Confiscation of gold merely based on retracted statements unjustified

Shri Balwant Raj Soni Vs Commissioner of Customs (Preventive) (CESTAT Kolkata)

CESTAT Kolkata held that gold bars/ pieces cannot be proved to be smuggled merely relying on the retracted statements without any other corroborative evidence. Accordingly, confiscation unjustified.

Facts- On 10.01.2020 the officers of DRI Patna along with officers of Gaya Customs intercepted two passengers namely Shri Rajesh Kumar Yadav(Noticee No.1) and Shri Umanath (Noticee NO.2) travelling by Train No.13009 (Howrah-DDN Doon Express) at 4.55 hrs. On examination of the said two passengers and their subsequent verification resulted in seizure of gold bars/pieces weighing 3999.590 gms. valued Rs.1,67,98,278/-. The said gold bars/pieces were seized by the DRI officers on the reasonable belief that they were smuggled into India from Bangladesh without any legal documents.

Post inquiry, a demand cum show cause notice was issued by DRI. The said notice was adjudicated by the Adjudicating Authority confiscating the gold u/s 111 of the Customs Act, 1962. Commissioner (A) upheld the order passed by the Adjudicating Authority. Accordingly, being aggrieved, present appeal is filed by the assessee.

Conclusion- We find that the Impugned Order mainly relied upon the statements of the Noticees 1 to 5 to establish the foreign origin nature of the gold. Other than the statements, there is no other evidence available on record to show that the gold were smuggled into the country from Bangladesh. It is incorrect to rely only on the statements of the co-accused without any corroboration, to prove the smuggled nature of the gold. It is a settled law that the statement of the co-accused cannot be relied without any independent corroboration.

In the case of Commissioner of Customs (Preventive), Lucknow vs Shakil Ahmad Khan, it has been held that confiscation based on retracted statements not sustainable.

Held that the gold bars/pieces cannot be confiscated based on the retracted statements alone.

FULL TEXT OF THE CESTAT KOLKATA ORDER

On 10.01.2020 the officers of DRI Patna along with officers of Gaya Customs intercepted two passengers namely Shri Rajesh Kumar Yadav(Noticee No.1) and Shri Umanath (Noticee NO.2) travelling by Train No.13009 (Howrah-DDN Doon Express) at 4.55 hrs. On examination of the said two passengers and their subsequent verification resulted in seizure of gold bars/pieces weighing 3999.590 gms. valued Rs.1,67,98,278/-. The said gold bars/pieces were seized by the DRI officers on the reasonable belief that they were smuggled into India from Bangladesh without any legal documents.

2. Samples of the gold bars/pieces were drawn and sent to CRCL, Kolkata for testing. The test report received from CRCL on 27.01.2020 revealed the purity of the gold as under:-

Sl.No.	Name of Sample	Lab No. & Date	Purity
1	SAMPLE-1	3605/SZD (G)-467 dtd15.01.2020	99.6%
2	SAMPLE-2	3606/SZD (G)-468 dtd15.01.2020	99.5%
3	SAMPLE-3	3607/SZD (G)-469 dtd.15.01.2020	99.6%
4	SAMPLE-4	3608/SZD (G)-470 dtd.15.01.2020	99.8%
5	SAMPLE-5	3609/SZD (G)-471 dtd.15.01.2020	99.5%

3. Statements were recorded from Shri Rajesh Kumar Yadav and Shri Umanath on 10.01.2020 wherein they stated that they have been working in a jewellery shop at Jaunpur, U.P. namely M/s. Gandhi & Sons whose proprietor is Shri Manoj Kr. Seth. The Mobile Numbers of Shri Rajesh Kumar Yadav are 9919553261 and 9369919332. They stated that they have received the gold from one Shri Dilip Singh, staff of Shri Anuragji of Kolkata and the gold pieces were carried by them for being handed over to Shri Manoj Kumar Seth and his son Shri Balwant Raj Soni. They have stated that the phone number of Shri Manoj Kumar Seth is 7376027653. They were coming from Howrah to Jaunpur along with the smuggled foreign gold and DRI officers intercepted them on their way.

4. The statement of Shri Anurag Jalan was recorded on 22.01.2020 wherein he admitted that his employee Shri Dilip Singh handed over the said gold bars/pieces to those carriers on 09.01.2020 afternoon for handing it over to Shri Manoj Kumar Seth and his son Shri Balwant Raj Soni. He does not have the exact address of Shri Dilip Singh who is from Aurangabad, Bihar and his phone numbers are 8017979210 and 8481227656. Shri Dilip Singh used to receive smuggled gold with foreign markings and reshape it after melting and hand it over to the representatives of buyers as per his instructions. After interception of the Noticee No.1 & 2 at Gaya Railway Station on 10/01/2020, he has sent Shri Dilip Singh to his native place.

5. Shri Manoj Kr. Seth vide his letter dated 21.01.2020 claimed the ownership of the seized smuggled gold. He stated that the seized gold belonged to M/s. Gandhi & Sons, which were legitimately purchased from one M/s. Chandan Enterprises of Delhi vide invoice No.3 & 5 dated 01.01.2020 and 03.01.2020 respectively. The DRI officers observed that the invoice mentioned by Shri Manoj Kr. Seth did not match with the purchase invoice and date shown by him in his letter dated 21.01.2020. Also no details of payment made to M/s. Chandan Enterprises, Delhi has been enclosed. Accordingly, the request for provisional release of the seized gold by Shri Manoj Kr. Seth was not considered.

