 of the Customs Act cannot be sustained solely on the basis of suspicion. The burden, therefore, cannot be said to have shifted upon the Respondents. Thus, we hold that the provisions of Section 123 of the Customs Act are not applicable to the facts and circumstances of this case. Hence, it is the responsibility of the Revenue to establish that the gold in question were smuggled in nature, which they failed. Accordingly, we hold that the ....
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....idence through cross-examination. These safeguards are not empty formalities but constitute substantive facets of the principles of natural justice. The record before us does not disclose compliance with the aforesaid mandatory requirements before placing reliance upon the statements in question. As the statements have not been subjected to the statutory safeguards embodied under Section 138B of the Customs Act, 1962, we hold that such statements cannot be relied upon and equated as conclusive evidence for discarding the documentary evidence furnished by the Respondents in support of their case. 21.2. It is also pertinent to take note of the submissions advanced on behalf of Respondents regarding the circumstances under which their statements under Section 108 of the Customs Act came to be recorded. It has been specifically contended that the statement was electronically typed by the investigating officers and the Respondents were merely directed to append their signature without being afforded an opportunity to meaningfully verify its contents. Although the statements recorded under section 108 of Customs Act can be relied upon in the instant proceedings, the fact remains that ....
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....egally admissible and cogent evidence, that the impugned gold was of smuggled origin and having consequently found the order of confiscation to be unsustainable, the foundation upon which the penalties imposed under Section 112 of the Customs Act, 1962 rest, itself ceases to exist. Penalty under Section 112 is consequential in nature and necessarily presupposes the existence of goods liable to confiscation under the Act. Once the very basis for confiscation fails, the consequential penal liabilities cannot survive independently. 21.5. We are also of the view that the penalty imposed upon the Respondents under Section 114AA of the Customs Act, 1962 is equally unsustainable. Section 114AA contemplates a deliberate act of knowingly or intentionally making, signing or using a declaration, statement or document which is false or incorrect in any material particular for the purposes of the Customs Act. Such penal provision, being quasi-criminal in nature, necessarily requires the Revenue 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 the R....