Principal Commissioner of Customs (Preventive) Vs Sh Bharat Shantilal Shah (Delhi High Court)
Summary: Delhi High Court admitted seven connected customs appeals filed by the Principal Commissioner of Customs (Preventive) and framed three substantial questions of law concerning the interpretation of Section 123 of the Customs Act, 1962, the evidentiary requirements under Section 138B in relation to statements recorded under Section 108, and the burden of proof for confiscation of gold jewellery alleged to have been manufactured from smuggled gold. The connected appeals concern Bharat Shantilal Shah, Krishi Jain @ Bittu, Subhash Tukaram Karan, Manish Kumar, Naresh Kumar, Sanjay Ram and Pawan Soni. At the outset, the Court allowed applications seeking condonation of delay in re-filing certain appeals.
The Revenue contended that the case did not involve violation of Section 138B and that CESTAT had wrongly interpreted Section 123 on the facts. After hearing counsel, the Court issued notice, which was accepted on behalf of the respondents, and framed substantial questions rather than finally deciding the controversy. The first question is whether CESTAT was correct in holding that the mandatory presumption under Section 123 does not extend to a person described as a “mastermind” or “financier” who allegedly exercises constructive possession and effective control over smuggled goods through employees when physical seizure is made from those employees, and whether “possession” for Section 123 includes the power to control and dispose of goods.
The second question concerns whether CESTAT was justified in treating examination of every Section 108 witness before the adjudicating authority as necessary for the statement to become relevant under Section 138B. In framing this question, the High Court specifically referred to its decision in Sushil Aggarwal Vs Principal Commissioner of Customs, (2025) 30 Centax 482 (Del.), concerning the scope of the right to cross-examination under Section 138B. The third question is whether the seized gold jewellery could, in the circumstances, be confiscated on the allegation that it was manufactured from smuggled gold and, if so, whether the burden of proof lies upon the Department.
Thus, the High Court has not yet reversed or affirmed CESTAT’s conclusions on merits; it has admitted the Revenue’s appeals for consideration of these legal questions. The connected matters have been directed to be listed for hearing on 28.01.2027.
Cases Discussed
- Sushil Aggarwal Vs Principal Commissioner of Customs (Delhi High Court) — (2025) 30 Centax 482 (Del.) — Referred to while framing the substantial question concerning Section 138B of the Customs Act and the proposition that the right to cross-examination under Section 138B is not an unfettered right in all cases.
Alternative SEO Titles:
Delhi HC Frames Questions on Section 123 Presumption in Customs Appeals
Delhi HC to Examine Constructive Possession Under Customs Act Section 123
Section 138B Cross-Examination Issue Admitted by Delhi High Court
Delhi HC to Decide Burden of Proof for Alleged Smuggled Gold
Customs Gold Confiscation: Delhi HC Frames Three Substantial Legal Questions
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. These applications are filed for condonation of delay in re-filing the appeals.
2. For the reasons mentioned therein, the applications are allowed. The delay in filing the appeals is condoned.
3. Learned counsel for the appellant inter alia contends that it is not the case of violation of Section 138B of the Customs Act, 1962 and Section 123 was given a wrong interpretation in the facts of the case.
4. Issue notice.
5. Learned counsel for the respondents accept notice.
6. After assistance of learned counsel for the parties the following substantial question of law are framed:-
a) Whether the learned CESTAT was correct in law in holding that the mandatory presumption under Section 123 of the Customs Act, 1962, does not apply to a “mastermind” or “financier” who exercises constructive possession and effective control over smuggled goods through his employees, when the goods are seized from the physical possession of those employees, and whether the concept of “possession” under Section 123 of the Act includes not only physical possession but also the power to control and dispose of the goods?
b) Whether the learned CESTAT’s interpretation of Section 138B of the Customs Act, 1962, as requiring the examination of every Section 108 witness before the adjudicating authority for the statement to be “relevant” in adjudication proceedings, is legally sustainable in light of Section 138B(2) of the Act, which applies the provision to proceedings before a court, and in light of the recent judgment of the Delhi High Court in Sushil Aggarwal vs. Principal Commissioner Of Customs (2025) 30 Centax 482 (Del.), which held that the right to cross-examination under Section 138B is not an unfettered right in all cases?
c) Whether in the facts and circumstances of the case the seized gold jewellery could be confiscated on the allegation that goods were manufactured from smuggled gold and if so the onus of proof lies on department or not?
7. Put up for hearing on 28.01.2027.