6. A demand cum show cause notice dated 05.03.2020 was issued by DRI to the following 5 Noticees :-

1.	Shri Rajesh Kumar Yadav	Noticee No.1
2.	Shri Umanath	Noticee No.2
3.	Shri Manoj Kumar Seth	Noticee No.3
4.	Shri Balwant Raj Soni	Noticee NO.4
5.	Shri Anurag Jalan	Noticee No.5

7. The said notice was adjudicated by the Adjudicating authority confiscating the gold under section 111 of the Customs Act, 1962. The order for absolute confiscation issued by the Adjudicating authority is as below:-

1. I order for absolute confiscation of:

(a) The consignment of gold comprising of 3 complete gold bars, 2 cut gold bars and 4 small pieces of gold, total weighing 3999.590 grams and valued Rs.1,67,98,278/- (One Crore Sixty-Seven Lakh Ninety-Eight Thousand Two Hundred Seventy-Eight) only, recovered from possession of Shri Rajesh Kumar Yadav, Noticee No.1 and Shri Umanath, Noticee No.2 at Gaya Railway Station and seized on 10.01.2020, under Clauses (b), (d) and (p) of the Customs Act, 1962;

(b) Seized pieces of newspaper, rubber, cloth belt [Kamarbandh’ and Gamchha used for concealing the smuggled consignment of gold mentioned under preceding Clause, under Section 119 of the Customs Act, 1962;

2. I impose a penalty of Rs.10,00,000/- (Rupees Ten Lakh) only under Section 112(a) and 112(b) of the Customs Act, 1962 on Shri Rajesh Kumar Yadav, Noticee No.1;

3. I impose a penalty of Rs.10,00,000/- (Rupees Ten Lakh) only under Section 112(a) and 112(b) of the Customs Act, 1962 on Shri Umanath, Noticee No.2;

4. I impose a penalty of Rs.50,00,000/- (Rupees Fifty Lakh) only under Section 112(a) and 112(b) of the Customs Act, 1962 on Shri Manoj Kumar Seth, Noticee No.3;

5. I impose a penalty of Rs.50,00,000/- (Rupees Fifty Lakh) only under section 114AA of the Customs Act, 1962 on Shri Manoj Kumar Seth, Noticee No.3;

6. I impose a penalty of Rs.10,00,000/- (Rupees TenLakh)) only under Section 112(a) and 112(b) of the Customs Act, 1962 on Shri Balwant Raj Soni, Noticee No.4;

7. I impose a penalty of Rs.10,00,000/- (Rupees Ten Lakh) only under Section 112(a) and 112(b) of the Customs Act, 1962 on Shri Anurag Jalan, Noticee No.5:

7. The Noticees filed Appeal before the Commissioner(Appeals), who upheld the order passed by the Adjudicating authority vide Order-in-Appeal No.11-13/CUS/PAT/Appeal/2022-23 dated 29.04.2022. The App Noticees No 3, 4 and 5 ( Herein after referred as Appellants) are before us against this impugned order passed by the Commissioner(Appeals).

8. In their grounds of appeal the Appellants have raised the following points:-

(1) The g`Manoj Kumar Seth, owner of M/s. Gandhi & Sons claimed the ownership of the gold vide his letter dated 21.01.2020.

(5) The DRI officers claimed that the said smuggled gold was handed over by one Shri Dilip Singh to Shri Rajesh Kumar yadav. However, no statement was recorded from Shri Dilip Singh.

(6) The Department contended that as per Section 123 of the Customs Act, 1962, the burden of proving that the gold was not smuggled is on the person who claims the ownership of the gold. In this case the gold is of domestic origin and hence the provisions of Section 123 of the Customs Act, 1962 is not applicable.

(7) Shri Rajesh Kr.Yadav and Shri Umanath have retracted their statements and the statement of a co-accused cannot be relied upon to implicate the Appellants in this case. The retracted statement is a very weak evidence and hence it cannot be relied upon.

(8)The penalties imposed on the Appellants under Section 112(a) and(b) and 114AA of the Customs Act,1962 are not sustainable as they have no role in the alleged seizure of the smuggled gold at Gaya Railway station.

10. The Appellants relied upon the following case laws :-

• Hon’ble Bombay High Court in the case of State of Maharashtra v. Prithviraj Pokhraj Jain reported in 2000 (126) ELT 180 (Bom.)
• CESTAT, Kolkata in the case of Nitya Gopal Biswas v. Commr. Of Customs (Prev.), Kolkata reported in 2016 (344) ELT 209 (Tri.-Kolkata)
• CESTAT, Kolkata in the case of Nand Kishore Sumani v. Comm. Of Cus., C.EX. & ST, Siliguri, reported in 2016 (333) ELT 448 (Tri.-Kolkata)
• Hon’ble Calcutta High Court in the case of Comm. Of Cus., Ex. & ST., Siliguri, reported in 2016 (337) ELT 10 (Cal.)
• CESTAT, Kolkata in the case of Madhukar Sonaba Bhagat v. Commr. Of Customs (Prev.), West Bengal, reported in 2019 (368) ELT 990 (Tri.-Kolkata).
• CESTAT, Kolkata in the case of Ram Naresh Chaurasiya v. Comm. Of Customs (Prev.), Patna, reported in 2019 (365) ELT 940 (Tri.-Kolkata)
• CESTAT, Kolkata in the case of Commr. Of Customs (Preventive), Kolkata v. Ashok Kumar Agarwal, reported in 2017 (348) ELT 555 (Tri.-Kolkata)
• CESTAT, Kolkata in the case of Goutam Karmokar Vs. Commr. Of Cus. (Prev.), West Bengal, reported in 2010 (261) ELT 812 (Tri.-Kolkata)
• Hon’ble Calcutta High Court in the case of Rajesh Pawar v. Union of India, reported in 2014 (309) ELT 600 (Cal.)

11. The Ld Departmental Representative reiterated the findings of the Adjudicating Authority in the Order-in-Original and relied upon the decisions cited in the Order-in-Original. He stated that under section 123 of the Customs Act, 1962, it is the responsibility of the person who claims ownership of the gold to prove that they were not smuggled.

12. Heard both sides and perused the appeal records.

13. The questions to be answered in this case are:

(i) Whether evidences available on record prove that the gold bars/pieces were smuggled into India from Bangladesh, without any legal documents?

(ii) Under the facts and circumstances of this case, whether the benefit of presumption under section 123 of Customs Act, 1962 goes in favour of Revenue?

(iii) Whether the retracted statements of the co-accused can be relied upon to establish the guilt of the Appellants, when the procedure prescribed under section 138B of the Customs Act was not followed?

(iv) Whether penalties imposed on the Appellants under section 112(a) and(b) and 114 AA of the Customs Act, 1962 are sustainable in this case?

14. We now proceed to answer the above questions.

15. The Appellant stated that the gold pieces/bars were seized on the reasonable belief that they were smuggled into India from Bangladesh. The Adjudicating authority has relied upon the decision of the Hon’ble Supreme Court in the case of Gopal Das Uddhav Das Ahuja v. UOI reported in 2004 (176) ELT 3 (SC) for effecting the seizure on the ground of ‘reasonable belief’. However, the said case is distinguishable on the ground, firstly, that the subjected case was during the breathing period of Gold Control Act, wherein possession of primary gold even unmarked had a thrust of burden upon the Assessee. When the Gold Control Act was repealed without a saving clause, the said decision under the Gold Control Act has no relevancy under the Customs Act.Currently under the Customs Law, the burden has been thrust upon the Department and the presumption under Section 123 of the Customs Act has no application in the present case, as the gold seized is of Indian origin.

16. The Appellants have relied upon the decision of the Hon’ble Supreme Court in the case of Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar reported in (2015) 11 SCC 628, which has explained the meaning of the word ‘reason to believe’ as under:-

“reason to believe” by opining it to be not the subjective satisfaction of the officer concerned, for “such power given to the officer concerned is not an arbitrary power and has to be exercised in accordance with their strains imposed by law” and that such belief must be that of an honest and reasonable person based upon reasonable grounds. Further, if the authority would be acting without jurisdiction or there is no existence of any material or conditions leading to the belief, it would be open for the Court to examine the same, though sufficiency of the reasons for the belief cannot be investigated.

In view of the above, the Appellants stated that to form a ‘reasonable belief’ that the goods are smuggled from Bangladesh, there must be irrefutable evidence to prove that allegation. In the present case there is no such evidence available to prove that the goods were of foreign origin and smuggled into India from Bangladesh.

17. The Appellants also relied upon the following decisions in support of their argument that the ‘reasonable belief’ must be supported with other independent corroborative evidences.

(i) In Assistant Collector of Customs v. Charan Das Malhotra, 1971 (1) SCC 697, Shelat J., has held reasonable believe to be relevant and not extraneous.

(ii) In Kewal Krishan V. State of Punjab, AIR 1967 SC 737, Kapur J., while dealing with identical provisions had clarified that confiscatory power based on ‘reason to believe’ has to be exercised only on the satisfaction based on certain objective material.

18. The Appellants relied upon judgment of the Hon’ble Supreme Court in the case of Sita Ram Sao Vs State of Jharkhand reported in (2007) 12 SCC 630, wherein the Hon’ble Apex Court defined the word ‘Corroboration’ as under:

“34. The word ‘corroboration’ means not mere evidence tending to confirm other evidence. In DPP Vs Hester (1972) 3 AIR ER 10.16, Lord Morris said: “The purpose of corroboration is not to give validity or credence to evidence which is deficient or suspect or incredible but only to confirm and support that which as evidence is sufficient and satisfactory and credible: and corroborative evidence will only fill its role if it is completely credible…..”

19. The Appellants also relied upon the decision of the Hon’ble Delhi High Court in the case of Shanti Lal Mehta Vs UOI and Others reported in 1983(14)ELT1715 (DEL), which elaborately dealt with Town seizures. The relevant portion of the Order are reproduced below:

19.1 The Appellants stated that ‘ Reasonable belief’ must be at the time when the goods are seized and not subsequent to seizure.

“54. The other question which was argued before me was that the customs officer did not act on any reasonable belief when he searched the petitioner’s premises on 15-12-1967 and seized the goods. Section 110 opens with the words “if the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods”. What is the meaning of “reasonable belief”? Did the officer entertain reasonable belief in the facts and the circumstances of this case? This is the other question to be decided. The Supreme Court has said that reasonable belief is a pre-requisite condition of the power of seizure that the statute confers on the officer. (See Collector of Customs v. Sampathu Chetty, AIR 1962 S.C. 316). The preliminary requirement of Section 110 is that the officer seizing should entertain a reasonable belief that the goods seized were smuggled.

55. Reasonable belief as required by Section 110 refers to the point of time when the goods in question are seized and not to a stage subsequent to the act of seizure. (M.G. Abrol v. Amichand, AIR 1961 Bom. 227). The condition precedent that there was such a reasonable belief anterior to the seizure must exist before the presumption under Section 123 can be invoked.”

19.2 Smuggled goods — Reasonable belief cannot be based on presumption.

“58. The second reason for entertaining a reasonable belief is that the seized goods were not accounted for by the petitioner on 15-2-1967 when the officer seized the goods from his possession. The seized goods consisted of 20 items of ornaments and diamonds. Out of these six items were released before the show cause notice was issued. One item was released at the adjudication stage. Six items were released by the Board on appeal. Only 7 items have been confiscated. These consist of 2 packets of diamonds and 5 ornaments. The petitioner claimed that they belonged to the queen mother of Nepal. A letter was written to queen mother. On her behalf a reply was received that she had given certain ornaments to the petitioner for polishing, remaking etc., though not for sale. But this was done later on. The letter was written on 3-7-1967. The reply was received on 24-7-1967. But at the time of seizure all that the officer had before him were 2 packets of diamonds and 5 ornaments. Neither the diamonds nor the ornaments had any foreign markings or label to suggest to the customs that these were smuggled goods. In the search list these two packets of diamonds are described as “appearing to be diamonds”. This shows that the customs officer did not believe them to be diamonds on any reasonable ground. The ornaments had no foreign label or making. They were ordinary ornaments as are worn in this country. There was nothing peculiar about them. Nothing extraordinary. On this material could any reasonable man entertain a belief that these were smuggled goods

59. The belief must be such as any reasonable man in the circumstances of the case would entertain about the existence or non-existence of a thing. Simply because the goods were not accounted for at that time does not necessarily mean that the goods were smuggled goods. Unaccounted goods may be stolen goods. Reasonable belief could be entertained either on the basis of some external indicia or on the basis of some internal information that the goods had been illegally imported into India from Nepal or some other foreign country either without payment of duty or in contravention of any restriction or prohibition imposed by statute. There was nothing to suggest the foreign origin of the goods. There was nothing to suggest the illegal importation of the goods into the country.

60. The goods must be smuggled goods. The word `smuggled’ means that the goods were of foreign origin and they had been imported from abroad. Only then does the presumption under Section 123 arise. The goods themselves did not suggest that the petitioner was an old smuggler or a dealer in smuggled goods. If there was such information with the customs, they ought to have disclosed it. The goods themselves did not suggest any illicit importation. Nor was there any inscription on the goods which could be the basis of the reasonable belief that the goods were of foreign origin. There was nothing in the appearance of the goods to suggest that they had been newly manufactured and brought into this country very recently from another country. In a word there was nothing absolutely from which inferences about their origin or recent import could arise. It was not a case where large quantity of gold with foreign markings was found hidden in the trousers of the accused as happened in Hukma v. State of Rajasthan, AIR 1965 S.C. 476.

61. In fact there is a finding by the Board in favour of the petitioner supporting his contention that there could be no reasonable belief in the mind of the officer when he seized the goods. On the penalty of Rs. 25,000/- imposed on the petitioner the Board observed : “there is no definite evidence to show that the appellant knew or had reason to believe that those items were smuggled. In the absence of this evidence the penalty imposed is not justified. The Board accordingly remits the personal penalty in full”. If the petitioner did not know that the goods were smuggled, how could the customs officer reasonably believe that the goods were smuggled. The petitioner knew better.

62. The customs officer merely thought that as the goods had not been accounted for these are smuggled goods. At the time of seizure what happened was this. The petitioner was present at the shop. He told the customs officer that they were duly entered in his account books but his accountant had gone to the income tax officer. The officer did not wait for the man to arrive to explain the entries to him. He seized the goods and took them away. This was not a case of reasonable belief. It was a case of suspicion. A case of speculation. A case of guess work.

63. As a result Section 123 did not apply to the case. There was no reasonable belief. No presumption could be raised under Section 123. There was no obligation on the petitioner to prove that the goods were not smuggled. The burden of proof was wrongly cast on him. The entire inquiry was vitiated.”

20. From the above discussion, we observe that the ‘reasonable belief’ on which the DRI officers presumed that the gold bars/pieces were of smuggled nature is not supported by any corroborative evidence. There is no document available on record to establish that gold bars/pieces were smuggled into India from Bangladesh. The impugned order has concluded that the said gold bars/pieces were smuggled into India only on the basis of assumptions and presumptions without any concrete evidence to substantiate this claim. Hence, we hold that material evidence available on record does not establish that the gold bars/pieces were smuggled into India without any valid documents. Accordingly, answer to question (i) above in para 13 above is negative.

21. The next question to be answered is whether the burden of proving that the goods are not smuggled rest with the Appellants. The Appellants No 1 and 2, Partners of Gandhi& Sons have claimed that they have purchased the gold from M/s Chandan Enterprises Delhi under the cover of Invoices 3 and 5 dated 01/01/20 and 03/01/20 respectively. They contended that they have made part payment for the gold purchased from M/s Chandan Enterprises and the balance could not be paid as the gold pieces were seized by DRI. Since gold is not of foreign origin, section 123 is not applicable in this case as the gold bars/pieces were purchased domestically.

