Commissioner of Customs (Preventive) Vs Abhishek Mundhra (CESTAT Kolkata)
The Revenue challenged an Order-in-Appeal that had set aside the confiscation of 15 kg of gold bangles/strips and 1,754.29 grams of silver granules, as well as penalties imposed on various noticees. The case originated from a DRI operation based on intelligence alleging that gold smuggled from Bangladesh was being transported to Chennai in the guise of “gold jewellery” through a courier service. During interception, DRI officers found 271 gold strips/bangles weighing 15 kg. Statements were recorded from various persons, including an employee who allegedly admitted that the gold had been smuggled from Bangladesh and melted into its present form. Subsequent searches resulted in seizure of silver granules and documents, and show cause notices were issued proposing confiscation under Sections 111(b) and 111(d) of the Customs Act, 1962, along with penalties.
The Tribunal examined whether the seizure, confiscation, and penalties were legally sustainable.
Reasonable Belief Under Section 110
The Tribunal first considered whether the seizure was based on a valid “reasonable belief” under Section 110(1) of the Customs Act, 1962. It noted that at the time of interception, the person transporting the goods produced Manufacturing Receipt Vouchers covering the quantities being transported. The respondents later produced GST invoices and documents showing procurement of gold from domestic sources and movement of goods for job work.
The Tribunal observed that the Department failed to produce evidence establishing that the gold had been smuggled from Bangladesh. The allegation that the gold was smuggled, melted, and then transported was found to be based on assumptions and conjectures. The seized gold bore no foreign markings, and its purity ranged from 99.5% to 99.7%. The Tribunal held that the Department had failed to establish the foreign origin of the gold or any smuggling route. Consequently, the statutory requirement of “reasonable belief” prior to seizure was not satisfied.
Burden of Proof Under Section 123
The Tribunal next examined whether the burden of proof under Section 123 of the Customs Act shifted to the respondents.
It held that before the burden can shift, the Department must first establish the foreign origin of the goods and demonstrate that they were seized on a reasonable belief of being smuggled. In the present case, the gold did not carry foreign markings, was seized within India during transportation between Kolkata and Chennai, and was not seized from a customs area or international border.
The Tribunal observed that the Department failed to produce conclusive evidence proving foreign origin. Therefore, the burden under Section 123 did not shift to the respondents. It distinguished the judgments relied upon by the Revenue, noting that those cases involved different factual circumstances, including more specific intelligence and different seizure situations.
Documentary Evidence Supporting Domestic Purchase
The Tribunal found that the respondents had produced Manufacturing Receipt Vouchers and GST invoices evidencing domestic procurement and movement of the gold. The Commissioner (Appeals) had examined these documents and concluded that the transactions were genuine.
The Tribunal noted that the investigation did not establish that the documents were false or fabricated. It also found that the silver granules were properly accounted for in the books and that there was no evidence of illegal procurement.
Accordingly, the Tribunal held that the documentary evidence sufficiently established licit purchase of both the gold and silver from domestic sources.
Confiscation Under Sections 111(b) and 111(d)
The Tribunal upheld the Commissioner (Appeals)’ finding that confiscation was not justified. It held that confiscation under the Customs Act requires cogent and credible evidence and cannot be based on assumptions or unverified inferences.
The Tribunal observed that the Department had failed to establish either the foreign origin of the gold or its smuggled nature. Mere allegations that the gold originated from Bangladesh were insufficient.
Regarding silver granules, the Tribunal noted that the quantity involved was only 1,754.29 grams, far below the threshold referred to in government instructions concerning silver bullion. The seized silver also did not bear foreign markings. Consequently, the Department failed to discharge its burden of proving that the silver was smuggled.
The Tribunal therefore upheld the setting aside of confiscation of both the gold and silver.
Penalties Under Section 112
The Tribunal also upheld the deletion of penalties imposed under Sections 112(a) and 112(b) of the Customs Act.
It observed that since the goods were not liable to confiscation and the respondents possessed documentary evidence establishing legal procurement, the foundation for penalties disappeared. The Tribunal further noted that mala fide intention had not been established by the Department.
Accordingly, the penalties imposed on the respondents were held to be unsustainable.
Final Decision
The Tribunal concluded that:
