Commissioner Of Customs (Preventive) Lko. vs Anand Navalchand Pugaliya

AFR
Reserved On :- August 6 , 2026
Delivered On :- September 2, 2026
Uploaded On :- September 3, 2026
HIGH COURT OF JUDICATURE AT ALLAHABAD
LUCKNOW
CUSTOM APPEAL No. - 1 of 2026
Commissioner of Customs (Preventive) Lko.
…..Appellant(s)
Versus
Anand Navalchand Pugaliya
…..Respondent(s)
Counsel for Appellant(s) : Saurabh Yadava,
Counsel for
Respondent(s)
: Jameel Ahmad, Vineet
Kumar Singh
Along with :
CUSTOM APPEAL No. - 2 of 2026:
Commissioner of Customs(Preventive) Lko.
1.
Versus
Nagendra Hira Lal Tiwari
CUSTOM APPEAL No. - 3 of 2026:
Commissioner Of Customs (Preventive) Lko.
2.
Versus
Purmanand Ramchandra Mishra

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CUSA No. - 1 of 2026
Court No. - 3
HON'BLE SHEKHAR B. SARAF, J.
HON'BLE ABDHESH KUMAR CHAUDHARY, J.
SHEKHAR B. SARAF, J. : These three appeals, preferred
by Commissioner of Customs (Preventive), Lucknow
under Section 130 of the Customs Act, 1962 (hereinafter
referred to as the 'Act') assail a common order dated
April 23, 2025 passed by the Custom, Excise and Service
Tax Appellate Tribunal, Allahabad (hereinafter referred to
as the ‘CESTAT’) whereby the order passed by
Commissioner (Appeal) was affirmed and order passed by
Adjudicating authority holding absolute confiscation of
gold bars alongwith packing materials used for
concealment, silver bullion and cash was set aside.
2. Custom Appeal No.1 of 2026 concerns Shri
Anand Navalchand Pugaliya (hereinafter referred to as
‘respondent’), the proprietor of M/s Pugaliya Jewellers,
who asserts lawful ownership of the seized gold bars.
Custom Appeal No.2 of 2026 and Custom Appeal No.3 of
2026 pertains to Shri Narendra Hiralal Tiwari and Shri
Purmanand Ramchandra Mishra respectively, from whose
possession the gold bars were recovered. Since all three
appeals arise from a common order raising same

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CUSA No. - 1 of 2026
questions of law regarding perverse findings and burden
of proof under Section 123 of the Act, therefore, they
have been heard together and are being decided by this
common judgment.
ADMISSION OF SUBSTANTIAL QUESTIONS OF LAW
3. Upon perusal of the records and having heard
the learned counsel for the appellant, the following
substantial questions of law have been raised by the
revenue department and have been admitted:-
I. Whether the CESTAT erred in law in misinterpreting
Section 2(39) read with Section 111 of the Customs Act,
1962 with regard to the terms ‘smuggling’ and
‘confiscation’ of such goods?
II. Whether the finding of the Tribunal that the Burden
of proof was discharged by the respondent is a perverse
finding?
FACTS
4. The factual matrix of the present lis is
delineated below:
a. On November 28, 2020, acting on specific

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intelligence, officers of the Directorate of Revenue
Intelligence (DRI), Lucknow Zonal Unit, intercepted Shri
Nagendra Hiralal Tiwari and Shri Purmanand Ramchandra
Mishra at Prayagraj while they were travelling in a bus en
route from Nagpur. During a personal search conducted
on their persons, two metal bars bearing the marking
‘Valcambi Suisse 1 KG Gold 995.0’ were recovered from
Shri Narendra Hiralal Tiwari and one metal bar bearing
the marking ‘Suisse 1 KG Gold 995.0’ was recovered from
Purmanand Ramchandra Mishra. The aforesaid three
yellow coloured metal bars weighing 2,997 grams valued
at Rs. 1,43,85,600/-, were wrapped in tape and
concealed inside the shoes of the intercepted persons.
b. When both the intercepted persons were questioned
on November 28, 2020, they admitted that they were
carrying the foreign origin smuggled gold for its delivery
at Prayagraj on the direction of respondent. They further
stated that they did not possess any valid documents
with respect to purchase or import of the foreign origin
gold. Hence, on the reasonable belief that the gold was
brought into India by way of smuggling, and therefore,
liable to confiscation under Section 111 read with Section
123 of the Act, the goods were seized by the DRI under

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Section 110 of the Act.
c. On the basis of the statements of both the
intercepted persons, a follow-up inquiry was conducted
on November 28, 2020 at the residential and business
premises of Shri Anand Navalchand Pugaliya wherein,
during the search, a Silver Bullion weighing 2,36,635
grams was recovered from his house while 7,005.64
grams of Silver Bullion was recovered from his shop,
aggregating to a total of 2,43,640.64 grams.
Simultaneously, cash amounting to Rs. 19,99,000/- was
recovered from the house and Rs. 9,72,270/- from his
shop, aggregating to a total of Rs. 29,71,270/-. Upon
failure to produce any documents in relation to the
recovered Silver Bullion and cash, both were seized under
Section 110 of the Act on the reasonable belief that the
Silver Bullion had been smuggled into India without
payment of customs duty and the cash represented the
sale proceeds of smuggled gold/silver.
d. The aforesaid metal bars were sent to the Chemical
Examiner CRCL, New Delhi wherein the metal bars were
confirmed to be gold with purity ranging from 99.35% to
99.67%.

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e. During the course of the investigation, in response
to summons, Shri Anand Navalchand Pugaliya vide letter
dated January 14, 2021 submitted certain documents
with regard to GST returns, purchase invoices of gold and
silver, a gift deed in relation to silver, a delivery note,
labour charges paid to a refiner, balance sheet, sale and
purchase ledger, stock statements and bank statements.
f. Upon receipt of a document pertaining to labour
charges paid to a refiner namely Shri Vijay Anandrao
Devkar, the DRI officers summoned him, and in response
to the said summons, he submitted a notarized affidavit
dated February 8, 2021, wherein it was stated that Shri
Anand Navalchand Pugaliya had given him 38 pieces of
gold weighing approximately 3 kg for melting and
converting into 3 bars of 1 kg each, for which he received
Rs. 1,500/- in cash. Moreover, in his statement recorded
on September 22, 2021, Shri Vijay Anandrao Devkar
corroborated his earlier statement regarding melting and
conversion of the gold and further stated that he did not
possess any dye bearing a marking akin to marking
engraved on the seized gold bars. He further confirmed,
upon being shown photographs of the seized gold bars
bearing the marking "Valcambi Suisse 1 KG Gold 995.0",

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CUSA No. - 1 of 2026
that he had not given any such marked gold bar to any
person during the preceding two years.
g. Statements of Shri Anand Navalchand Pugaliya were
recorded under Section 108 of the Act on April 22, 2021,
April 23, 2021, June 2, 2021, June 4, 2021 and October
18, 2021. In his statement dated April 22, 2021, he
stated that the recovered gold was purchased from two
different sellers, namely Safari Bullion and Jewellers
Jasraj Shantilal Baid. However, in his subsequent
statements dated June 2, 2021 and June 4, 2021, he
modified his earlier statement and claimed that the gold
was purchased from Safari Bullion only. He also failed to
provide details of the artisan at Prayagraj, namely Shri
Raju Bhai, to whom the recovered goods were allegedly
destined for delivery.
h. During the investigation, it was found that Shri
Anand Navalchand Pugaliya had on an earlier occasion
manipulated his books of accounts to validate bogus cash
proceeds from the sale of gold bullion in order to
establish the ownership of the impugned cash and as a
result an order dated December 31, 2020 under Section
24(4)(b)(i) of the Prohibition of Benami Property
Transaction Act, 1988 (hereinafter referred to as ‘PBPT

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Act’) was passed provisionally attaching the impugned
cash of Rs. 67.50 lakhs as ’Benami Property’ under
Section 2(9)(D) of the PBPT Act.
i. Based on the aforesaid facts and other material
available on record, a show cause notice dated November
26, 2021 was issued for contravening Section 7, 11 and
123 of the Act to the respondent proposing confiscation
of the seized gold bars, silver bullion, cash, and for
imposition of penalty. In response to the show cause
notice, defence replies were filed on behalf of the
respondent.
j. After considering the show cause notice, relied upon
documents and affording opportunity of personal hearing,
the adjudicating authority vide order dated November 14,
2022 had ordered absolute confiscation of the seized
foreign origin smuggled gold weighing 2997 grams valued
at Rs.1,41,16,791/- and silver bullion weighing
2,43,640.64 grams valued at Rs.1,37,96,297/-. The said
confiscations were ordered in terms of Section 111(a)(b)
(h) & (m) of the Act. Apart from the aforesaid
confiscation, learned adjudicating authority also ordered
confiscation of cash amounting to Rs.29,71,970/- under
Section 121 of the Act besides imposing penalty of

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CUSA No. - 1 of 2026
varying amounts on the respondent and the two
intercepted persons under Section 112(b) of the Act.
k. However, a volte-facie was observed at the
appellate stage, when the Commissioner (Appeal) vide
order dated June 5, 2023, has allowed the appeal filed by
the respondent alongwith the two intercepted persons
and set aside the order of confiscation passed by
adjudicating authority.
l. This decision of Commissioner (Appeal) was affirmed
by the Customs, Excise and Service Tax Appellate
Tribunal (CESTAT) vide order dated April 23, 2025 with
the observation that Commissioner (Appeal) has duly
analyzed the evidence tendered and produced before the
lower authorities in support of their contentions.
m. Being aggrieved by the order of the CESTAT dated
April 23, 2025, the revenue has preferred the present
appeal before this Court under Section 130 of the Act
raising substantial questions of law arising from the
impugned final order.
ANALYSIS
5. Upon perusal of the order passed by the

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Tribunal, the core controversy in the present appeal is
with regard to whether the Tribunal, being the last fact
finding authority, has acted in a proper manner in
appreciating the evidence that was provided by the
respondent with regard to the seizure of gold, silver and
cash. The Tribunal held that the Burden of proof that was
cast upon the respondent under Section 123 of the Act
had been discharged and that it was incumbent upon the
revenue to contradict the veracity of evidence furnished
by the respondent.
6. The first aspect to be considered in the case in
hand is with regard to on whom the burden of proof lies.
We would like to examine Section 123 of the Act, which
reads as follows:-
“ 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;

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(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.”
7. