Case Law Details
Commissioner of Customs Vs Shri Mohammed Ali Jinnah (CESTAT Chennai)
CESTAT Chennai held that in absence of foreign marking and any other cogent evidence, onus is on department to prove that the smuggled nature of the goods.
Facts- The present appeal is filed by the department against the order passed by the Commissioner (Appeals) who set aside the confiscation of goods (gold) and also the penalties imposed by the adjudicating authority.
Based on specific intelligence, a search was carried out towards Mohammed Ali Jinnah (the respondent). During the personal search of the respondent, the officers recovered a copy of his Aadhar card, bus ticket and two packets wrapped with blue adhesive tape and kept in a green and blue polythene bag. On cutting open these packets, it contained two crude gold bars (of weight 1720 and 1377 grams) totally weighing 3097 grams. The respondent did not have any valid document for the possession of the gold and it appeared to the department that these two crude gold bars are smuggled into India from Sri Lanka without declaring it to customs with the intention to evade payment of customs duties and held as the gold bars were liable for confiscation under the provisions of the Customs Act, 1962. The same were seized under mahazar dated 23.1.2017.
The officers visited the residence and premises of Mohammed Ali Jinnah at Devakottai but did not find any incriminating documents. The travel details of bus tickets recovered from the respondent were obtained from the Tamil Nadu State Transport Corporation Ltd.
In the absence of evidence on the part of the respondent to prove that the gold was legally procured and since the crude gold bars had 999.9 purity, it appeared to be smuggled into India in violation of Foreign Trade Policy 2015 – 2020 read with RBI Regulations and having been found to be concealed in a bag.
After due process of law, the adjudicating authority confiscated the seized 3.097 kg of foreign origin gold bars and imposed penalty u/s 112 of the Customs Act, 1962.
Commissioner (Appeals) vide the order impugned herein held that the department has failed to prove that the gold is smuggled into India. The Commissioner (Appeals) allowed the appeal. Aggrieved, the department is now before the Tribunal.
Conclusion- In the absence of foreign markings, there should be cogent evidence to establish that the gold is of foreign origin. The contention of the learned AR that if gold jewellery when converted into bullion will not have 999.9% purity is without any substance. The statement of respondent which has been retracted cannot be the basis for holding that the gold is smuggled unless corroborated by other evidences.
In the case of Shri Sarvendra Kumar Mishra, the facts are almost similar wherein the only evidence relied by the department was the statement of Shri Kishan Kumar Dhuria. The gold in that case did not have any foreign markings and it was held by the Tribunal that the onus would be on the department to prove the smuggled nature of the goods.
Held that the view arrived by the Commissioner (Appeals) is legal and proper and does not require any interference. The appeal filed by the department is without merits. The appeal is dismissed.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The above appeal is filed by the department against the order passed by the Commissioner (Appeals) who set aside the confiscation of goods (gold) and also the penalties imposed by the adjudicating authority.
2. Brief facts are that on specific intelligence that one person by name Mohammed Ali Jinnah would be arriving at Chennai from Pudhupattinam by bus carrying a black colour backpack with crude gold bars of foreign origin / foreign marked gold bars which are smuggled into India from Sri Lanka, the officers of Directorate of Revenue Intelligence (DRI) maintained surveillance at the bus stand. A person carrying a black colour backpack and wearing a pink and white full-sleeved shirt was intercepted by the officers. On inquiry, he introduced himself as Mohammed Ali Jinnah from Devakottai and that he had come by bus from Perungalathur to Pallavaram. He denied having gold bars of foreign origin or foreign marked gold bars in his person or in his luggage. On persistent inquiry by the officers, he agreed that he was carrying gold bars in his bag. He was taken to the office of the DRI at T. Nagar, Chennai – 17 along with other independent witnesses for further examination. During the personal search of the respondent (Mohammed Ali Jinnah), the officers recovered a copy of his Aadhar card, bus ticket and on search of his backpack, the officers found two packets wrapped with blue adhesive tape and kept in green and blue polythene bag. On cutting open these packets, it contained two crude gold bars (of weight 1720 and 1377 grams) totally weighing 3097 grams and valued at Rs.91,98,090/- (Rs.2,970/- per gram). The respondent did not have any valid document for the possession of the gold and it appeared to the department that these two crude gold bars are smuggled into India from Sri Lanka without declaring it to customs with an intention to evade payment of customs duties and that for this reason, the gold bars were liable for confiscation under the provisions of the Customs Act, 1962. The same were seized under mahazar dated 23.1.2017.