22. Section 123 of Customs Act 1962 puts the burden of proving that the gold is not smuggled one, on the person who claims ownership of the gold. For the sake of easy reference, the said section 123 is reproduced below:

22.1 SECTION 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 form 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, and manufactures thereof, watches, and any other class of goods which the Central Government may be notification in the Official Gazette specify

22.2 We find that Section 123 applies inter-alia to gold/silver bullion seized on the reasonable belief that they are smuggled goods . The burden of proving that they are not smuggled goods shall be on the person, who claims to be the owner of the goods so seized or from whose possession the goods are seized. The contention of the Department is that in the instant case, the onus of proving that the gold bars/pieces were not of smuggled in nature, lies on the Noticees from whose possession the impugned goods were seized. The Revenue contended that both Rajesh Kumar Yadav and Umanath did not produce any document for their lawful possession of the recovered gold bars/pieces at the time of seizure in Gaya Railway Station on 10/01/20.

22.3 The contention of the Appellants is that the gold bar/pieces were not of foreign origin. Section 123 of Customs Act is applicable only to foreign marked gold. Also the gold bars/pieces sized is not of 99.99 purity. Since, there is no foreign mark available on the gold bars/pieces seized from the Appellants, the provisions of section 123 is not applicable in this case.

22.4 The Appellants relied upon many decisions to support their case. In the case of Sanjeeb Kumar @ Pappu Kumar vs Jt CC, Lucknow, 2019 (369) ELT 1177 ( Tri-All), it has been held as under:

“3. The Learned Counsel for the appellants submits that in terms of Section 123 of Customs Act, 1962 the onus is on the appellant to prove that the gold in question is not smuggled one, although appellants have failed to prove that gold is not smuggled one but the allegation of the Revenue that the gold is restricted item being third country origin has not been proved by the Revenue and no evidence has been brought on record by the Revenue that how the gold is in question has come to India through Nepal. In that circumstances, gold cannot be absolutely confiscated in the facts and circumstances of the case, therefore, gold is required to be released to the appellants on payment of redemption fine and penalty. He also relied on the decision of the Hon’ble Bombay High Court in the case of State of Maharashtra v. Prithviraj Pokhraj Jain reported as 2000 (126) E.L.T. 180 (Bom.).

4. On the other hand Learned AR appearing on behalf of the Revenue submits that in this case Shri Umesh Kumar in his statement has admitted that gold is being smuggled from Nepal by Shri Sanjeeb Kumar, therefore, Revenue has established that gold in question is smuggled one and is of third country origin. The appellants have failed to prove that the gold in question is not smuggled one. In that circumstances, the Revenue has rightly absolute confiscated the Gold in question.

5. Heard the parties.

6. Considering the submissions made by both the sides, we find that the appellants have failed to prove the source of procurement of gold, therefore, we hold that gold is smuggled one but on the same time, Revenue is also failed to prove that gold is of third country origin and smuggled through Nepal. In fact, the Revenue has not adduced any evidence to that effect, whereas on the other side, Shri Sanjeeb Kumar, himself has categorically stated that he is not dealing with the purchase and sale of the gold. Therefore, the Revenue has failed to prove that the gold in question is of third country origin and have been imported/smuggled through Nepal. In that circumstances, the gold in question cannot be held as restricted goods and they can be released on payment of redemption fine and penalty as the goods are smuggled in nature. We also gone through the case law relied upon by the Learned Counsel for the appellants in the case of Prithviraj Pokhraj Jain (supra) wherein in Para 19 which is extracted below wherein the Hon’ble High Court observed as under –

“19. The burden was, therefore, on the prosecution to prove that the goods were smuggled. For this the prosecution relied upon the evidence of Hebbar who stated that he believed the goods to be smuggled, because watches and watch straps were of foreign origin, the import of which was heavily restricted and prohibited and they were found in huge quantity. The foreign origin of the watches is tried to be shown from the foreign markings on the watches. The question whether the foreign markings of goods can be treated as admissible in evidence was considered by Naik J. in Criminal Appeal No. 3 of 1966, decided on 22nd December, 1966. Among the property involved in that case were some gold slabs. The slabs bore the marking “Johnson Mathey 9990 London”. Naik J. observed in his judgment that the markings do not speak for themselves and that evidence would be hearsay evidence. There was nothing to indicate that the markings were really done by Johnson Mathey in London. No presumption can arise in regard to the markings, unless there is evidence to show that those markings were made by a particular company in the ordinary course of business. A Division Bench of the Gujarat High Court has also taken a similar view in Asstt. Collector of Customs, Baroda v. M. Ibrahim Pirjada, 1970 Criminal Law Journal, 1305. There, the Gujarat High Court has held that mere markings cannot be taken as proof of the fact of foreign origin of the goods as such markings and labels would be hearsay evidence. With respect, I agree with the above view.”

Relying on the said decision, without evidence, the benefit of presumption under Section 123 of the Customs Act, 1962 is not available to the Revenue.”

22.5 The Appellants also relied upon the decision in the case of Balanagu Naga Venkata Raghavendra vs CC Vijayawada 2021 (378) ELT 493 (Tri-Hyd), where in it has been held that the burden under section 123 will not shift on the Appellants when the seizure of gold without foreign markings are seized from city. The relevant portion of the order is reproduced below.

