Case Law Details
Kogatam Sadik Basha Vs Commissioner of Central Tax Preventive – Vijayawada (CESTAT Hyderabad)
Confiscation of gold without corroborative evidence and merely on assumptions are liable to be set aside: CESTAT Hyderabad
CESTAT Hyderabad, led by the Single Bench member, held in the present case of Kogatam Sadik Basha Vs Commissioner of Customs ,(Preventive), Vijayawada that producing the corroborative evidence for allegation that gold is smuggled is crucial also the penalty imposed for such absolute confiscation under Section 112(b)(i) of the Customs Act,1962 was also examined.
Facts: The authorities intercepted Mr. Kaluva Hari Obulesu, the carrier with 2 bits of gold weighing 697 grams of the value Rs. 30,01,979/- at Renigunta Railway station and sought for the valid documents in proof of the gold bits. The carrier however could not produce the same hence the gold had been confiscated as absolute confiscation.
Thereafter, the carrier had stated that the gold in possession had been purchased from Mr. Hari Gopal of Chennai on behalf of his employer, Mr. Kogatam Sadik Basha in exchange for the cash and thereby the proceedings had been initiated. The allegation made by the department was that the gold had been re-melted and procured from unidentified sources and hence is smuggled in nature.
It was held that the gold carrying is permitted as per the repealed gold control act and though the invoice for such purchase of gold had not been submitted, the source of cash along with the address proof the seller had been provided during the proceedings.
Conclusion: It was held by the CESTAT that the Authorities have presumed facts that the gold procured by Mr. Kogatam Sadik Basha in collusion with the “unidentified persons” as there sustains no water due to the lack of corroborative evidence in this regard as, in spite of the proper evidences produced for existence of the seller, the Authorities lacked to prove their contention. Whereby the confiscated gold were bits and not the gold bars which had no foreign markings on them. Alongside , the carrier had not been intercepted in the customs area but it was a mere town seizure for which confiscation of gold is unjust and illegal. Hence, the above order is liable to be set aside and the consequential relief had been provided.
FULL TEXT OF THE ORDER OR THE JUDGEMENT
The issue in this appeal is whether the order of absolute confiscation of 2 bits of gold totally weighing 697 gms valued at Rs. 30,01,979/- under Section 111 (a), (b) and (d) of the Customs act is justified and further whether the penalty of Rs. 5 lakhs have been rightly imposed on the Appellant under Section 112 (b)(i) of the Customs Act.
2. The facts in brief are that the Appellant – Kogatam Sadik Basha is carrying on jewellery business mainly as goldsmith at Proddutur, YSR Kadapa District under the name and style of M/s Sadik Jewellers. Mr Kaluva Hari Obulesu, the employee of Appellant while carrying 2 gold bits totally weighing 697 gms was intercepted by the Customs Officers of Tirupathi while on train. He was found to be carrying gold. On being asked to produce documents regarding the legal posesseion of gold, he failed to produce any document. In his statement during punchnama proceedings Mr Kaluva Hari Obulesu stated that on 21.02.2020 he collected an amount of Rs. 30 lakhs from his employer – Sadik Jewellers and proceeded to Yerraguntla RS and purchased tickets to Chennai and back. On reaching Chennai he proceeded to shop of Mr Hari Gopal located at NSC Bose Road, behind Kakada Ram Prasad Sweet House, Sowcarpet, Chennai. He handed over amount of Rs. 30 lakhs to Mr Hari Gopal and in return received gold of 697 gms comprising in two bits. He had boarded the LTT Express for return. Further, stated that he does not have any invoice or valid document for the purchase of gold. The Customs Officer called the jewellery appraiser for verification who certified vide certificate dated 25.02.2022 that the two bits (one big and one small) are gold bits totally weighing 697 gms have purity 999 and determined the value at Rs. 30,01,979/- (at the rate of Rs. 4307 per gram).
3. During the course of investigation, statement of Mr Kaluva Hari Obulesu was recorded on 26.02.2020 wherein he interalia stated that he was working with M/s Sadik Jewellers on monthly salary of Rs. 1,000/- per month. For each trip for purchasing gold, his employer gives him Rs. 1,400/-towards the expenditure. He is doing the work of carrying cash and bringing gold for last some months, as and when Mr Sadik Basha asks him. Further stated that on an average, he visited Chennai 3 times in a month for purchasing gold. He further stated that they regularly purchase gold from Mr Hari Gopal at Chennai, but he never issues any invoice/bill. He was always required to carry cash and hand over the same to Mr Hari Gopal at Chennai and bring gold from him. On the big gold bit, he has seen the marking engraved being ‘999’. Further stated that he knows that carrying gold and cash should not be done without proper documents.