3. The statement of the respondent was recorded under sec. 108 of the Customs Act, 1962 on the same day. He stated that one person named Murugan aged 55 years approached him on 22.1.20 17 to carry the gold smuggled from Sri Lanka, from Pudupattinam in Ramnad District to be handed over to Batcha @ Pitchai at Chennai for a monetary consideration of Rs.5,000/-. He came by bus and reached Perungalathur on the same day. He called Batcha using his mobile who told him to come to Pallavaram bus stand. While waiting for Batcha at the bus stop, he was intercepted by DRI officers. He admitted to have concealed the smuggled gold in his back pack. He stated that he did not know the address of Murugan and Batcha and that earlier on four or five occasions, he had travelled by bus and handed over the smuggled gold, collected from Murugan for monetary consideration of 5,000/. He furnished the mobile numbers of Shri Batcha @ Pitchai and Sri Murugan.
4. The officers visited the residence and premises of Mohammed Ali Jinnah at Devakottai but did not find any incriminating documents. The travel details of bus tickets recovered from the respondent was obtained from the Tamil Nadu State Transport Corporation Ltd. Later, vide letter dated 20.2.2017, the respondent retracted the statements made before the officers on 23.1.20 17 and 24.1.20 17. In his retracted statement, he stated that the gold was acquired by him from his earnings when he was abroad and that he had made the crude bars through a goldsmith in Nambuthalai. Another letter dated 5.4.2017 was sent to the DRI officers stating that the gold seized from him was not smuggled gold and that the same was his earnings. He stated that the gold was purchased by him in India and was saved for his daughter’s marriage. He got converted the gold by goldsmith into crude bars and was supposed to sell the same in Chennai to buy jewellery for his daughter’s marriage. In view of the above letters retracting the earlier statements, the DRI officers again summoned the respondent on 10.4.2017. The respondent replied that he was not well and would appear later.
5. Later, letters were issued to the officers which were written by Shri Shahul Hameed, Smt. Ayesha Beevi and Smt. Nashrina Begum who are respectively father, mother and wife of the respondent. In these letters, they claimed that the gold seized was not smuggled gold and that it was purchased in India only from his earnings. On verification of the details of statement of bank account of the respondent from the Devakottai Branch of Indian Overseas Bank, it was seen that as on 1.5.2017 there was a balance of Rs.415/- only and most of the cash deposits happened during the period before the seizure of gold. The statement of Sri G. Kannan (goldsmith) was recorded who stated that he has not melted the gold for the respondent.
6. The respondent was again issued summons to produce bank account details, income, source of funds and income tax statements. He appeared on 7.6.2017 and gave a voluntary statement under sec. 108 of the Customs Act, 1962 wherein he agreed that he was present during the mahazar proceedings. He agreed that he had travelled as per the tickets obtained from the State Transport Corporation. It was also stated that he maintained a bank account with IOB, Devakottai and later his wife’s name was added to the bank account. He earlier worked in Malaysia and Saudi Arabia and submitted a copy of his passport. He did not have PAN and was not an income tax assessee. He did not have any proof of his savings / documents for the licit purchase of gold or to prove that the crude gold bars were not of smuggled nature.