“14. The confiscation of the gold by the adjudicating authority was set aside by the Tribunal and on appeal by the Revenue the Hon’ble High Court of Kerala, in the above factual matrix, has overturned the decision of the Tribunal. Therefore, it was not merely the purity of the gold in question but also the statements made during the investigation which formed the basis of the reasonable belief of the officers. In the present case, none of the statements recorded by the Department admit to or even suggest that the gold was smuggled gold. It has also not been brought out in the show cause notice that the purity of the seized gold is such that it could only have been of foreign origin. It is true that the conduct of the appellants was suspicious inasmuch as the gold pieces were being carried in newspapers and a letter was found written to one Shri Vijay in Trissur for requesting the gold to be handed over to the bearer of the letter. It is also confirmed by the DCM, Railways that the appellants had travelled from Trissur to Vijayawada by train. However, we note that Trissur is not even a port in itself. The gold was apparently collected from one Shri Vijay in Trissur. There were also several contradictions between different statements as recorded in para 16 of the show cause notice. All these would show that Shri Kanaka Ratnam (Appellant in Appeal No. 30496 of 2017) wrote a letter to Shri Vijay of Trissur to hand over gold to the bearer of the letter and both the letter and the gold were recovered from his son Shri Naga Venkata Raghavendra (Appellant in Appeal No. 30495 of 2017). Both the appellants had travelled by train from Trissur to Vijayawada. Naga Venkata Raghavendra was acting suspiciously when the Officers approached him. Subsequent statements were contradictory to each other. These factors by themselves cannot, in our considered opinion, constitute the basis for forming a reasonable belief that the seized gold was smuggled. Therefore, the Officers did not have a reasonable belief in the first place to assert that the seized primary gold was smuggled gold which is essential to shift the burden on to the accused under Section 123. The case of Om Prakash Khatri (supra) was different inasmuch as in that case while the foreign markings were missing on the gold in that case the carriers had admitted that they were carrying smuggled gold for Shri Khatri and that it was smuggled through Kerala and they were carrying it to Bombay and marks and numbers have been deleted to avoid being caught. They also admitted that they avoid air travel as there is a high risk of being caught. Coupled with these statements was the fact the gold of very high purity. The ratio of this judgment does not apply to the present case and the facts are quite different.

15. In view of the above, we find that the officers of the Department had no reasonable belief that the gold was smuggled and therefore they have not discharged their responsibility of forming reasonable belief under Section 123 without which the burden of proof will not shift to the person from whom the gold is seized.”

22.6 It is observed from the Test report that the gold bars/pieces were of purity 99.5, 99.6 and 99.8 only. Normally foreign origin/foreign marked gold will be of purity 99.99. There is no foreign mark available on the gold seized. They were seized from Shri Rajesh Kumar Yadav and Shri Umanath at the Gaya railway station. The Appellants claimed that the gold bars/pieces were purchased domestically from M/s Chandan Enterprises, Delhi under Invoices 3 and 5 dated 01/01/20 and 03/01/20. The Appellants stated that the the gold bars/pieces in question were sent to Kolkata to the goldsmiths for making of jewellery . The investigation ignored their claim and charged that the Appellants failed to give name, addresses, contact number, of the persons/goldsmiths to whom the said goods were sent for exchanging the same into gold jewellery. The investigation also alleged that at the time of interception of Mr.Rajesh Kuamr Yadav and Mr. Umanath, they were not carrying any papers/document related to purchase of the gold from M/s Chandan Enterprises. However,the Investigation failed to make any inquiry from M/s. Chandan Enterprises about the legal purchase of the gold.

22.7 We observe that the Appellants claimed that the gold bars/pieces were purchased from M/s Chandan Enterprises. Delhi. The investigation has not verified the documents submitted by them in support their claim of domestic purchase of the gold bars/pieces. They brushed aside the evidences submitted by the Appellants by citing some mismatch in the dates. One of the reasons cited for ignoring the invoice was that the invoices were not carried along with them by the persons who carried the gold. Not having the invoices at the time of seizure cannot be areason to ignore their claim. The documents produced could have been verified to find out the veracity of their claim. On the contrary, the investigation could not provide any evidence to establish the smuggled nature of the gold. In the absence of any such evidence, the burden of proving that the gold bars/pieces were not smuggled one cannot be thrust upon the Appellants.

22.8 In view of the above discussions and the decisions cited above, we hold that the burden under Section 123 of Customs Act, to prove that the gold is not smuggled one, does not lie on the Appellants, in this case. Accordingly answer to question no (ii) in para 13 above, is negative.

23. The next question to be answered is whether the retracted statements of the co-accused can be relied upon to establish the guilt of the Appellants, when the procedure prescribed under section 138B of the Customs Act was not followed. The Appellants stated that the retracted statements does not have higher evidentiary value than facts on record. They contended that the findings in the impugned order are based mainly on the basis of the statements of the co-accused, without any independent, corroborative evidence. The Order passed by the Adjudicating Authority confiscating the gold bars/pieces and imposing penalty on the Appellants, mainly on the basis of the statements of the co-accused, is not sustainable in law.

24. In support of their claim, the Appellants relied upon the following decisions:

i) Mohtesham Mohd. Ismail Vs. Special Director, Enforcement Directorate- 2007(220)ELT 3 (SC) .

That a confession of a co-accused person cannot be treated as substantive evidence and can be pressed into service only when the Court is inclined to accept other evidence and feels the necessity of seeking for an assurance in support of the conclusion deducible therefrom. A confession purported to have been made before an authority would require a closure scrutiny. It is therefore, now well settled that the Court must seek corroboration of the purported confession from independent sources.

ii) Prakash Kumar Vs. State of Gujarat- (2007) 4 SCC 266 .

