Seizure unjustified as not established that gold jewellery is of foreign origin

R. Mahaveer Pipada Vs Commissioner of Customs (CESTAT Chennai) 

CESTAT Chennai held that seizure of gold jewellery unjustified as revenue failed to establish beyond doubt that gold jewellery seized is of foreign origin.

Facts- Based on specific intelligence received by the Directorate of Revenue Intelligence (DRI), Chennai, Mr. R. Mahaveer Pipada (the first appellant herein) was intercepted at Chennai Airport. upon examination of the hand baggage of the first appellant, the DRI found four boxes containing gold jewellery, which were examined, apparently, by a Government approved assayer namely, one Mr. Mohan Achari, who, after examination on the spot, appears to have certified that the said gold jewelleries were of foreign origin weighing 8.452 kgs. of 22 carat purity and valued at Rs.2,35,21,916/-. On enquiry as to the source of foreign gold jewellery, the first appellant appears to have revealed that the same was smuggled into India from Singapore through various airports by ‘Burma Bazaar’ operators known to him.

The gold jewellery that was found with the first appellant was thereafter seized by the DRI after drawing a mahazar on the same date i.e., 19.03.2013 and thereafter, the same were handed over to the Airport Customs warehouse for safe custody.

The Revenue believed that the appellants had violated the provisions of Foreign Trade Policy (FTP) and that the goods imported were liable for confiscation in terms of Sections 111(d) and 111(l) of the Indian Customs Act.

The adjudicating authority confirmed the demand as proposed in the show cause notice. Being aggrieved, the present appeal is filed.

Conclusion- Held that this is a case where the appellants have been penalized for an alleged activity which, according to the Revenue, has resulted in confiscation of the allegedly imported goods. When, therefore, a Show Cause Notice is issued by the DRI, a reasonable belief is required to be established before alleging any activity in the nature of smuggling. In the case of town seizure, the initial burden is always on the Revenue to prove as to what prompted it to reasonably believe that the gold / gold jewellery in question were smuggled / of foreign origin.

Held that the gold jewellery seized could not be proved to be of foreign origin, which the Revenue has not been able to establish beyond doubt. As the gold jewellery seized were not proved to be of foreign origin, the seizure of 4.627 kgs. of gold bars/bits, 3 nos. of 1 kg. gold bars and 10.011 kgs. of admittedly Indian-made gold jewellery as sale proceeds of smuggling is also not in accordance with the law.

FULL TEXT OF THE CESTAT CHENNAI ORDER

These appeals arise out of the common adjudication/Order-in-Original No. 90858/2022 dated 15.06.2022 passed by the Commissioner of Customs, Chennai-IV and since the facts and the apparent issue are identical, the same are taken up for common disposal, for convenience.

2.1. Brief facts, as could be gathered from the Show Cause Notice and the impugned Order-in-Original, are that based on specific intelligence received by the Directorate of Revenue Intelligence (DRI), Chennai, Mr. R. Mahaveer Pipada (the first appellant herein) was intercepted at Kamaraj Domestic Terminal of Chennai Airport when he was about to board the flight no. SG 3241, bound for Cochin on 19.03.2013.

2.2. It appears that on preliminary enquiry by the Officers in the presence of independent witnesses, the first appellant, who was travelling to Cochin with his son namely Mr. Sanjay Kumar, appears to have admitted to be carrying about 8.5 kilogrammes of gold jewellery of foreign origin to sell the same to certain jewellery shops in Cochin. The above appellant, upon being enquired as to the production of relevant documents like Bill-of-Entry, duty payment receipts, etc., appears to have admitted that he was not in possession of any such documents since the impugned gold jewelleries were smuggled into India without payment of duty through various airports over a period of time and that the payment towards the purchase of the above jewellery was made in cash.

2.3 It appears that upon examination of the hand baggage of the first appellant, the DRI found four boxes containing gold jewellery, which were examined, apparently, by a Government approved assayer namely, one Mr. Mohan Achari, who, after examination on the spot, appears to have certified that the said gold jewelleries were of foreign origin weighing 8.452 kgs. of 22 carat purity and valued at Rs.2,35,21,916/-. On enquiry as to the source of foreign gold jewellery, the first appellant appears to have revealed that the same was smuggled into India from Singapore through various airports by ‘Burma Bazaar’ operators known to him.

2.4 The gold jewellery that was found with the first appellant was thereafter seized by the DRI after drawing a mahazar on the same date i.e., 19.03.2013 and thereafter, the same were handed over to the Airport Customs warehouse for safe custody.

3.1.1 As a follow-up action, it appears that the DRI recorded statement of Mr. R. Mahaveer Pipada (appellant no. 1) wherein, as reflected in the Show Cause Notice, this appellant is alleged to have admitted, inter alia, that he approached Mr. Ashish Mundhra and Mr. Abishek Mundhra of M/s. Mundhra Jewellers for financial help, with which he started procuring gold jewellery of foreign origin; that he was frequently travelling to Singapore since 1998 and thus came into contact with the manufacturers of gold jewellery and traders in Singapore; that importing gold jewellery by paying duty was not profitable and therefore, he decided to smuggle the same through ‘Burma Bazaar’ operators who used to smuggle goods from Singapore through Airport; that Karupaswamy, Ali, Malar and Praveen were his major Burma Bazaar operators through whom he smuggled gold jewellery from Singapore and that he would collect the smuggled gold jewellery from the said operators after paying a carrier commission of around Rs.140/- to Rs.160/- per gram, which was thereafter sold to different jewellery shops locally in Chennai and other cities.

3.1.2 During investigation, it appears that the DRI wanted to know as to when he received and who had ordered the jewellery which was seized at the Airport, to which this appellant appears to have replied as to having received the same “around previous week in different quantities” and that the same was being carried to Cochin at the instance of Mr. Sebi and Mr. Jose of M/s. Josco Jewellers to be shown to their chairman. To a query as to the suppliers of the gold jewellery in Singapore, the first appellant appears to have revealed the names of Kim Leon, Simon and Chia of G&J Jewellery as his major contacts in Singapore from whom the gold jewellery was procured.

3.1.3 It appears that the first appellant had also been asked about the modus operandi of smuggling the gold jewellery into India, his alleged reply to which has also been reproduced at paragraph 5 of the Show Cause Notice. He was also asked about his last visit to Singapore, to which he appears to have indicated that it was on February 14^th till 16^th of February. He is also alleged to have indicated that he would record by writing the quantity of smuggled gold jewellery received by him from various operators in bits of paper and maintained the same until sale was made and the amount was fully realized and only thereafter he would discard the same.

4. It appears that during the investigation, there was a simultaneous search at the residential premises of appellant no. 1, during which time the Revenue appears to have seized: –

i. 2. 409 kgs. of assorted 22 ct. gold jewellery – all imported Singapore gold jewellery;

ii. 4. 627 kgs. of 24 ct. gold bars and bits;

iii. 10.011 kgs. of assorted 22 ct. gold jewellery – Calcutta-made jewellery

for which a separate mahazar was also drawn on the same date i.e., 19.03.2013. It also appears that the value, purity and origin of the said gold jewellery was certified by Mr. P. Lal Chand Jain, a Central Government approved assayer.

5.1 The investigating agency appears to have recorded the voluntary statement of Mr. Jose Kattukaran, Executive Sales Head, M/s. Josco Fashion Jewellers, Thrissur, who appeared to have revealed that he wanted to purchase Singapore gold jewellery and in that context, one Mr. Benny, who was working in M/s. Prince Jewellers and who was a friend of Mr. Sebi, gave a mobile number and asked to visit M/s. Mundhra Jewellers at Sowcarpet, whereafter he appears to have met Mr. Mahaveer, who showed him the gold ornaments imported from Singapore. It appears that the said Mr. Jose, showing interest in the said jewellery, requested Mr. Mahaveer to bring those Singapore gold jewellery to their shop at Thrissur, to which this appellant appears to have accepted to bring those imported Singapore gold jewellery to Thrissur on 19.03.2013.

5.2. It flows from the above that the crucial link in exposing this appellant is one Mr. Benny, as revealed by Jose, who has not been examined during the investigation made by the DRI.

5.3. Mr. Sebi K.A., employee of M/s. Josco Jewellers, also appears to have been summoned and his statement was also recorded, who has reiterated the statement given by Mr. Jose.

6.1. It appears that another statement of the first appellant – Mr. R. Mahaveer Pipada was recorded on 25.03.2013 wherein he appears to have identified few pages of the made up file containing loose papers recovered from his residential premises showing the details of gold jewellery smuggled into India, to an extent of about 200 to 250 kgs. of gold jewellery. In respect of sale of 137 chains weighing 1385.800 grams to M/s. Saravana Stores Thanganagai Maligai, T. Nagar, Chennai on 15.03.2013 and sale of gold chains weighing 847.630 grams to M/s. Saravana Stores Thanganagai Maligai, T. Nagar, Chennai, he appears to have informed that he received payments in the form of gold bars from them the next day, for which no bills were raised by him.

6.2 As an offshoot of the above statement, it appears that there were simultaneous searches on 27.03.2013 at the business premises of various buyers to whom this appellant is alleged to have sold the Singapore gold jewellery. During search, it appears that the Revenue has recorded the statements of the concerned persons of the said business entities and during search, the Revenue also appears to have seized gold jewellery of different weightages from those business entities.

7. It appears that the first appellant-Mahaveer retracted his earlier statement vide letters dated 29.03.2013 and 15.05.2013 thereby also contending that the gold jewellery of 8.452 kgs. seized from him at the Airport was not smuggled jewellery and that his earlier statements were not true. Upon being questioned again by the Revenue, it appears that the first appellant again confirmed that his previous voluntary statements dated 19.03.2013 and 25.03.2013 were true and that the retraction letters dated 29.03.2013 and 15.05.2013 were sent on the advice of his counsel.

8.1. It appears that on 28.03.2013, the premises of M/s. Mundhra Jewellers was searched again, wherein four plastic boxes were found and seized.

8.2 Subsequently, it appears that the statement of Mr. G. Surendar Kumar, Accountant of M/s. Mundhra Bullion Pvt. Ltd. And M/s. Mundhra Jewellers was recorded on 29.03.2013.

8.3. Mr. Ashish Mundhra (appellant no. 2 herein) was also summoned and his statement was also recorded on 09.04.2013; the statement of Mr. Abishek Mundhra was also recorded on 12.04.2013.

8.4. It appears that Mr. Narayan Soni was also summoned and his further statement was also recorded on 11.06.2013 wherein he appears to have revealed, insofar as 3 kgs. of unaccounted foreign origin gold bars which were seized from the premises of M/s. Mundhra Jewellers were concerned, that the same were given by him in return for gold bars given by Mr. Ashish Mundhra earlier. He also appears to have indicated vide his letter dated 20.04.2013 that he had given 5907.5 grams of gold bars to Mr. Ashish Mundhra for safe custody. With regard to the 3 kgs. of gold bars of foreign origin, he appears to have revealed that the same were purchased by him from M/s. GRT Jewellery; that he used to regularly sell Calcutta jewellery to M/s. GRT Jewellery, who would give him gold bars on loan and he would pay them by giving equivalent amount of jewellery. The said 3 kgs. of gold bars was given by him to Mr. Ashish Mundhra to be handed over to Mr. Mahaveer, as payment equivalent to the imported Singapore gold jewellery received from Mr. Mahaveer. Insofar as gold jewellery of 10 kgs. which were Calcutta made and seized from a suitcase at the residence of Mr. Mahaveer are concerned, it appears that Mr. Narayan Soni had admitted that the same belonged to him and that they were Indian made jewellery which was brought by him for exhibition in Chennai and that was kept with Mr. Mahaveer.

8.5 The Revenue also appears to have interrogated Mr. Praveen Kumar on 24.07.2013, one of the alleged ‘Burma Bazaar’ operators, who is alleged to have procured gold jewellery for Mr. Mahaveer for which he got a commission of about Rs.1,25,000/- from Mr. Mahaveer, for each of his trips to Singapore. It is a fact borne on record that the said Mr. Praveen Kumar appears to have later on retracted his earlier statement by his subsequent statement dated 25.07.2013.

9. From the above statements, it appears that the Revenue believed that the appellants had violated the provisions of Foreign Trade Policy (FTP) and that the goods imported were liable for confiscation in terms of Sections 111(d) and 111(l) of the Indian Customs Act.

10. Consequent to the above, a common Show Cause Notice dated 16.09.2013 was issued, inter alia, to these appellants to show cause as to why: –

• 452 kgs. of seized 22 ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• Penalty under Section 112 ibid. should not be imposed.

• 409 kgs. of seized 22 ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• 627 kgs. of gold bars/bits seized from the residential premises, should not be confiscated under Section 121 ibid.

• Penalty under Section 112 ibid. should not be imposed.

• The 3 nos. of 1 kg. gold bars (9950 purity) seized from the premises of M/s. Mundhra Jewellers should not be confiscated under Section 121

• 011 kgs. of Indian-made 22 ct. assorted gold jewellery seized from the residential premises of appellant no. 1 should not be confiscated under Section 121 ibid.

• 894 kg. of 22 ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• Penalty under Section 112 should not be imposed.

• 541 kgs. of 22 ct. Singapore gold jewellery should not be confiscated under Section 111(d) and 111(l) ibid.

• Penalty under Section 112 should not be imposed.

• 602 kg. of 22ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• Penalty under Section 112 should not be imposed.

• 584 kg. of 22 ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• Penalty under Section 112 ibid. should not be imposed.

• 065 kg. of 22 ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• Penalty under Section 112 should not be imposed.

• 097 kg. of 22 ct. Singapore gold jewellery should not be confiscated under Sections 111(d) and 111(l) ibid.

• Penalty under Section 112 should not be imposed.

11. It appears from the documents placed on record that the appellants filed their reply to the Show Cause Notice by inter alia contending as under: –

(i) 8.452 kgs. of gold jewellery was seized from Mr. Mahaveer at the Airport, but however, copy of the mahazar drawn on the same date i.e., 19.03.2013 was never given to him.

(ii) 10.011 kgs. of 22 ct. Indian-made gold jewellery belonged to Mr. Narayan Soni, who was given the said gold for exhibition and sale.

(iii) 9947. 200 gms. of 22 ct. imported gold jewellery belonged to one Mr. Vijayababu who was given the same for exhibition and sale.

(iv) 913. 8 gms. of 22 ct. gold jewellery and 4.627 kgs. of 24 ct. gold bullion belonged to him.

(v) The appellant no. 1 was forced to sign on various typed papers and also made to write four to five lines at the bottom of the typed papers, the copies of which were never furnished.

(vi) In the Show Cause Notice, there is no one-to-one correlation of the seized 22 ct. gold jewellery.

(vii) At paragraph 54 of the Show Cause Notice, the DRI has clearly admitted that neither the quantity of smuggled gold jewellery nor the sale proceeds of the same were readily available for seizure; even the date wise details of the smuggled gold jewellery was not available, as reflected at paragraph 54 of the Show Cause Notice.

(viii) The appellants requested for enabling them to cross-examine the so-called witnesses, officers, etc., who had signed all the mahazars, giving clear reasons as to why their cross-examination was necessary.

12. The adjudicating authority having considered the replies offered by the appellants, however, vide impugned Order-in-Original No. 90858/2022 dated 15.06.2022 proceeded to conclude the adjudication thereby confirming the demands proposed in the Show Cause Notice. The demands which are relevant to the present appeals, as confirmed vide the impugned Order-in-Original, are as under: –

• Confiscation of the seized 8.452 kgs. of smuggled 22ct. Singapore gold jewellery, valued at Rs.2,35,21,916/- under Section 111(d) and Section 111(l) of the Customs Act, 1962.

• Confiscation of the seized 2.409 kgs. of smuggled 22ct. Singapore gold jewellery, valued at Rs.65,55,161/- under Section 111(d) and Section 111(l) of the Customs Act, 1962.

• Confiscation of the 4.627 kgs. of gold bars/bits, valued at Rs.1,37,42,784/-, seized from Mr. Mahaveer’s residential premises, being sale proceeds of smuggled gold jewellery, under Section 121 of the Customs Act, 1962.

• Confiscation of the 3 nos. of 1 kg. gold bars (995 purity), valued at Rs.89,70,000/-, seized from the premises of M/s. Mundhra Jewellers, being sale proceeds of smuggled gold jewellery, under Section 121 of the Customs Act, 1962.

• Confiscation of the 10.011 kgs. of Indian-made 22ct. assorted gold jewellery, valued at Rs.2,72,42,380/-seized from the residential premises of Mr. Mahaveer, being sale proceeds of smuggled gold jewellery, under Section 121 of the Customs Act, 1962.

• Imposition of penalty of Rs.52,00,000/- (Rupees Fifty Two Lakhs only) on Mr. Mahaveer Pipada under Section 112(a) of the Customs Act, 1962.

• Imposition of penalty of Rs.52,00,000/- (Rupees Fifty Two Lakhs only) on Mr. Ashish Mundhra of M/s. Mundhra Jewellers under Section 112(a) of the Customs Act, 1962.

13. It is against this order that the present appeals have been filed before this forum.

14. Heard Shri N. Muralikumaran, Ld. Senior Advocate for the appellants and Shri S. Balakumar, Ld. Assistant Commissioner.

14.1 The dispute / issue in these appeals is about the challenge to the confiscation of gold / gold jewellery found and seized during the DRI investigation i.e., 8.452 kgs. of 22ct. gold jewellery seized from the appellant no. 1 at the Chennai Airport, 2.409 kgs. of gold jewellery, 4.627 kgs. of gold bars/bits and 10.011 kgs. of admittedly Indian-made gold jewellery seized from the residential premises of the appellant no. 1, and 3 nos. of 1 kg. gold bars seized from the premises of M/s. Mundhra Jewellers / appellant no. 2 (partner).

15.1 Ld. Senior Advocate would submit at the outset that since both the cases arise out of a common Order-in-Original, he is consolidating his submissions, for convenience. The common submissions are as under: –

• On specific intelligence, Mr. Mahaveer Pipada and his son Mr. Sanjay Kumar were intercepted on 19.03.2013, in the Domestic Airport at Chennai while they were attempting to board a flight to Cochin; they were carrying 8.5 kgs. jewellery of foreign origin, which were seized.

• None of the gold jewellery had any marking to indicate that they were of foreign origin.

• Mr.  Mahaveer Pipada admitted that they were smuggled through various airports over a period of time and the purchases were made in cash.

• One Mr. Mohan Achari, Assayer, who was there, certified the quality and origin of the assorted gold jewellery on the spot (page nos. 15 and 16 of the Annexure to the Show Cause Notice) that they were of foreign origin. On 19.03.2013 they were seized under reasonable belief that the same were liable for confiscation under Section 111 of the Customs Act.

• But however, his expertise to declare as to the foreign origin and the method used to determine, is not forthcoming nor has his certificate indicated the very basis of his conclusion as to any marking to the effect on any of the gold jewellery and nor does he specifically admit as to the presence of any marking as to the origin.

• On the same day, the premises of M/s. Mundhra Jewellers situated at No.20, Thulasingam Street, Sowcarpet, Chennai – 600 079 was searched and 3 gold bars of 1 kg. each of 9950 purity were seized.

• Simultaneous search was also conducted on the same day at the residential premises of Mr. Mahaveer Pipada wherein 10,011.9 grams of assorted jewellery, 2409.1 grams of assorted imported jewellery and 4647.200 grams of 24 carat gold bars and bits were seized, in the presence of Mrs. Srimathi Chandra, wife of Mr. Mahaveer Pipada.

• The seizure was done on the reasonable belief that they are smuggled goods and that they are liable for confiscation.

• Mr. P. Lal Chand Jain was presented with all the jewellery and bullion and he examined and certified them. The said Lal Chand Jain gave a report dated 19.03.2013, which is enclosed as Doc No.9 at page nos.35 to 38, in Annexure-A to the Show Cause Notice. Mr. Lal Chand Jain used the word “imported” for the assorted jewellery weighing 2409.1 grams.

• But however, his ability to declare as to foreign origin and the method used to determine, is not forthcoming nor has his certificate indicated the very basis of his conclusion as to any marking to the effect on any of the gold jewellery and nor does he specifically admit as to the presence of any marking as to the origin.

•Mr.  Mahaveer Pipada, during the personal hearing, by his communication dated 25.02.2021, informed that the bullion weighing 4.627 kgs. seized from his residence belonged to him and his family.

• Mr. Mahaveer Pipada requested for cross-examination of the persons who had affixed their signatures on the mahazar, including Assayers.

• The burden of proving that the sale proceeds are of the smuggled goods sold lies on the Department, which has not been discharged in the present case and therefore the confiscation of the 3 kgs. of gold bars seized from M/s. Mundhra Bullions, the 10.011 kgs. of 22 carat Indian-made jewellery and 4.627 kgs. of bullion seized from the house of Mr. Mahaveer Pipada are completely without authority of law and clear abuse of power of the DRI.

• Apart from the above, the 3 kgs. of gold bars having Sl. Nos. 2195147, 2195148 and 2195176 were duly proved to have been imported by the documents enclosed at page nos. 186 and 187 of the appeal paper book filed by M/s. Mundhra Bullion.

• Even according to the Department, the 10.011 kgs. of jewellery was Indian made. The bullion seized from the house of Mr. Mahaveer Pipada are not imported ones. The bullion seized from M/s. Mundhra Bullion were imported and duty was duly paid; therefore, the seizures as well as confiscation of the above are illegal.

• Insofar as the seizure of jewellery weighing 8.5 kgs. from Mr. Mahaveer Pipada in the airport is concerned, the only document that is relied upon is that of Mr. Mohan Achari, Assayer, who certified them as foreign jewellery. Similarly, as far as the seizure of 2409.1 gms. of assorted jewellery from the house of Mr. Mahaveer Pipada is concerned, in the so-called certificate issued by Mr. Lal Chand Jain, the word “imported” is used. It is unknown as to what is the qualification and competence of Mr. Mohan Achari and Mr. Lal Chand Jain in testing and declaring a jewellery as Indian made and foreign. Admittedly, there were no such marking on any of the gold jewellery. What was the methodology adopted to arrive at such a conclusion and whether any known processes and methodologies have been adopted to declare as foreign-made are not stated anywhere and a specific request to cross-examine them, setting out the reason for cross-examination by communication dated 25.02.2021 as well as by communication dated 26.03.2021, were denied, thereby depriving the appellant to prove that Mr. Mohan Achari and Mr. Lal Chand Jain are not only incompetent and have not carried out any test of any nature to determine and conclude as to whether the jewellery was Indian-made or foreign jewellery, but also to establish that none of the jewellery were of foreign origin. In this regard, reliance has been placed on the following case-law:

i. Commissioner of Customs v. Mohammed Ali Jinnah [Customs Appeal No. 40099 of 2020 – Final Order No. 40289 of 2023 dtd. 20.04.2023 – CESTAT, Chennai]

ii. Daleep Kumar Verma v. Commissioner of Customs
(Preventive), Shillong & ors. [Customs Appeal No. 75315 of 2022 & ors. – Final Order Nos. 75300­75302 of 2023 dtd. 04.05.2023 – CESTAT, Kolkata] (para. 20)

iii. Customs v. Dina Aruna Gupta [2011 SCC Online Del 3024] (paras. 31 and 32)

iv. Central Excise Department, Bangalore v. P. Somasundaram [1979 SCC OnlineKar 187] (para.9)

• The alleged statement said to have been given under Section 108 of the Customs Act and that too, when retracted, cannot alone be the basis of confiscation. In this regard he has relied on the decision in the case of Union of India v. Imtiaz Iqbal Pothiwala [2019 (365) E.L.T. 167 (Bom.)] to contend that for confiscation, the confession should be subsequent to the Show Cause Notice. The following case-law were also relied upon:

i. Di Gold Designer Jewellery v. Commr. of Customs [2021 SCC Online CESTAT 4213]

ii. Ankit Agarwal v. Commr. of Customs (Preventive) [2020 SCC OnLine CESTAT 210] (paras. 13,16)

iii. Daleep Kumar Verma v. Commissioner of Customs (Preventive), Shillong & ors. [Customs Appeal No. 75315 of 2022 & ors. – Final Order Nos. 75300­75302 of 2023 dtd. 04.05.2023 – CESTAT, Kolkata] (para. 21.4)

to contend that once it is proved that the gold is not a smuggled one, the burden under Section 123 stood discharged.

• Before exercising the power to seize under Section 110 of the Customs Act, the Revenue has to form reasonable belief that the goods in question are liable for confiscation; subjective satisfaction is therefore a condition precedent for the exercise of power under Section 110

• The formation of reasonable belief should be prior to the seizure and cannot be subsequent to the seizure and hence, the very seizure is invalid. When the seizure is invalid, all subsequent proceedings and consequential actions are also bad in law.

• There was nothing at all to indicate that any of the gold jewellery which were seized by the Revenue were of foreign origin, nor did they contain any marking to that effect.

• When the gold did not have the foreign marking the burden of proof will not shift to the appellants. In this regard, reliance is placed on the order of CESTAT, Kolkata in Daleep Kumar Verma (supra) [paragraph 19.8]

• When it is admitted that the seized goods were purchased from indigenous sources, the provisions of Section 123 of the Customs Act will not apply, which stand is supported by the order in Daleep Kumar Verma (supra) [paragraphs 19.4, 19.5]

15.2 Ld. Senior Counsel concluded his arguments by placing reliance on many decisions of various higher judicial fora and also many orders of co-ordinate Benches of the CESTAT.

16.1 Per contra, Ld. Assistant Commissioner relied on the findings of the lower authorities. He would also contend that the Revenue had entertained a reasonable belief that the gold jewellery in question was smuggled into India based only on the voluntary statement of Mr. Mahaveer Pipada, the appellant no. 1 herein.

16.2 He would take us through various portions of the findings in the impugned order to highlight the modus operandi of the first appellant, who was regularly importing gold jewellery from Singapore through some of his ‘Burma Bazaar’ operators.

16.3 He would also urge that both the appellants had a conspirational arrangement to smuggle gold jewellery from Singapore by engaging carriers, thereby avoiding Customs Duty, through various airports.

17.1 In his rejoinder, the Ld. Senior Advocate would contend that the DRI, during the course of investigation, has searched and recorded statements of the owners/personnel of various gold jewellery shops and have also seized gold jewellery apparently based on the statement of the appellant no. 1, but however, both the appellants have retracted their original statements; that the Revenue thereafter again made the appellants to retract even the retraction statement by coercing the appellants and hence none of the statements of the appellants are reliable and other than this, the Revenue has no other piece of evidence to implicate the appellants in the alleged act of smuggling gold jewellery from Singapore.

17.2 He would also submit that one Mr. Narayan Soni had clearly admitted that he is the owner of the gold jewellery to the extent of 10.011 kgs., recovered from the residential premises of the first appellant, who is the Director of M/s. Shree Ganapati Jem & Jewellers (P) Ltd., Kolkata, but however, without giving any reasons, the Revenue has ignored his statement.

17.3 He drew our attention to the statement of Mr. Vikram Jain, Proprietor of M/s. Balaji Jewel Paradise, Chennai, to highlight that there was no restriction or prohibition in importing gold and the same being freely tradable, such goods cannot be seized; that the DRI had seized the gold from his shop, which was validly purchased and he had never imported any gold jewellery at any point of time, and hence, the seizure of gold jewellery from his shop was clearly illegal. (paragraph 64 of the Order-in-Original). This, according to the Ld. Advocate, implies that it is Mr. Vikram Jain who is the owner and not any of the appellants.

17.4 He would refer to the statement of Mr. Y. Siva Arul Durai, Managing Partner of M/s. Saravana Stores Thanga Nagai Maaligai, who appeared to have revealed that the seized 20 gold chains of 22 carat weighing about 584.700 grams were validly purchased in the local market by his firm, from M/s. Mundhra Jewellers vide invoice No. MJ/12-13/CREDIT 2 dated 19.10.2012 (paragraph 65 of the Order-in-Original).

17.5 He drew our attention to the statement of the Proprietor of M/s. I.K. Jewellers, Mr. I. Jayanthilal, who had categorically indicated that they had furnished, at the time of search and seizure by the DRI itself, the invoices of M/s. Shri Vasavi Gold and Bullion (P) Limited bearing invoices No. 446 dated 30.05.2012, Invoice No. 447 dated 30.05.2012 and Invoice No. 861 dated 20.07.2012, from whom they had purchased the imported gold ornaments; but under the threat of arrest and coercion by DRI officials, they had been forced to admit as if the gold jewellery were purchased from the appellant no. 1; they had been misguided by the searching officials that if a statement as dictated by them is made, they would not be put to any problems. (paragraph 67 of the impugned Order-in-Original)

17.6 Statement of one Mr. Prapanna Kumar of M/s. Nathella Sampath Jewellery Pvt. Ltd., Chennai was referred to wherein, inter alia, the said person has admitted that the gold jewellery purchased had suffered local tax and that there was no material on record to support, in the Show Cause Notice that he received smuggled Singapore gold jewellery without bills; they had received the gold as part of their purchase for business in terms of duly accounted tax paid invoice and payment was made through banking channels.

17.7 Insofar as seizure of 3 kgs. of gold bars from the office premises of M/s. Mundhra Bullion Pvt. Ltd. is concerned, it was argued that the same contained serial nos. 2195147, 2195148 and 2195176 on the gold bars, which were delivered vide two Bullion Operations Delivery Order memos dated 08.03.2013 and 11.03.2013, a delivery note (Form JJ) dated 18.03.2013 and a voucher dated 18.03.2013 of M/s. GRT Jewellers; that the serial numbers would match with the Bullion Operation delivery order memos dated 08.03.2013 and 11.03.2013 of HDFC Bank (as could be seen from paragraph 62.2 of the impugned Order-in-Original), which would clearly show that the said gold bars were locally purchased through banking channels by M/s. GR Thanga Maaligai Jewellers Pvt. Ltd. and hence, the seizure of the same ignoring the valid documents is a serious illegality and clear abuse of process of law.

17.8 He would also contend that the DRI team has ignored the purchase documents / invoices submitted insofar as the seizure of 584.700 gms. from M/s. Saravana Stores Thanga Nagai Maaligai is concerned; that 22 ct. gold jewellery weighing 11,658.000 gms. was purchased by M/s. Saravana Stores Thanga Nagai Maaligai from M/s. Mundhra Jewellers; in fact, the said M/s. Saravana Stores Thanga Nagai Maaligai did also furnish proof of payment made by RTGS / banking channels for purchase of the said gold jewellery, which have been ignored by the Department.

17.9 Insofar as 10.011 kgs. of 22 ct. Indian-made jewellery is concerned, it was argued that the same belonged to one Mr. Narayan Soni, 9947.200 gms. of 22 ct. imported gold jewellery belonged to one Mr. Vijaybabu, 913.8 gms. of 22 ct. gold jewellery and 4.627 kgs. of gold bullion belonged to the first appellant; that the DRI had seized the gold jewellery belonging to the family members of the first appellant, like his mother, his wife and his daughter-in-law. Without prejudice, he would also contend that this is a case of town seizure of gold jewellery and therefore, for argument’s sake even it is to be assumed that there was smuggling of the same as appearing in the alleged statement of appellant no. 1, he is alleged to have admitted that he is visiting Singapore since 1998 and hence, it is necessary to match / correlate the gold jewellery vis-à-vis the alleged smuggling activity. Moreover, neither in the mahazar nor anywhere else has the Revenue brought out any foreign marking on any of the gold jewellery, to allege that they were of foreign origin; that other than bullion, foreign make marking can never be seen or found on jewellery and therefore, Assayers have clearly misled the DRI. Hence, had they cross-examined them, then the truth would have come to light, not only as to the method of identifying / determining the origin of the same, but also about their origin as well.

18. We have considered the rival contentions carefully and we have also perused the impugned Order-in-Original. We have also gone through the various decisions relied upon by the Ld. counsel during the course of arguments.

19. The issue in the appeals on hand revolve around the interpretation of Section 111(d) and (l) of the Customs Act, 1962, which authorizes confiscation. In this regard, the following legal provisions are also required to be looked into, namely, Sections 2(22), (33) and (39), Section 111(i) and (p), Section 112, Section 120, Section 121 and Section 123: –

Relevant statutory provisions:

• Section 2(22), (33) and (39): –

“Section 2. Definitions. — In this Act, unless the context otherwise requires.

(22) “goods” includes –

(a) vessels, aircrafts and vehicles;

(b) stores;

(c) baggage;

(d) currency and negotiable instruments; and

(e) any other kind of movable property;

…

(33) “prohibited goods” means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with;

…

(39) “smuggling”, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113;”

• Section 111 (d), (i), (l) and (p): –

“Section 111. Confiscation of improperly imported goods, etc. –

The following goods brought from a place outside India shall be liable to confiscation : –

(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;

…

(i) any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof;

…

(l) any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;

…

(p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened.”

• Section 112: –

“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 sub­section (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.”

• Section 120: –

“Section 120. Confiscation of smuggled goods notwithstanding any change in form, etc. —

(1) Smuggled goods may be confiscated notwithstanding any change in their form.

(2) Where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation :

Provided that where the owner of such goods proves that he had no knowledge or reason to believe that they included any smuggled goods, only such part of the goods the value of which is equal to the value of the smuggled goods shall be liable to confiscation.”

• Section 121: –

“Section 121. Confiscation of sale-proceeds of smuggled goods. — Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation.”

• Section 123: –

“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 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, [and manufactures thereof,] watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify.”

20.1 Section 111(d) ibid. authorizes confiscation of improperly imported goods contrary to any prohibition imposed by or under this Act or any other law for the time being in force.

20.2 Section 111(l) ibid. authorizes confiscation of any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage, in the declaration made under Section 77.

20.3 Two things: ‘import’ and ‘improper’ – to establish the import which was improper. Now, therefore, Revenue has to satisfy that the gold jewellery had foreign mark, they were being improperly imported and hence, Section 111 is applicable.

20.4. Section 112 ibid. authorizes levy of penalty for improper importation of goods.

20.5 Section 123 ibid. talks of burden of proof in certain cases wherever goods are seized under the Customs Act in the reasonable belief that they are smuggled goods.

21.1 We have very carefully analysed the findings in the impugned order and also copy of the mahazars placed on record. We do not find concrete evidence, much less any evidence at all to indicate that the gold jewellery that were seized / confiscated were of foreign / Singapore origin. Even the Assayers have not specifically identified the presence of any mark to the effect that the goods in question were of foreign / Singapore origin. We do not find any material placed on record before us as to how a gold jewellery could be identified as Singapore make. We also do not find any distinguishing factor being placed on record by the Revenue or even by Lal Chand Jain, to opine that the gold jewellery he examined were of Calcutta make. Hence, the only source for the Revenue to allege that some of the gold jewellery were of foreign / Singapore make are the alleged inculpatory statements recorded under Section 108 of the Customs Act. Having obtained such statements, there could have been further investigation to find out the veracity of such statements or, at least, to prove such statements, but we do not see any such effort, being placed on record, at least before us. But however, it is a fact borne on record that the statements of crucial persons have also been retracted.

21.2 From the facts of the case, admittedly, the gold / gold jewellery were not seized during the course of import and nor has the Revenue proved that the goods in question were of foreign / Singapore origin. Had the Assayers been subjected to cross-examination, perhaps they would have revealed as to the basis for their conclusion as to the source of the goods in question, but in any case, neither the mahazar nor even the Assayers’ report give any proof that any of the gold jewellery involved had any mark as to their foreign origin and hence, the burden under Section 123 ibid. remains on the Revenue.

Reasonable belief:

21.3 In our opinion, therefore, mere inculpatory statement of persons allegedly involved which were later on retracted, cannot by themselves form the basis or become a clinching piece of evidence to hold that the goods in question were smuggled goods. Thus, the above discussion indicates that the officers of the DRI did not have a reasonable belief, at the threshold, to even entertain a doubt that the seized gold jewellery were smuggled goods in order to shift the primary burden on to the appellants herein, under Section 123 ibid.

21.4 On going through the documents placed on record, the Order-in-Original and the Show Cause Notice, it appears to us that the Department has not pursued the investigation after issuing the Show Cause Notice and the only effort seems to be that since no valid import documents could be produced by the first appellant-person carrying the gold, the same were deemed to be smuggled into India. Going by the ratio of the decisions of various higher judicial fora, the requirement of law is that the Revenue needs to prove the smuggled nature of the goods. It was not the intention of the Government to bring back the Gold (Control) Act albeit by a backdoor entry, by notifying gold under Section 123 ibid. The Revenue, therefore, is required to prove that the gold jewellery were of smuggled nature, even when it is notified under Section 123. In the case of Union of India and anor. v. Imtiaz Iqbal Pothiwala & ors. [2019 (365) E.L.T. 167 (Bom.)], the Hon’ble High Court has observed as under: –

“2. This appeal was admitted on 28th June, 2007 on the following substantial questions of law :-

“(a) Whether in the facts and circumstances of the case and in law, the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal) is justified in allowing the appeal of the respondents herein and setting aside the order of confiscation of the seized gold, by totally discarding the confessional statements given by the respondents under the provisions of Section 108 of the Customs Act, 1962, which are in the nature of admissible legal evidence, as clearly mandated by the Hon’ble Supreme Court in the cases of (i) K.I. Pavunny v. The Assistant Collector (HQ), (1997) 3 SCC 721, and (ii) Naresh J. Sukhwani v. Union of India – (1996) SCC (Cri) 76 = 1996 (83) E.L.T. 258 (S.C.)?

(b) Whether in the facts and circumstances of the case and in law, the Tribunal is justified in holding that the respondents have discharged their burden/onus cast on them in terms of the provisions of Section 123 of the Customs Act, 1962 to prove and/or establish that the huge quantity of 575 gold bars seized from their custody is not the smuggled one, in spite of the fact that no legal evidence, such as maintenance of any basic books of account whatsoever, registration details under the provisions of sales tax, payment of purchase price of the gold, payment of Government levies, like income-tax, Sales Tax, etc., duly supported by the annual returns, etc., has been produced/brought on record by the respondents?”

.

.

.

7. Secondly, the questions which arise for our consideration in this case is in the context of the application of Section 123 of the Act in respect of the goods notified therein. Gold is an item which is notified under Section 123 of the Act and it provides that burden of proof in case of notified goods, would be upon the person from whose possession and/or the person who claims ownership of the goods to prove that the seized goods are not smuggled goods. However, before the aforesaid burden could be cast upon the person who claims to be the owner of the seized goods, the Revenue should be able to establish that the goods seized under Section 110 of the Act, was on a reasonable belief that the imported goods were smuggled goods. Therefore, where seizure is a subject of challenge on the ground of absence of reasonable belief then, the question of burden of proof on the person, claiming to be the owner of the goods, would arise only when the challenge to seizure is, negatived. In the facts of the present case, neither before us nor before the authorities under the Act, has the respondent No. 1 challenged the seizure for absence of reasonable belief that the seized gold was smuggled goods. Thus, the burden of proof in this case is upon the respondent to establish that the seized gold bars are not smuggled.

8. We shall now take up for consideration, the substantial questions of law in seriation, as under :-

(A) Re. Question (a) :-

(i) This question essentially proceeds on the basis that as the respondent had made a confessional statement under Section 108 of the Act, it is admissible as evidence and warrants, confirming the show cause notice. This particularly, in the absence of the party being able to explain away the confession made. Even if we accept that a confessional statement, can be admitted as evidence, it must contain a confession by the deponent to form the basis of confirmation of the show cause notice.

(ii) We noted that statements of respondent No. 1 were recorded on 9th March, 2000, 15th March, 2000, 22nd March, 2000, 30th March, 2000 and 27th April, 2000.

(iii) We specifically called upon the Learned Additional Solicitor General to show us any confessional statement made by respondent No. l and/or other respondents i.e. Driver, Employees/Agents to the effect that, the seized confiscated gold is a smuggled gold. However, he was unable to show us any confessional statements in respect of gold made either by respondent No. 1 and/or his Drivers/Employees/ Agents. In fact, the impugned order of the Tribunal also records this finding of fact in respect of respondent No. 1 in para 14 of the impugned order dated 3rd June, 2005.

(iv) …

(v) In the above view, no fault can be found in the impugned order dated 3rd June, 2005 on the above question.

(vi) Therefore, this substantial question of law is answered in the affirmative i.e. in favour of the respondent-assessee and against the appellant-Revenue.

(B) Reg. Question (b) :-

(i) The grievance of the Revenue as brought out in this question is that the burden of proof cast upon the respondent under Section 123 of the Act, that they were not smuggled goods, is not discharged. This we note from the questions framed is only in view of the absence of legal evidence, such as maintenance of books of account, registration with the Sales Tax, Income-tax, etc., to show legal purchase of the gold.

(ii) …

(iii) We are of the view that in the absence of evidence in the form of regular books of account, registration under the income-tax and Sales Tax, etc., cannot ispo facto lead to the conclusion that the seized gold bars, are smuggled gold bars. These may lead to proceedings for breaches of other Acts but it does not follow from it that the gold bars are smuggled goods. In fact, if a person in possession of the stolen gold is able to establish that it had come into India after a proper declaration and compliance of the Act, no confiscation under the Act, can arise. Proceedings under the Indian Penal Code may be initiated by the police for theft, but it would not by reason of theft become smuggled goods. Moreover, smuggling as defined under Section 2(39) of the Act, is an act or omission which will render goods liable to confiscation under Section 111 of the Act for import and 113 of the Act for exports. On reading of Sections 111 and 113 of the Act, not keeping proper books of account or not being registered with the income-tax and/or Sales Tax Authorities, is not an omission which renders the goods liable for confiscation i.e. smuggled goods.

(iv) …

(v) At this, the Learned Additional Solicitor General emphasized the fact that the 575 seized gold bars were secreted in a specifically made cavity in jeep. This, according to him, would be done only in case the gold so secreted, was smuggled gold. Further, it is submitted by the Revenue that on 8th March, 2000, neither the respondent No. 1 and/or his driver (Mr. Anis Ashraf) whose statement was recorded, could produce any documents in support of the legal possession of the gold.

(vi) …

(vii) The Learned Additional Solicitor General drew our attention to various statements of respondent No. 1 under Section 108 of the Act, which indicated that he was not filing income-tax return, so much so he is unable to explain the source of the funds to purchase the gold. This for the reason that though he states that the money was borrowed, he is unable to state the name of the persons who lent him the money….

….

.

.

Therefore, the principle laid down in R.V.E. Venkatachala Gounder (supra) is applicable to adjudicating proceedings under the Act. By virtue of Section 123 of the Act, the burden to prove that the gold is not smuggled, is on the person found in possession of the gold. Thereafter, the onus keeps shifting. The impugned order holds the absence of the Revenue being able to discharge the onus on it after the respondent No. 1 has discharged the primary onus by showing the source of its purchase of gold. In fact, respondent No. 1 has also shown the source of its source. Thus, shifting the onus upon the Revenue. In the absence of the Revenue discharging its onus, it must follow that in the present facts, the respondent has discharged the burden of proof imposed upon him under Section 123 of the Act.”

22. In view of our above discussion, we are satisfied that the officers of the Department had no reasonable belief that the gold jewellery seized were smuggled and therefore, they have not discharged their primary responsibility of forming a prima facie / reasonable belief under Section 123 , without which, the burden of proof could not shift to the appellants from whom the goods in question have been seized. As contended by the Ld. Advocate, the sources in respect of some of the items seized, like gold bars and gold jewellery, have been explained even during investigation and also in writing, but however, the same have been ignored by the Department.

23. From the impugned Order-in-Original, we find, at paragraph 8, that it was one Benny working with M/s. Prince Jewellers, who is a friend of Mr. Sebi, who is the person who revealed for the first time the name of M/s. Mundhra Jewellers, for purchasing Singapore gold jewellery, but however, the said Benny has not at all been examined. How this Benny knew about M/s. Mundhra Jewellers selling Singapore gold jewellery is a question which could have been answered had he been interrogated by the DRI during its investigation. Hence, we are of the view that Benny is the crucial witness who could have thrown more light as to the origin of the jewellery and the involvement of the appellants, to support the report of the Assayers. Quite clearly, a crucial witness has not been examined.

Aspect of cross-examination:

24.1 Ld. Senior Advocate would take us through the reply filed by the appellants to the Show Cause Notice, in the form of written submission, copy of which is placed at pages 209 to 225 of the appeal memorandum. He drew our attention particularly to the tables at paragraphs 5 and 7 wherein he has tabularized the list of persons who were required to be cross-examined. Drawing further attention to the said tables, he would invite specifically to Column 3 where reasons for cross-examination of each person have been specifically mentioned.

24.2 From the documents placed on record and the impugned order, it is an undisputed fact that an opportunity to cross-examine any of the persons (73 plus 10 persons) has not been provided for. The Revenue may have difficulty in subjecting their own officials to cross-examination for various reasons, like their subsequent transfers, etc., but however, the important witnesses like the Assayers could have been subjected to cross-examination in order to elucidate the truth, but the same apparently has not been done, nor do we see palpable reasons for rejecting the request for cross-examination, the uncorroborated testimony of such persons cannot be taken on the face value.

24.3 When there is no cogent evidence in support and the sole reliance is on uncorroborated testimony which are not beyond suspicion but amenable to doubts, the only recourse in order to bring out the correct facts / truth is to subject the persons whose statements are relied upon to cross-examination. Hence, we are of the view that when only statements of Assayers, who are not even claimed to be experts in their field, are relied upon by the Revenue to allege that the gold / gold jewellery in question were of foreign origin, rejection of the request for their cross-examination without assigning any reasons would very well shake the very foundation of the Revenue’s case. They are no doubt Government approved Assayers, but whether they are experts in the respective fields who could identify the source or origin of a gold jewellery, is required to be established by the Revenue.

25.1 From the documents placed before us, we find that 8.452 kgs. of gold jewellery, alleged to be ‘Singapore gold jewellery’, was seized at Chennai Domestic Airport on 19.03.2013 and as a follow-up action, a search was conducted at the residential premises of Mr. Mahaveer Pipada which resulted in the seizure of 2.409 kgs. of allegedly Singapore gold jewellery, 10.011 kgs. of admittedly Indian-made gold jewellery, 4.627 kgs. of gold bars and bits. Apart from this, 3 kgs. of gold bars were seized from the premises of M/s. Mundhra Jewellers.

25.2 The allegation for the seizure of the above 8.452 kgs. of jewellery at the airport and 2.409 kgs. of jewellery at the residence of Mr. Mahaveer Pipada was that these jewellery of Singapore origin were smuggled through Burma Bazaar operators through different airports, and the reason advanced for the seizure of 4.627 kgs. of gold bars/bits and 10.011 kgs. of admittedly Indian-made gold jewellery from the residence Mr. Mahaveer Pipada along with 3 kgs. of gold bars from the premises of M/s. Mundhra Jewellers was that the same were on account of proceeds of smuggling.

25.3 The reason for concluding that certain jewellery as imported or ‘Singapore’ jewellery is on the basis of the Assayers’ Reports namely, that of Mr. B. Mohan Achari and Mr. P. Lal Chand Jain.

26.1 The relevant portion of the report issued by Mr. B. Mohan Achari is reproduced below: –

26.2 The relevant portion of the report issued by Mr. P. Lal Chand Jain is also reproduced below: –

27. So, the investigation concluded the seized jewellery as foreign jewellery only basing on these Assayers’ certificates, as reproduced supra, and the basis for their appraisal is not forthcoming, as to whether it is on the basis of their experience or on account of the model, purity or any other characteristic which differentiates Indian jewellery from Singapore jewellery. The methodology adopted to arrive at such a determination and as to whether any known processes / methods have been adopted have not been stated. Further, on all the jewellery, there are no foreign markings and hence, there is no reasonable basis to conclude these to be of imported origin.

28. In this context, the burden of proof does not shift to the appellants, but the burden lies on the investigating agency to prove that the seized jewellery were of foreign origin.

Judicial Precedents:

29.1 In the case of Pr. Commissioner of Customs (Prev.), Delhi v. Ahamed Mujjaba Khaleefa [2019 (366) E.L.T. 337 (Tri. – Del.)], the CESTAT had held as under: –

“10. It is seen that there is no foreign marking on the jewellery. Revenue has not placed any proof to substantiate that the jewellery was smuggled into India other than the statement of the passenger. In the facts and circumstances of the case, I find no reason to interfere with the findings of the impugned order which is sustained for the reason mentioned therein. In the result, Revenue appeal is rejected.”

29.2 The co-ordinate Kolkata Bench of the CESTAT in the case of Commissioner of Customs (Prev.), Shillong v. Manisha Devi Jain [2019 (370) E.L.T. 401 (Tri. – Kol.)] has observed as under: –

“5. On perusal of records, I find that the Indian Origin remolten gold/gold ornaments could not be legally confiscated as the possession of the same is not prohibited under any provision of law. In the present case, the seized gold do not bear foreign markings and do not have uniform weight/purity. It is observed that the respondent belongs to a respectable and a well to do family. She is also a regular Income Tax assessee. The seized gold rods were made from the gold ornaments belonging to her.”

29.3 Further, the Hon’ble High Court of Judicature at Bombay in the case of State of Maharashtra v. Prithviraj Pokhraj Jain [2000 (126) E.LT. 180 (Bom.)] has, at paragraph 19, held 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.”

30.1 The importance of cross-examination has been explained by various High Courts. In the case of Basudev Garg v. Commissioner of Customs reported in 2013 (294) E.L.T. 353 (Del.), the Hon’ble Delhi High Court has held as under: –

“10. Insofar as the general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those statements ought to be given to the assessee. This is clear from the observations contained in Swadeshi Polytex Ltd. (supra) and Laxman Exports Limited (supra). Apart from this, the decision of this court in J&K Cigarettes Ltd. (supra) clinches the issue in favour of the appellant. In that case, the validity of Section 9D of the Central Excise Act, 1944 was in question. The said Section 9D of the Central Excise Act, 1944 reads as under :-

“9D. Relevancy of statement under certain circumstances. – (1) A statement made and signed by a person before any Central Excise Officer of a gazette rank during the course of any inquiry or proceedings under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains: –

(a) When the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.

(2)   The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.”

11. We may straightaway say that the provisions of Section 9D of the Central Excise Act, 1944 are identical to the provisions of Section 138B of the Customs Act, 1962 which would be applicable in the present case.

12. Section 138B of the Customs Act, 1962 reads as under:-

“138B. Relevancy of statements under certain circumstances. – (1) A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, –

(a) When the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable or

(b) When the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.

(2) The provisions of sub-section (1) shall so far as may be apply in relation to any proceeding under this Act, other than a proceeding before a court, as they apply in relation to a proceeding before a court.”

It is apparent that both the provisions are identical.

13. This court while upholding the validity of Section 9D of the Central Excise Act, 1944 interpreted its provisions as under:

“12. Bare reading of the above section manifests that under certain circumstances, as stipulated therein, statement made and signed by those persons before any Central Excise Officer of a gazette rank during the course of inquiry or proceedings under this Act can be treated as relevant and taken into consideration if under the given circumstances such a person cannot be produced for cross-examination. Thus, this provision makes such statements relevant for the purposes of proving the truth of the facts which it contains, in any prosecution for an offence under the Act in certain situations. Sub-section (2) extends the provision of sub-section (1) to any proceedings under the Act other than a proceeding before the Court. In this manner, Section 9D can be utilized in adjudication proceedings before the Collector as well. In the present case, provisions of Section 9D of the Act were invoked by the Collector holding that it was not possible to procure the attendance of some of the witnesses without undue delay or expense. Whether such a finding was otherwise justified or not can be taken up in the appeal.”

14. The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings.

(Emphasis supplied)

30.2 Further, the Hon’ble High Court of Delhi in the case of Flevel International v. Commissioner of Central Excise reported in 2016 (332) E.L.T. 416 (Del.), in paragraph 42 of the judgment, held as under:

“42. It is settled law that the denial of opportunity of cross-examination of a witness whose statements have been relied upon in the adjudication order would vitiate the order of adjudication. In Basudev Garg v. Commissioner of Customs – 2013 (294) E.L.T. 353 (Del.), this Court referred to Section 9D of the CE Act and noted that even while upholding its constitutional validity in J & K Cigarettes Ltd v. Collector of Central Excise – 2011 (22) S.T.R. 225 (Del.) = 2009 (242) E.L.T. 189 (Del.), a Division Bench of this Court had observed that the circumstances under which the right of cross-examination can be taken away would have to be ‘exceptional’. This would include circumstances where the person who had given the statement was dead or cannot be found are is incapable of giving evidence or is kept out the way by adverse party or whose presence cannot be obtained without an element of delay or expense which, under the circumstances the Court considers unreasonable. It was held by the Court in Basudev Garg (supra) that “it is clear that unless such circumstances exist the noticee would have right to cross-examine the persons whose statements are being relied upon even in quasi-judicial proceedings.”

30.3 It is clear from the above that any statement/s which are used against a person, unless such statement/s are subjected to scrutiny in the form of cross-examination by the affected persons / appellants, the same would only remain mere statements lacking any credibility. It is not as though it was impossible for the Revenue to at least subject the Assayers to cross-examination since it is they who have certified that the gold jewellery in question were of foreign make. Other than their statements, there is no other documentary evidence placed on record and hence, it was very much essential in the interests of justice to subject them to cross-examination, which opportunity having been denied to the appellants, we are of the view that their statements / certificates do not inspire any confidence and therefore the same are required to be ignored.

31.1 In the case of Kashi Kumar Aggarwal v. Commissioner of Customs (Preventive), New Delhi [Final Order No. 50387 of 2023 dated 23.03.2023 in Customs Appeal No. 50536 of 2022 – CESTAT, New Delhi], the Ld. co-ordinate Bench of Delhi has explained the applicability of Section 111(d) ibid. to town seizures or seizures at ports and airports. The relevant paragraph is extracted below for convenience: –

“B. Gold jewellery weighing 581.71 grams seized from the appellant (part of S.No.(ii) of the operative part of the Order in original)

33. These gold ornaments were confiscated in the order in original and the confiscation was upheld in the impugned order under sections 111(d), 111(i) and 111(p) read with section 120 of the Customs Act. Section 120 provides that Smuggled goods may be confiscated notwithstanding any change in their form. Further, it also provides that where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation. It is the case of the department that the seized jewellery was made out of smuggled gold and NOT that it itself was smuggled. There were also no foreign markings on them to show that the jewellery is smuggled. Thus, it is not in dispute that the gold jewellery was not smuggled but is made in India. If it was established with some evidence that the jewellery was manufactured out of smuggled gold, then such smuggled gold would have been covered under Section 123 and by virtue of section 120, would have been liable for confiscation notwithstanding the change in its form into jewellery. However, there is no such evidence on record. In our considered view, therefore, the jewellery is not liable to confiscation in the absence of any evidence that it is smuggled or it has been made by converting smuggled gold. The mere fact that the jewellery was found along with the smuggled gold bars makes no difference. Confiscation of the gold jewellery cannot be sustained and needs to be set aside and we do so. In Final Order dated 25.5.2021, this tribunal had taken a similar view with respect to the jewellery seized from others in this case.”

31.2 Similarly, in one another case, the Ld. Principal Bench of the CESTAT in the case of Deepak Handa & anor. v. Principal Commissioner of Customs (Preventive), New Delhi [Final Order Nos. 51520-51521 of 2021 dated 25.05.2021 in Custom Appeal Nos. 52922-52923 of 2019 – CESTAT, New Delhi], in a more or less similar situation, has held as under: –

“A.2. Gold jewellery weighing 4.687 kg and miscellaneous items of gold weighing 0.742 kg with a purity of 87.5% seized (part of S. No.(i) of the operative part of the Order in original)

34. These gold ornaments were confiscated in the order in original and upheld in the impugned order under sections 111(d), 111(i) and 111(p) read with section 120 of the Customs Act. Section 120 provides that smuggled goods may be confiscated notwithstanding any change in their form. Further, it also provides that where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation.

35. It is the case of the department that the seized jewellery was made out of smuggled gold and NOT that it itself was smuggled. There were also no foreign markings on them to show that the jewellery was smuggled. Deepak had no bills or invoices to show legitimate purchase of these ornaments….

…

36. In his statement, Deepak, said that he got the jewellery made by supplying imported foreign marked, gold to the jewelers. Even if this statement is taken on face value, it does not say that smuggled gold was supplied to make the jewellery. It only says the jewellery was made from imported gold which could be (a) legitimately imported gold sold by traders; or (b) smuggled gold. If it was established with some evidence (including statements) that the jewellery was manufactured out of smuggled gold, then such smuggled gold would have been covered under Section 123 and by virtue of section 120, would have been liable for confiscation notwithstanding the change in its form into jewellery. However, there is no such evidence on record. In our considered view, therefore, the jewellery is not liable to confiscation in the absence of any evidence that it is smuggled or it has been made by converting smuggled gold. The mere fact that the jewellery was found along with the smuggled gold bars and gold coins makes no difference.”

32. Insofar as burden of proof within the meaning of Section 123 ibid. is concerned, the following orders guide us to understand the same better.

32.1 In the case of Daleep Kumar Verma v. Commissioner of Customs (Preventive), Shillong & ors. [Customs Appeal No. 75315 of 2022 & ors. – Final Order Nos. 75300-75302 of 2023 dated 04.05.2023 – CESTAT, Kolkata], the co-ordinate Kolkata Bench has held as under: –

“18.3 We find merit in the argument of the Appellants. The gold bangles seized from Indigo airlines, does not have any foreign markings. They were claimed by Mr Karan Sehdev of KSTE that they have sent the raw gold for job work to M/S STM, Imphal. The gold was purchased by them from indigenous sources, but DRI Officers have not taken into account the evidences submitted by them about their legal purchase in India. The goods were dispatched along with an Invoice raised by the job worker. All these documents indicate that the raw gold was indeed received by M/S STM, Imphal from M/S KSTE, New Delhi for job work and they were dispatched after completion of the job work by M/S STM, Imphal. There is no evidence available on record to prove that the gold were smuggled from Myanmar. Except the statements of the Co Noticees, which were later retracted, there is no other evidence available to establish the smuggled nature of the gold. In view of the above discussion and relying upon the cases laws cited above, we hold that the gold jewellery which were dispatched under proper Invoice are not liable for confiscation.

19.1 The next ground raised by the Appellant is regarding Burden of Proof as envisaged under Section 123 of Customs Act,1962 . As per this section, the burden of proving that the goods are not smuggled, lies on the person fromwhose possession the goods were seized. For the sake of easy reference, the said section 123 is reproduced below:

…

19.4. The contention of the Appellant is that the gold bangles and silver bar were not of foreign origin. Section 123 of Customs Act is applicable only to foreign marked gold and silver. Since, there is no foreign mark available on the gold bangles and silver bars seized from the Appellants, the provisions of section 123 is not applicable in this case.

.

.

19.7 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.

19.8 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.”

20. The next ground raised by the Appellants is that they have been denied the right to cross examine the Expert who has given the certificate. The Appellants stated that Shri Akshay Kumar Paul, Goldsmith has given a Certificate dated 17.05.2019 certifying that the 90 pieces of gold were of foreign origin in strip form, based on its purity. They argued that Sh. Akshay Kumar Paul has no expertise to give that opinion. The purity of silver cannot be the basis to construe that the gold is of foreign origin. We agree with the claim of the Appellants. The purity of the gold alone cannot be a determining factor whether the gold is of foreign origin or not. As discussed in para 19 above, the Appellant has produced evidence to the effect that the gold were procured from domestic sources. Hence, we hold that no weightage can be given for the certificate of purity issued by the Expert, to establish its foreign origin.”

32.2 The Bangalore Bench of the CESTAT in the case of Naveed Ahmed Khan v. Commissioner of Customs, Bangalore [2005 (182) E.L.T. 494 (Tri. – Bang.)], after considering the rival contentions, has concluded as under:-

“5. On a careful consideration of the submissions, we find from the facts of the case that the goods were seized in Bangalore by the Police. And the appellants had handed over the goods under seizure to the Customs Department for further investigation. In terms of the judgments relied by the Counsel which are noted supra, Section 123 of the Customs Act is inapplicable when the Police have seized the goods and handed over the same to the Customs Department as held in the case of Jitendra Pawar v. C.C.; Rajkamal Departmental Stores; State of Maharashtra v. P.P. Jain. Therefore, the burden of proving that the goods are smuggled ones is on the Revenue. The Commissioner has taken a view that the department has discharged their burden of showing the goods having a foreign marking on the goods. On this point also we find that the Tribunal has held that mere marking of foreign origin does not by itself render the goods to be smuggled ones as noted in the citations extracted supra. The Statements of the appellants that they were not directly involved in the smuggle but they have purchased the goods from the shops located opposite to the Customs Office, Madras have not been contradicted by the Revenue and there is no finding in OIO that the appellants statements are incorrect and that they have directly smuggled the goods from abroad. Therefore, the fact of the appellants having purchased from open market has been established by the appellants. The fact that they did not carry the licit documents were not a ground to hold that the goods are smuggled ones. No doubt the goods carried the foreign marking but that by itself cannot be a ground to hold the goods to be smuggled ones as noted in the judgments cited supra.. ”

32.3 The relevant observations of this Bench in the case of Commissioner of Customs v. Mohammed Ali Jinnah [Customs Appeal No. 40099 of 2020 – Final Order No. 40289 of 2023 dated 20.04.2023 – CESTAT, Chennai] are as under: –

“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.

.

.

.

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 copies 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.

…

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)

…

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.

…

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.

…

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 earnings. The department has not been able to adduce any evidence to disprove these contentions…

…

37. The learned AR has adverted to various decisions Surjeet Singh Chabra Vs. Union of India – 1997 (89) ELT 646 (SC), Kanungo & Co. Vs. 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 crossexamine him without giving cogent reasons vitiates the proceedings.”

33. As per sub-section (8) of Section 129C of the Customs Act, 1962, any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code, and the Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973. Thus, the Indian Evidence Act is no stranger to proceedings under the Customs Act.

34.1 Order 6, Rule 2 of the Civil Procedure Code, 1908, states that the pleading shall only contain important facts that must be shown in a concise form. Evidence is a relative term that refers to a connection between two facts: the fact in dispute (factum probandum), or statement to be proven, and the evidential fact (factum probans), or material corroborating the proposition.

34.2 The requirements under the burden of proof are covered in Chapter VII of the Indian Evidence Act. Under the Indian Evidence Act, 1872, Sections 101 to 103 deal with the burden of proof in general, whereas Sections 104 to 106 deal with the situation where the burden of proof is placed on a specific individual.

34.3.1 The burden of proof is defined under Section 101 of the Indian Evidence Act: –

“Anyone who wants a court to rule on a legal right or responsibility based on facts he claims must first show that such facts exist. The second Section of the statute specifies that when a person is required to show the existence of a fact, that person shall also bear the burden of proof.

As a result, a person seeking a favourable decision from the court must provide evidence in support of his case, according to this clause. The usual rule is that the party that asserts a truth bears the burden of proof, not the side that denies it.”

34.3.2 Section 102 of the Indian Evidence Act reads as under: –

“Who bears the burden of proof — In a suit or procedure, the person who would fail if no evidence was presented on either side has the burden of proof.”

34.3.3 . Section 103 of the Indian Evidence Act states:

“The burden of proof as to any specific fact is with the person who asks the court to believe in its existence unless any law provides that the burden of proof rests with any particular individual.”

34.3.4 Section 104 of the Indian Evidence Act states that the burden of proof is on the person giving the evidence to prove the facts that must be shown in order for the evidence to be admissible.

Conclusion:

35. This is a case where the appellants have been penalized for an alleged activity which, according to the Revenue, has resulted in confiscation of the allegedly imported goods. When, therefore, a Show Cause Notice is issued by the DRI, a reasonable belief is required to be established before alleging any activity in the nature of smuggling. In the case of town seizure, the initial burden is always on the Revenue to prove as to what prompted it to reasonably believe that the gold / gold jewellery in question were smuggled / of foreign origin.

36.1 Considering all the facts and attending circumstances, and by applying the standard of proof of preponderance of probabilities, we are of the view that the gold jewellery seized could not be proved to be of foreign origin, which the Revenue has not been able to establish beyond doubt. As the gold jewellery seized were not proved to be of foreign origin, the seizure of 4.627 kgs. of gold bars/bits, 3 nos. of 1 kg. gold bars and 10.011 kgs. of admittedly Indian-made gold jewellery as sale proceeds of smuggling is also not in accordance with the law.

36.2 Once the seizure is invalid, all subsequent proceedings and consequent actions are bad in law, as held in the case of Dimondstar Exports Ltd. & ors. v. Director General of Income Tax (Investigaton) [(2005) 278 I.T.R. 36].

36.3 Further, it has to be observed that Section 123, even assuming it is applicable, comes into play only if the ingredients for exercise of power under Section 110 are satisfied, as held in the case of Di Gold Designer Jewellery v. Commissioner of Customs [2021 SCC Online CESTAT 4213].

37. Investigation has revealed that these 3 kgs. of gold bars seized at the premises of M/s. Mundhra Jewellers were validly purchased by M/s. GR Thanga Maaligai Jewellers Pvt. Ltd. through banking channels. It is an admitted fact that Mr. Ashish Mundhra, appellant no. 2 herein, had received the seized 3kgs. of gold bars from Mr. Narayan Soni, who in turn had received the same from M/s. M/s. GR Thanga Maaligai Jewellers Pvt. Ltd. It appears from the record that M/s. GR Thanga Maaligai Jewellers Pvt. Ltd. had purchased the same via Bullion Operations Delivery Order memos dated 08.03.2013 and 11.03.2013 of HDFC Bank and Form-JJ along with issue voucher (as observed by the Ld. Commissioner at paragraph 62.2 of the impugned Order-in-Original) which apparently contain the serial nos. 2195147, 2195148 and 2195176 as present on the seized 3 nos. of 1 kg. gold bars seized from the premises of appellant no. 2 (copies of same are placed on record at page numbers 186 and 187 of Customs Appeal No. 40053 of 2020). Hence, seizure of the gold, despite all these evidence forthcoming and being shown, is clearly abuse of the process of law.

38. In view of the peculiar facts of the case as discussed by us and in the light of the guidance set by judicial fora, we hold that confiscation of the gold / gold jewellery from the appellants is bad in law, the Revenue has also failed to establish / prove that any of the gold / gold jewellery confiscated from the appellants had any marking as to its foreign origin and that the Revenue acted in a haste and without reasonable belief that the impugned goods were smuggled.

39. The appellants have questioned the leviability of penalty under Section 112 of the Customs Act on them. Section 112 authorizes imposition of penalty, obviously, for ‘improper importation’ which renders such goods liable for confiscation. From the analysis, as above, we are satisfied that the Revenue has not established that the goods in question were liable for confiscation in any manner known under law. Nor has the Revenue placed any piece of evidence on record to even suggest that the gold jewellery that were seized had any marking as to their foreign origin and hence, there was no ‘import’ at all. Consequently, when there was no import, then, there is nothing to allege as improper import. Hence, we are of the clear opinion that penalty under Section 112 not being automatic, cannot be imposed in the facts of this case, on the appellants. Therefore, we set aside the impugned order to this effect.

40. In view of the above detailed discussion and reasoning, we set aside the impugned Order-in-Original dated 15.06.2022 passed by the Commissioner of Customs, Chennai and allow the appeals with consequential benefits, if any, as per law.

(Order pronounced in the open court on 31.08.2023)