7. The investigation and voluntary statements given by Shri Umarkatta (respondent’s wife’s uncle) and Shri G.Kannan (goldsmith) clearly proved that the respondent was only a carrier and the retraction made by his letters and the letters of his family members were only an afterthought to mislead the investigation so as to absolve him from the allegations. Though the officers were not able to get clear whereabouts of Murugan or Batcha @ Pitchai, the gold was assayed by Shri G. K. Shankar who certified the two crude gold bars to be of 24 karat and has 999.9 purity which proved the gold to be of foreign origin.
8. In the absence of evidence on the part of respondent to prove that the gold was legally procured and in view of the fact that the crude gold bars had 999.9 purity, it appeared to be smuggled into India in violation of Foreign Trade Policy 2015 – 2020 read with RBI Regulations and having been found to be concealed in a bag, a Show Cause Notice dated 21.7.2017 was issued to the respondent by the Additional Director, DRI as to why the crude gold bars should not be confiscated and penalties should not be imposed under the Customs Act, 1962.
9. After due process of law, the adjudicating authority vide order dated 10.9.2018 held as under:-
(i) I confiscate the seized 3.097 kg of foreign origin gold bars, totally valued at Rs.91 ,98,090/- under Section 111 (a), 111 (d) and 111(i) of the Customs Act, 1962.
(ii) I confiscate the packing materials with no commercial value used for concealing the smuggled gold bars under Section 119 of the Customs Act, 1962.
(iii) I impose a penalty of Rs.5,00,000/- (Rupees Five Lakhs only) on Shri Mohammed Ali Jinnah under Section 112 of the Customs Act, 1962.
(iv) I impose a penalty of Rs.1 0,00,000/- (Rupees Ten Lakhs only) on Shri Murugan under Section 112 of the Customs Act, 1962.
(v) I impose a penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) on Shri Batcha @ Pitchai under Section 112 of the Customs Act, 1962.
10. Against the above order of absolutely confiscating the gold bars and also imposing penalties under the provisions of the Customs Act, 1962, the respondent preferred an appeal before the Commissioner (Appeals). After granting personal hearing on 19.9.2019 and on various dates, the Commissioner (Appeals) vide the order impugned herein held that the department has failed to prove that the gold is smuggled into India. The Commissioner (Appeals) allowed the appeal. Aggrieved, the department is now before the Tribunal.
11. The learned AR Smt. Anandalakshmi Ganeshram appeared and argued for the department. The learned AR filed written synopsis in which the grounds of appeal are summarized. It is submitted that the Commissioner (Appeals) has completely ignored the evidence available on record of the case. In the voluntary statement dated 23.1.2017 and 24.1.2017, the respondent has admitted his involvement in the smuggling. Further, the respondent has not produced any valid document to show legal possession / import of the smuggled crude gold bars and has admitted the activity of smuggling for monetary consideration. The findings of the Commissioner (Appeals) that the crude gold bars do not have foreign markings and therefore cannot be presumed that they are of foreign origin is erroneous.
12. In para 16 and 17 of the impugned order, it is stated by the Commissioner (Appeals) that the gold bars are not of standard size.It is discussed that from the websites it is seen that the weight of impugned gold bars do not relate to any of the standard size. This observation is factually incorrect. Further, the assayer had certified that the gold bars are of 24 carat and 999.90 purity. On the date of hearing, the learned AR produced a copy of the certificate issued by the Assayer Shri G.K. Shankar dated 24.1.20 17. It is submitted by the learned AR that jewellery when converted into bullion will not have 9 purity so the case of the respondent that gold jewellery belonging to his family was melted and converted to crude gold bars is false. The Commissioner (Appeals) has relied upon the observation of the Magistrate in the criminal proceedings. The certificate issued by the Magistrate had only stated that the seized goods are crude gold bars (no foreign marking) and not that the gold bars are not of foreign origin. Mahazar itself clearly brings out that the intelligence received was that the respondent would be carrying crude gold bars of foreign origin and further the assayer had certified that the two gold bars are of 24 karat and 999.9 purity.
13. The respondent has put forth a case that the gold belongs to him and that it was purchased from his earnings. Letters were issued by some of his family members stating that the gold was purchased in India with their earnings. The bank statements of the respondent showed that it contained only meagre amount. The claim of the respondent that he purchased the gold bars with his earnings therefore cannot be accepted. The respondent has also stated that the goldsmith named Shri Kannan converted the gold bars into crude gold bars. Though the officers contacted Shri Kannan (goldsmith), the said person denied any knowledge. This would prove that the story set up by the respondent is false.
14. The Commissioner (Appeals) has overlooked the fact that bus tickets were recovered from the respondent under the mahazar proceedings. Without any reason, the Commissioner (Appeals) has wrongly brushed aside the conclusion arrived by the investigation officers and held that these tickets do not evidence the activity of
15. The subscriber details of the mobile numbers used by the respondent Shri Batcha @ Pitchai and Shri Murugan were obtained and found to be belonging to one Latha and one Nagendra. The mobile numbers used by the respondent was in the name of one Krishnaveni. This is detailed in para 10 to 12 of the Show Cause Notice.
16. The findings of the Commissioner (Appeals) in para 24 and 25 that the investigation agency has not been able to prove any positive evidence that the gold was smuggled from Sri Lanka into India as it did not contain any foreign markings is factually incorrect. The certificate issued by the assayer would prove the purity of the gold to be 999.9. Only foreign gold bars will have such purity.
17. The contention of the respondent that the request for cross-examination of the assayer Shri K.G. Shankar, the goldsmith Kannan and other witnesses was denied and therefore has caused much prejudice to them is put forward by the respondent only for the purpose of absolving from the penal liability. The learned AR prayed that the appeal may be allowed.
18. The respondent was represented by Shri B. Kumar, Senior Advocate assisted by Advocates Shri T. Sudhan Raj and Shri Shruthan.
19. The learned Senior Advocate submitted that the entire Show Cause Notice is based on the statements recorded from the respondent on 23.1.2017 and 24.1.2017. These statements cannot be accepted in evidence for the reason that they have been retracted in clear terms by the letters issued by the respondent on 20.2.2017. On such score, to prove the allegations, the department has to corroborate the said statements with material particulars so as to establish the allegations raised in the Show Cause Notice. In the statement recorded on 23/24.1.20 17, it is recorded that one person named Murugan handed over the gold bars to the respondent to be given to Shri Batcha @ Pitchai. The department has not been able to establish the existence of such persons. The department has filed an affidavit before the Hon’ble High Court of Madras in CMA No. 1911/2021 (which is an appeal filed by the department) wherein the Assistant Commissioner has clearly admitted that the investigation revealed that there was no person such as Murugan or Batcha. The investigation agency has not been able to find out any person named Murugan and Batcha @ Pitchai. Though it is alleged that the respondent made a call from his mobile to Batcha who asked the respondent to get down at Pallavaram bus stand and wait for him, the investigating agency has not verified the call records of the respondent to prove whether any such call was made. The mobile phone of the respondent also is not seen seized as per the mahqazar for reasons known only to the department. It is stated that the mobile phone used by the respondent belongs to one Krishnaveni. The call records of this number is not verified. Though it is stated that the phone numbers referred to by respondent as belonging to Murugan and Batcha belong to some other persons, the investigating agency has not bothered to make verification of call details of these phone numbers to ensure whether the respondent has made any call to these numbers. Thus, the allegation that respondent was entrusted with gold by Murugan to be delivered to Batcha is not at all established. The allegation that the gold is smuggled from Sri Lanka is thus false and baseless.
20. The learned counsel submitted that the respondent had stated before the authorities that the gold was procured by him by using his earnings. His family members had written letters separately to the officers explaining that the gold was procured with their earnings. Further, the respondent had worked in foreign countries for 16 long years. To establish the same, he had produced his passport before the authorities. The gold was purchased out of his money and also the jewelleries that belonged to his family which was melted by Shri A. Kannan (goldsmith) into crude bars. The department has not examined or verified from Shri A. Kannan. Instead, the department has recorded statement of Shri G. Kannan who is also having a shop in the same complex. The respondent vide letter dated 17.7.2017 informed the officers much before the issue of Show Cause Notice (21.7.2017) to verify and examine Shri A. Kannan. This request was ignored by the department and there was no investigation done as to whether A. Kannan has melted the gold into crude bars for the respondent. Even during the adjudication proceedings, the respondent had requested to examine Shri A. Kannan who had melted the gold for the respondent. The request for cross-examination was denied by the adjudicating authority. The learned counsel relied upon the judgment of the Hon’ble High Court of Madras in the case of M/s. Jet Unipex in W.P. No. 5233 of 2016 dated 19.5.2020 to argue that the evidence placed by the department cannot be accepted when the request for cross-examination has been denied.
21. The learned counsel submitted that though the gold has been seized on a reasonable belief that it is smuggled gold, there is no material to show that the gold is smuggled in nature. Admittedly, the gold bars do not have any foreign markings. The presumption under sec. 123 of the Customs Act, 1962 would not apply at all as the gold does not have any foreign markings. Moreover, the seizure is not made at any point of import. The respondent was intercepted at a public place which is a bus stand. The reasonable belief is based only on the so called secret information and the said information has no evidentiary value unless established with evidence.
22. The learned counsel referred to the Annexure to the Show Cause Notice issued under Section 124 of Customs Act, 1962 dated 7.2017. The certificate which is produced by the learned AR and said to have been issued by assayer is not mentioned in this Annexure. Thus, it is not part of relied upon documents (RUDs). The copy of the certificate issued by the assayer was not given to the respondent. The request of respondent for cross-examination of assayer was also denied. The documents produced by the learned AR purported to be the certificate issued by assayer cannot be accepted. The learned counsel submitted that the department has failed to establish that the gold was smuggled from Sri Lanka as alleged by them in the Show Cause Notice.
23. To support the arguments, the learned counsel relied upon the decisions of the following cases:-
(a) Shri Sarvendra Kumar Mishra & Anr. Vs. Commissioner of Customs – 2021 (9) TMI 405 CESTAT – Allaha bad
(b) M/s. Ankit Agarwal Vs. Commissioner of Customs – 2020 (10) TMI 783 CESTAT – Kolkata
(c) Commissioner of Customs Vs. Shakil Ahmad Khan & Ors. – 2019 (2) TMI 465
24. The learned counsel submitted that the Show Cause Notice in the present case is issued by DRI. The issue whether Show Cause Notice issued by DRI is proper and valid is contentious and matter is pending consideration of the Hon’ble Supreme Court. It is submitted that the respondent does not wish to contest this issue in this appeal and that the respondent has filed an affidavit to the effect that the respondent is not contesting the issue as to whether the Show Cause Notice issued by DRI is proper and valid before this forum or any other forum. The learned counsel prayed that the appeal may be dismissed.
25. Heard both sides.
26. At the outset it has to be stated that though the Show Cause Notice is issued by DRI, it is submitted by the learned counsel that the respondent is giving up the claim and contest on the issue as to whether DRI is the proper officer for issuing the Show Cause Notice. The respondent has filed affidavit to this effect which reads as under:-
“2. I submit that the above appeal has been preferred by the appellant against the order of the Commissioner of Customs (Appeals) in Order-in-Appeal Seaport C. Cus. II No. 550/2019 dated 14.11.2019.
3. I state and submit that the Show Cause Notice had been issued by the DRI. The said issue whether DRI officers are proper officers or not to issue Show Cause Notice who are not proper officers as per the Supreme Court’s decision. But through this affidavit, I am not pressing the issue and the matter may be taken on merits without going into the jurisdictional issue of DRI.”
27. We therefore proceed to examine the merits of the case. The allegation in the Show Cause Notice is that the gold seized from the respondent is gold smuggled into India without declaring it to Customs for avoiding payment of customs duties. The first issue that requires to be analyzed is whether the gold is of foreign origin. Admittedly, the gold does not have any foreign markings. It is the case of department that the gold assayer Sh. G.K. Shankar has issued certificate that the purity of the gold is 24 karat and of 999.9%. It is contended by department that only foreign gold would have such high purity. It is seen mentioned in the mahazar dated 23.1.2017 that the gold was assayed by the assayer on the same day. However, the said document is not made part of relied upon documents for the purpose of issuing Show Cause Notice. The learned counsel for respondent has submitted that the respondent was not served with copy of this document. The said contention was raised before the Commissioner (Appeals) also. On the date of hearing of this appeal by us, the learned AR has produced a copy of this document purported to be issued by assayer. We do not understand what prevented the department from placing this document as part of relied upon documents. Usually, only copes of the Relied Upon Documents are given to the noticee. It can therefore be inferred that the appellant was not given copy of this document. Although it is seen mentioned in the mahazar that the assayer certified the purity of gold on the same day of the incident (23.1.2017), the date mentioned in the certificate produced by the learned AR is 24.1.2017. Further, it says 24 karat gold and does not say 999.9%. This document is produced only now, at the second appeal stage. This document which is not made part of RUD and of which a copy has not been served to the respondent, when produced at the fag end of proceedings cannot be viewed without suspicion.
28. The gold was seized from the respondent at a public place which is a bus stand. At the time of interception, the respondent did not produce any valid documents as to how he has procured the gold. Though in the Show Cause Notice it is alleged that the respondent deposed that the gold was handed over to him by Murugan who said that it was smuggled from Sri Lanka and asked the respondent to handover to Shri Batcha @ Pitchai, the department has not been able to establish any of this. The telephone details of any call made by the respondent to these persons is not verified. In fact, the investigation agency has not been able to find out as to the existence of anyone named Murugan or Batcha. If the case of the department is to be accepted, the mobile phone of the respondent which was available to the investigation agency would be the first evidence by which the call details of the respondent can be verified as to whether he has made any calls to Murugan or Batcha. The event chain starts with a loose link.
29. The purity of the gold as certified by the assayer is the main reason for the department to allege that the gold is of foreign origin and is smuggled into India. Apart from challenging the certificate issued by assayer, the learned counsel has also challenged the method adopted for ascertaining the purity of the gold. It is not stated in the certificate as to what is the method adopted by the assayer to ascertain the purity. The learned counsel submitted that the touchstone method is not an acceptable method to prove the purity of the gold. The Customs officers ought to have obtained a report from a competent agency like the Government Mint. The decision in the case of Customs Vs. Dina Aruna Gupta reported in 2011 (274) ELT 323 (Del.) is relied by the respondent to assail the certificate of assayer. The relevant para reads as under:-
“31. The prosecution has examined PW-3 Shri Ramesh Chand Aggarwal, the goldsmith and the valuer who had tested the gold bars allegedly recovered from the possession of the accused. Whether PW-3 Shri Ramesh Chand Aggarwal was possessed of any qualification in the matter of testing gold was liable to be proved by the prosecution. The certificate issued by the PW-3 Shri Ramesh Chand Aggarwal i.e. Ex. PW-1/F does not disclose the method on the basis of which he had tested the gold and had reached to the conclusion that it was gold of 24^ purity.
32. Normally, the test applied for testing gold is furnace test but the same was not applied or resorted to in the present case. There is no evidence on record that PW-3 Sh. Ramesh Chand Aggarwal was possessing any proficiency in the matter of testing gold. The certificate/report Ex. PW-1/F does not contain any data. Whereas the certificate must contain actual data and not mere opinion. Further, the gold of foreign origin has to be proved by the authentic manner. Law is well settled that mere marking cannot be taken as a proof of the gold for origin of the gold as markings and labels. In such a situation, the statement of the accused under Section 108 of the said Act has no consequences.”
(Emphasis supplied)
30. The Hon’ble High Court of Karnataka in the case of Central Excise Department, Bangalore Vs. P. Somasundaram reported in 1979 SCC Online Kar. 187 observed as under:-
“9. One more aspect that is clear form the evidence of PW2 is that he has simply sworn that on testing M.Os 1 to 50, he came to the conclusion that each one of the biscuits was of 24 carret purity and was of foreign origin because of the markings and fineness. He has nowhere stated that was the test he applied and what were the conversations, namely, the date on which he based his conclusion amid the opinion. Sri Hakim argued that the defence has not cross-examined PW 2 as to what test he had applied and, therefore, there is no lacuna in the evidence of PW2. It is laid down in Madnukar’s case that when there is no data on which the opinion is furnished by the so called expert, the evidence of such a witness is neither legal nor sufficient. We respectfully agree with this view. It was for the prosecution to bring out such data in the evidence of PW 2 when it has failed to bring out the date on which PW 2 came to the conclusion and furnished opinion that each of the biscuits was of 24 carrat purity and was of foreign origin because of the markings and fineness, the evidence of PW2 would not be legal, hence, becomes inadmissible. The prosecution has not produced any other evidence in proof of the fact that each one of the biscuits in question is gold and of particular purity and fineness. So, it has to fail.”
(Emphasis supplied)
31. We have to say that in the case on hand, the certificate does not mention 999.9% as contended by department. It merely says 24 carat. It does not mention the method adopted to test the purity. Further, the certificate is not made part of RUD. The copy of certificate is not given to the respondent. Again, the request to cross-examine the assayer was denied. It is produced belatedly and there is no petition filed by learned AR stating reasons to accept the document at the appellate stage. On the totality of these facts, we have to hold that the certificate of the assayer produced by the learned AR cannot be accepted in evidence.
32. Apart from the certificate, the department relies on the statements given by the respondent on 23/24.1.2017. These statements have been retracted later by the respondent. In such circumstances, the department has to place reliable evidence to prove that the gold is smuggled from Sri Lanka. There is no evidence to prove that the gold is smuggled from Sri Lanka or any connection of the gold with Murugan or Batcha.
33. The department has mechanically applied section 123 of the Customs Act, 1962, which reads as under:-
“123. Burden of proof in certain cases.—
(1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be—
(a) in a case where such seizure is made from the possession of any person,—
(i) on the person from whose possession the goods were seized; and
(ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person;
(b) in any other case, on the person, if any, who claims to be the owner of the goods so seized.]
(2) This section shall apply to gold 2[and manufactures thereof] watches, and any other class of goods which the Central Government may by notification in the Official Gazette, specify.”
34. In the absence of foreign markings, there should be cogent evidence to establish that the gold is of foreign origin. The contention of the learned AR that if gold jewellery when converted into bullion will not have 999.9% purity is without any substance. The statement of respondent which has been retracted cannot be the basis for holding that the gold is smuggled unless corroborated by other evidences.
35. In the case of Shri Sarvendra Kumar Mishra (supra), the facts are almost similar wherein the only evidence relied by the department was the statement of Shri Kishan Kumar Dhuria. The gold in that case did not have any foreign markings and it was held by the Tribunal that the onus would be on the department to prove the smuggled nature of the goods. The Tribunal observed as under:-
“15. Further, the only evidence relied upon by the Revenue is the statement of Shri Kishan Kumar Dhuria, wherein he stated that the gold may be of foreign origin, as according to his knowledge gold is smuggled through Bangladesh into India, which he received at Kolkata. We find that other then the statement of Shri Kishan Kumar Dhuria, no evidence is brought forth by Revenue to conclude that the impugned gold has been smuggled. We have perused the statement of Shri Dhuria and find that the information about the gold being smuggle from Bangladesh is very general in natue. We find that nowhere Shri Dhuria has confessed that the impugned Gold is smuggled from Bangladesh. It is not open for the department to draw conclusions from a general statement to particularlse about the impugned goods. As admittedly, the gold having no foreign markings, the onus would be on department to prove the smuggled nature of the same. The onus was not discharged. Moreover, the provisions of Section 1 38B of the Customs Act have not been complied with and therefore, the sanctity of the statement recorded under section 108 has been lost and consequently, it cannot be conclusively relied upon.
16. The expert valuer has not subjected the gold to any analysis as to find out the purity of the Gold, which is also one of the determining factors. It is not clear as to how he has reported the purity of the gold without testing. The original authority comes to the conclusion that the impugned gold is of foreign origin by alluding to a website which said that purity can be 995 onwards. Valuer is expected to arrive at the purity and value of the Gold in a scientifically established manner. If his services were required only to value the Gold, the same can be arrived on the basis of day-to-day Bullion rates announced by various exchanges. In addition to the above, fact remains that the Gold did not have any foreign markings; it has not been established that the same has been smuggled. The circumstances would certainly create reasons to believe that the impugned gold could be a smuggled one necessitating further probe. It does not constitute reasonable belief to seize the goods under Section 123 of the Customs Act, 1962. We find Tribunal in the case of Ram Nath Sah 2007 (219) ELT 546 (Tri – Kol) held that:-
I find that the seizure report does not indicate any foreign marking on the gold. The purity is also not of 999 generally found with the foreign origin gold. The seizure report also does not indicate the individual weight of the gold pieces. As such, this is a case where the benefit of doubt requires to be extended to the appellants as there is no conclusive proof that the gold is of foreign origin and smuggled.”
(Emphasis supplied)
36. The respondent has put forward the contention that the seized gold belongs to him and that he had procured it using his earning and the gold jewellery of other members of the family. His family members such as father, mother, wife and daughter have written letters to the department stating that the gold was procured by their jewellery and The department has not been able to adduce any evidence to disprove these contentions. The respondent contends that the gold was melted into crude bars by a goldsmith named Shri A. Kannan. Department has recorded statement of one G. Kannan. It is seen that the respondent pointed out to the department that they have inquired with the wrong person (G. Kannan) and the goldsmith to whom the respondent had entrusted the work of melting was a different person (A. Kannan). However, we are not able to see any further inquiry made in this regard even though the respondent informed this by writing much before issuance of Show Cause Notice.
37. The learned AR has adverted to various decisions Surjeet Singh Chabra Vs. Union of India – 1997 (89) ELT 646 (SC), Kanungo & Co. Collector of Customs, Calcutta – 1983 (13) ELT 1486 (SC), Union of India Vs. GTC Industries – 2003 (153) ELT 244 (SC) and Sanjay Shah Vs. Commissioner – 2011 (268) ELT A109 (SC) to argue that not allowing cross-examination will not be violation of principles of natural justice. These cases are distinguishable on facts. When the evidence relied by the department to prove that the gold is of foreign origin is the certificate issued by assayer, the rejection of request to cross-examine him without giving cogent reasons vitiates the proceedings.
38. The evidence put forward by the department to allege that the gold is smuggled from Sri Lanka is too flimsy to be accepted. The Commissioner (Appeals) in para 34 has held as under:-
“34. In view of the above findings, it is held that the essential things for confiscation namely proof of the gold having been smuggled into India was not proved. The investigation has assumed that the impugned gold was smuggled from Sri Lanka and no corroborative evidence was produced by the DRI. More so, it was certified by the Court that the gold bars do not have foreign markings. AA has proceeded on wrong premises that the impugned crude Gold bars are of foreign origin. There was no positive evidence except the statement of the appellant. The retracted statement has not been corroborated with findings/evidence/statements of others i.e. 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 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.
39. The appeal filed by the department is without merits. The appeal is dismissed.
(Pronounced in open court on 20.4.2023)
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