The confession of co-accused by itself is not sufficient to hold the other accused guilty. It has been held repeatedly by this Court that the confession of a co-accused is a fragile and feeble type of evidence and it could only be used to support the other evidences, if any, adduced by the prosecution.

iii) Assistant Collector of Customs Vs. Amrik Singh 2014 (301) ELT 170 (P&H) The question arises whether the admission of co-accused under Section 108 of the Customs Act can be basis of conviction of other co-accused. The Ld. Trial Court has rightly held that statement of co- accused under Section 108 of the act against the co-accused with a weak type of evidence and conviction of co-accused cannot be based on the uncorroborated statement of co-accused.

iv) Anisur Rahaman Vs. Commissioner of Customs (Prev.) West Bengal 2003 (160) ELT 816 (Tri-Kolkata).

Non-appearance before DRI Officer in response to summons is not a ground for holding that the appellant is guilty-The entire case is based upon the statement of the Driver which is in the nature of uncorroborated statement of a co-accused and cannot be made the sole-basis for penalizing the appellant.

v) Jahed Mondal Vs. Commissioner of Customs (Prev.), West Bengal-2002 (149) ELT 319 (Tri.-Kol.) Para 8 & 11.).

Penalty has been imposed upon Shri Jahed Mondal based upon the statement of Bablu Biswas who was intercepted by the Customs Officer from whose possession one gold biscuit has been recovered. Penalty cannot be imposed on the basis of confession of co-accused unless corroborated by other evidences. Non-appearance in response to Summons cannot be a factor or criteria in determining the guilty conduct of the appellant.

vi) Narayan Das Vs. Commissioner of Customs, Patna- 2004 (178) ELT 554 (Tri.-Kolkata) Para-6.

Mere inculpatory statement of the co-acused about the purchase of gold from the appellant cannot be the basis of imposing penalty under Section 112(b) of the Customs Act, 1962 in the absence of any other corroborative evidence.

25. The Appellants further submits that the statement of the co-accused in this case cannot be considered as relevant in view of non-compliance of the mandate under Section 138B of the Customs Act, 1962 by the Adjudicating Authority which is pari materia with Section 9D of the Central Excise Act, 1944. In the case of Flemingo DFS Pvt. Ltd., Vs. Commissioner of Customs, Visakhapatnam reported in 2018 (363) ELT 450 (Tri-Hyderabad), it has been held that if Revenue chooses not to examine any person in the adjudication proceedings, it amounts to giving up that witness and such statement cannot be considered relevant. Since the co-accused person whose statement has been relied upon in this case was not examined in adjudication proceedings, his statement could not have been considered relevant against the Appellant. Reliance was placed in the case of Haricharan Kurmi reported in AIR 1964 SC 1184, wherein it was held that even otherwise the statement of co-accused can only be considered for corroboration of any tangible evidence and in the instant case, there is no tangible evidence to seek corroboration from statement of co-accused.

26. The appellants submits that Adjudicating Authority should have first examined the person whose statements have been relied upon to form an opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence. This was mandatory. The statement of any person cannot be relied upon directly as has been held by the Hon.ble High Court in the case of G-Tech Industries – Vs. Union of India– 2016 (339) ELT 209 (P&H). In the said decision the rationale behind the mandate contained in Section 9D of the Central Excise Act, 138B of the Customs Act, 1962 has been mentioned as below:

“Para 15- The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement recorded during inquiry/investigation, by the Gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D (1) mandates that the evidence of the witness has to be recorded before the Adjudicating Authority, as in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned.”

27. The Appellants submits that the Adjudicating Authority, therefore, should follow the procedure to rely on the statement as relevant for proving the truth of the contents of the statement, to admit the statement in evidence. In this case, the said mandate has not been followed and hence the statement of the co-accused in this case cannot be said to be voluntary and his statement also cannot be said to be true and correct and shall not be taken as evidence.

28. The Appellants submits that after examination by the Adjudicating Authority the question of cross-examination would arise as has been held in Prakash Raghunath Autade- Vs. Union of India – 2022 (380) ELT 264 (Bom.).

29. The Appellants further relied upon the decision of the Tribunal in the case of S. Mohanalal reported in 1987 (29) ELT 63 (Tri-Madras) wherein the Tribunal held that “it will be unfair to fasten the appellant with penal consequences merely on the basis of a statement recorded from a third party to the effect that Gold Pellets under seizure were eventually intended to deliver to the Appellant”. In the case of Sourav Goyal reported in 2020 (373) ELT 676 (Tri.-Del.), it was held by the Tribunal that the statement of the co-noticees unless corroborated by any independent evidence do not constitute the legal evidence and there is no justification for imposition of penalty on the Appellant.

30. In the present case, the Appellants submits that only on the basis of the statement of the co-accused inference has been made about the smuggled nature of the gold bars/pieces. The Appellants relied on the decision in the case of Surinder Kumar Khanna- Vs. Intelligence Officer, DRI- 2018 (362) ELT 935 (SC) on the facts identical with the facts of the Appellant’s case wherein the Hon’ble Apex Court has held as under:

Para-14 – “In the present case it is accepted that apart from the aforesaid statements of co-accused there is no material suggesting involvement of the appellant in the crime in question. We are thus left with only one piece of material that is the confessional statements of the co-accused as stated above. On the touchstone of law laid down by this Court such a confessional statement of a co-accused cannot by itself be taken as a substantive piece of evidence against another co-accused and can at best be used or utilized in order to lend assurance to the Court. In the absence of any substantive evidence it would be inappropriate to base the conviction of the appellant purely on the statements of co-accused. The Appellant is therefore entitled to be acquitted of the charges levelled against him.”

31. We find that the Impugned Order mainly relied upon the statements of the Noticees 1 to 5 to establish the foreign origin nature of the gold. Other than the statements, there is no other evidence available on record to show that the gold were smuggled into the country from Bangladesh. It is incorrect to rely only on the statements of the co-accused without any corroboration, to prove the smuggled nature of the gold. It is a settled law that the statement of the co-accused cannot be relied without any independent corroboration.

31.1 In the case of Commissioner of Customs (Preventive), Lucknow vs Shakil Ahmad Khan, it has been held that confiscation based on retracted statements not sustainable. The gist of the Order is reproduced below:

Smuggling – Burden of proof – Retracted confessional statements of co-accused – No efforts made to prove that confessional statements were voluntary – Accused were not examined during adjudication – HELD : Confiscation and penalty order based only on retracted statements of accused persons were not sustainable – It was contrary to settled legal position, illegal, arbitrary and liable to be set aside – Sections 108, 111, 112 and 123 of Customs Act, 1962. [paras 22, 25, 26] Evidence – Confessional statement of co-accused – It is not substantive evidence against another co-accused – It can at best be used for assurance to Court – In absence of any substantive evidence, it was inappropriate to base conviction of accused on statements of co-accused – Section 108 of Customs Act, 1962. [para 25]

31.2 The Tribunal in the cases of Principal Commissioner of Customs (Prev.), Delhi Vs. Ahmed Mujjaba Khaleefa [2019 (366) ELT 337 (T) dismissed the appeal of Revenue holding that jewellery not bearing any foreign marking – other than statement of passenger no other proof produced by Revenue to substantiate the claim that jewellery were smuggled into India.

31.3 In view of the above discussion and relying upon the the decisions cited above, we hold that the gold bars/pieces cannot be confiscated based on the retracted statements alone. Accordingly answer to question no (iii) is negative.

32. Regarding penalty imposed under section 112(a) and (b)and 114AA of the Customs Act 1962, the Appellants stated that the gold was purchased from indigenous sources against statutory invoices. There is no evidence on record to show that the gold bars/pieces were of foreign origin and smuggled into the country. In the absence of any evidence to establish that the gold bars/pieces were smuggled ones, no penalty is imposable under Section 112(a) and (b) and 114AA of the Customs Act 1962. They relied upon many decisions of the Tribunal and High Court to support their claim. We find merit in the argument of the Appellants. Section 112 of the Customs Act 1962, details the circumstances under which penalty is imposable under this section. For the sake of ready reference, the Section 112 is reproduced below:-

“SECTION 112

Penalty for improper importation of goods, etc. —

Any person, –

(a) who, 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) who 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,

shall be liable, –

(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding the value of the goods or five thousand rupees], whichever is the greater;

(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher :

Provided that where such duty as determined under sub-section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the penalty so determined;]

[iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty [not exceeding the difference between the declared value and the value thereof or five thousand rupees], whichever is the greater;

(iv) in the case of goods falling both under clauses (i) and (iii), to a penalty [not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest;

(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty [not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest.]

33. From the Order-in-Original, we find that personal penalty under section 112 (a) and(b)of Customs Act,!962 has been imposed on the following persons.

(i) Rajesh Kumar Yadav – Rs 10,00,000

(ii) Umanath – Rs 10,00,000

(iii)Shri. Manoj Kumar Seth – Rs 50,00,000

(iv)Shri. Balwant Raj Soni – Rs 10,00,000

(v)Shri. Anurag Jalan – Rs 10,00,000

Shri. Manoj Kumar Seth has also been imposed a penalty of Rs 50,00,000 under section 114 AA of Customs Act, 1962.

Under section 112 (a) and (b) penalty is imposable when the person is found to be dealing with goods for which prohibition is in force or the goods are liable for confiscation. The gold bars/pieces dealt by the Appellants were established to be of Indian origin and hence not prohibited goods. The gold bars/pieces were seized at Gaya railway station fromShri Rajesh Kumar Yadav and Shri. Umanathwho were carrying the gold and are employees of Manoj Kumar Seth and Balwant Raj Soni. They were carrying the gold which were domestically purchased and hence there is no offence established against them.Manoj Kumar Seth and Balwant Raj Somi are the partners of the jewellery shop Gandhi and Sons and they claimed the ownership of the seized gold vide their letter dated 21/01/20. They have submitted invoices no 3 and 5 dated 01/01/20 and 03/01/20 respectively for the purchase of the said gold bars/pieces from M/s Chandan Enterprises, Delhi. The investigation has not brought in any evidence to counter this claim. Hence, we find merit in the argument of the Appellants that penalty is not imposable on them under section 112(a)and(b) of Customs Act, 1962. Under section 114 AA of Customs Act, 1962, penalty is imposable when a person makes false or incorrect statement or declaration. The investigation has not brought in any evidence to establish that Manoj Kumar Seth has intentionally made false statement or declaration warranting penalty under section 114AA of Customs Act, 1962. Hence, we hold that penalties under sections 112(a) and (b) and 114 AA of the Customs Act, 1962 are not imposable in this case. Accordingly answer to question no (iv) in para 13 above, is negative.

34. In view of the above discussion we set aside the impugned order and allow the appeals filed by the Appellants with consequential relief , as per law.

(Order pronounced in the open court on 18 May 2023.)