Commissioner of Customs (Prev.) Vs Rajesh Kumar (Delhi High Court)
The present appeal was filed by the Department challenging the order dated 31 October 2022 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi. The hearing was conducted in hybrid mode.
As per the background stated in the appeal, the Respondent was working as a broker in the bullion market at Kucha Mahajni, Chandni Chowk, Delhi, and was involved in selling gold received on a consignment basis. On 14 October 2016, the Directorate of Revenue Intelligence (DRI), Delhi Zonal Unit searched the Respondent’s premises. During the search, around 20 kgs of gold of foreign origin, valued at Rs. 6,46,57,189/-, was recovered. A substantial amount of currency was also recovered.
Based on these facts, the Additional Commissioner, by Order-in-Original dated 31 January 2019, directed seizure of the gold weighing around 20 kgs (market value Rs. 6,46,57,189/-) and confiscation of Indian currency of actual value Rs. 6,43,74,000/-. However, the CESTAT in its impugned order held that the confiscation was bad in law and observed that the seized goods were not liable to confiscation.
On 2 April 2025, questions of law were framed in the matter. During pendency of the appeal, the Respondent passed away on 4 November 2025. The Court noted that the clear issue arising was whether the penalty, if any, imposed by the Department against the Respondent would abate or not.
The Court noted that CESTAT had set aside confiscation on the ground that there was no definite evidence to conclude that the 20 kgs gold was smuggled. CESTAT treated the matter as a town seizure and not a seizure in the customs area or near the international border. Since there was no chain of events supporting movement of smuggled goods into the town from any person coming from the international border, CESTAT held that smuggling could not be concluded. CESTAT also noted that the seized gold was of 99.5% purity, whereas smuggled gold is normally of 99.9% purity, and held that foreign markings alone do not justify presumption of smuggling. It further held that mere possession of foreign-marked gold without a bill does not establish it as smuggled. CESTAT also recorded that penalty under Section 112(b) requires mens rea, and conscious knowledge that the person was dealing in smuggled gold, which was not established from the evidence. Accordingly, it held confiscation under Section 111(d), (o), and (p) as bad and set aside penalty under Section 112(b)(i).
In appeal, the Department contended that one Amit Goel, stated to be the main seller, did not claim rights in the gold. The Respondent also did not claim rights over the gold at the relevant time. Therefore, the Department argued confiscation could not have been set aside as there was no challenge to confiscation by either of them. It was also stated that the Department had disposed of the gold on 31 March 2019, as per an affidavit.
The Court noted that the appeal relating to Amit Goel (CUSAA 76/2024) had already been dismissed on 15 October 2024 due to low tax effect, as the tax effect was below the threshold limit specified in CBIC instructions dated 02.11.2023.
In view of the fact that neither party claimed rights in the gold, the Court held that setting aside confiscation was no longer tenable. Accordingly, the impugned order to the extent it set aside confiscation of the gold and currency was set aside. The Court also set aside the penalty imposed on the Respondent and observed that in any case the penalty would abate due to the Respondent’s demise. As a result, the Court held that the questions of law no longer required adjudication and disposed of the appeal along with pending applications.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