4. Statement of appellant – Mr K S Basha was recorded who interalia stated that he had handed over cash of Rs. 30 lakhs to Mr Kaluva Hari Obulesu for purchase of gold from Mr Hari Gopal at Chennai. He also stated that he have earlier also on some occasions purchased gold from Mr Hari Gopal. He had initially asked Mr Hari Gopal to give him Bill for the purchases made but, he denied. He has no option but to purchase gold in cash to compete in the market. Out of his past savings from his goldsmith work and with some borrowings he started procuring re-melted gold since November 2019 and thereafter sell the same after conversion in jewellery.
5. It appeared to Revenue that the Appellant is dealing in smuggled gold as his employee was found to be carrying 697 gms of gold and they could not produce any documents regarding the possession of gold, Show Cause Notice dated 22.09.2020 was issued proposing to confiscate the 2 bits of gold (re-melted and transformed with spurious marking) weighing 697 gms totally valued at Rs. 30,01,979/- seized under panchnama dated 25.02.2020 proposing confiscation under Section 111 (a), (b) and (d) of the Customs Act with further proposal to confiscate the packing material and further penalty was also proposed under Section 112 (a) and (b) & under Section 117 of the Customs Act. Penalty was also proposed on this appellant – Mr K. S. Basha under Section 112 (a) and (b) and Section 117 of the Customs Act. The SCN was adjudicated on contest and the seized gold as aforementioned was confiscated absolutely along with the packing material which was seized on 25.02.2020 and further penalty of Rs. 5 lakhs under Section 112 (a) and (b) was imposed both on this Appellant and also his employee Mr Kaluva Hari Obulesu.
6. Being aggrieved, the Appellant preferred appeal before the Commissioner (Appeals) who vide impugned Order-in-Appeal was pleased to dismiss the appeal on merits confirming the Order-in-Original passed by the Additional Commissioner of Customs.
7. Being aggrieved, the Appellant is in appeal before this Tribunal.
8. The Learned Counsel for the Appellant inter-alia makes the following submissions:
That both the Appellant and his employee at the very initial stage of enquiry/investigation have stated that the gold in question have been purchased at Chennai from Mr Hari Gopal, who has a small jewellery shop on the 1st floor in the building adjacent to Kakada Ram Prasad Sweets and Chats, NSC Bose Road, Sowcarpet, Chennai by making payment in cash. This appellant had immediately appeared before the Customs officers on the very next day of seizure, on 26.02.2020 and had stated that he is a goldsmith by occupation and he is dealing in gold since 2014. He had started his own jewellery shop since November 2019. He has been purchasing gold from Mr Hari Gopal of Chennai by making payment in cash. He further stated that the said seller – Mr Hari Gopal denied to issue any bill/tax invoice. He also furnished the source of funds of Rs. 30 lakhs for purchase of gold in question.
9. It is further urged that the allegations in the show cause notice are vague and based on assumptions and presumptions. Admittedly, 2 gold bits in question are of irregular shape and size and are not standard gold bars. Admittedly, there is no marking of any foreign refinery on the said gold bits. Further, admittedly, it is a matter of town seizure. It is further urged that there is no restriction in dealing in pure gold after repeal of the Gold Control Act. It is further stated that the whole proceedings are vitiated as there is no indication based on the 2 gold bits or on the statement of the person carrying, that the gold in question is of smuggled in nature. The Revenue had mis-led itself by imagination that certain persons in Chennai are engaged in the activity of illegal import of gold in violation of the provisions of the Customs Act 1962 without payment of customs duty and thereafter such persons intentionally remove the foreign markings by melting and put a mark to believe that gold is not of foreign origin. Such gold is sold at cheaper rates in the market and people like the appellant are purchasing the same and thereafter selling the same in order to make profits. It is further urged that the appellant due to the COVID pandemic during the relevant time could not make proper representation and or obtained confirmation from the seller of the gold Mr Hari Gopal of Chennai. In spite of proper address and details given of Mr Hari Gopal, Revenue did not make proper effort to contact him and vaguely stated alleging that the Revenue in the course of enquiry could not find Mr Hari Gopal at the address stated by the appellant. In support of his contentions, Learned Counsel states that the details of Mr Hari Gopal engaged in dealing in gold are also available on ‘Just Dial’ online Directory giving his address as G. Hari Gopal Jewellers at NSC Bose Road, Sowcarpet, Chennai-I. Screen shot from the website of Just Dial Business Directory have been also annexed in the appeal paper book as proof of existence of the said seller. The appellant have also filed photograph of the building where the said jewellery shop of Mr Hari Gopal is located beside Kakada Ram Prasad Sweets and Chats. It is further urged that the allegation of Revenue that the appellant is dealing in smuggled gold to make higher profits is also without any basis as the appellant have purchased the gold in question 679 gms for Rs. 30 lakhs and the Authorised Jewellery valuer engaged by Revenue have valued the gold in question at Rs. 30,01,979/-. Thus there is a meagre difference of less than Rs. 2,000/-. It is further urged that Revenue have erred in holding that the said Mr Hari Gopal – seller is a ficticious person. Revenue has not issued a single summon or a letter of enquiry to the said person Mr Hari Gopal.
10. It is further urged that in absence of reasonable belief of the gold in question being of smuggled in nature, the whole proceedings including seizure of the gold from the employee of the appellant is ultravires the provisions of Customs Act. No reason have been recorded by Revenue that the gold in question is with reference to some evidence, appears to be of smuggled in nature. Reliance is placed on the ruling of this Tribunal in Suresh Chandra Garg Vs Principal Commissioner, CGST (C/53680/2023, CESTAT Principle Bench). It is further urged that Revenue mis-directed itself in alleging that there is violation of the Customs Act read with the Baggage Rules read with Foreign Trade Policy. Admittedly, the said employee of the appellant have not been intercepted in any customs area, nor have arrived from any foreign country on the said date. The explanation given by the appellant and his employee that they had travelled from home town Proddutur (Renigunta RS) to Chennai and was returning after purchasing gold when he was intercepted, which explanation has not been found to be untrue or wrong. In the facts and circumstances, the provisions of the Customs Act read with rules there under are not attracted. Admittedly, 2 gold bits seized and confiscated have no foreign markings, marked with the marking – 999. It is further urged that the appellant have never said that the gold in question is re-melted gold out of smuggled gold, and the same is only imagination on the part of Revenue. It is further urged that the testing of the gold in question by the said approved valuer – Mr Gowri Shankar has been done by touch stone method, which is not the scientific method for testing purity. The approved test methods are XRF lab test or Fire assay method. Reliance is placed on the ruling of Kerala High Court in the case of Assistant Collector Vs Ismail where it have been held that Touch stone method is not a fully proved method to establish the purity of gold. Learned Counsel also relies on the following rulings:
i) Madhukar Sonaba Bhagat Vs Commissioner of Customs (Prev.), West Bengal reported as [2019 (368) ELT 990 (Tri-Kolkata)]
ii) Commissioner of Customs, Chennai-III Vs Shri Mohammed Ali Jinnah reported as [2023-TIOL-418-CESTAT-MAD]
iii) Shanti Lal Mehta [1983 (14) ELT 1715 (SC)]
iv) Commissioner of Customs, Excise & Service Tax, Siliguri Vs Nand Kishore Somani reported in [2016 (337) ELT 10 (CAL-HC)]
v) Ram Naresh Chaurasiya Vs Commissioner of Customs (Prev), Patna reported in [2019 (365) ELT 940 (Tri-Lolkata)]
Accordingly, Learned Counsel prays for allowing the appeal with consequential reliefs.
11. Opposing the appeal, Learned AR for Revenue Mr Pradeep Saxena and Mr Rangadham opposes the appeal and rely on the impugned Order-in-Appeal. It is further stated that admittedly appellant could not produce any valid document in support of their claim of purchase from Mr Hari Gopal of Chennai. In this view of the matter, the Revenue have rightly assumed the same to be of smuggled in nature. Reliance is placed on the rulings in the case of Om Prakash Khatri Vs Commissioner [2019 (11) TMI 796 – SC] and also some other rulings.
12. Having considered the rival contentions, I find that admittedly, the seizure of the 2 gold bits is a town seizure at Renigunta Railway Station when the employee of the appellant was on-board the train. Further, admittedly the 2 gold bits totally weighing 697 gms are of irregular shape and size, having no foreign markings. Further, the person who was in possession at the relevant time – Mr Kaluva Hari Obulesu had stated that he had purchased the said gold at Chennai and was carrying it to Proddutur for his employer/appellant. Under these facts, I find that there was no basis on which the Customs Officer could have formed an opinion that the gold is of foreign origin and/or smuggled in nature.
13. Further, I find that both the appellant and his employee Mr Kaluva Hari Obulesu have stated that the gold have been purchased at Chennai from Mr Hari Gopal against payment made in cash. They also gave the proper address and location of Mr Hari Gopal at Chennai. The appellant also explained the source of money for the purchase of gold. I find that Revenue have rejected this contention on the basis of report received from Chennai Customs, that when their person went to enquire from Mr Hari Gopal, he could not locate him. I find that appellant have led sufficient evidence as regards existence of Mr Hari Gopal at the said address by bringing on record his name and address appearing in the Just Dial Business Directory and have also filed a photograph of the said building where the shop of Mr Hari Gopal – ‘G. Hari Gopal Jewellers’ is located at NSC Bose Road, Sowcarpet, Chennai-I. I further find that the said report received vide letter dated 17.08.2020 from the office of Commissioner of Customs is not a RUD and hence no reliance can be placed on the same. Accordingly, I hold that the appellant have discharged the onus under Section 123 of the Customs Act.
14. I further find that all the allegations made by Revenue are by way of assumptions and presumptions which have no legs to stand.
15. In view of my aforementioned findings and observations, I allow the appeal and set aside the impugned order. The appellant shall be entitled to consequential benefit including return of the confiscated gold and if the gold has already been disposed of by the Department, shall be entitled to receive the sale proceeds with interest as per rules.
(Order pronounced in the open court on 02.04.2024)
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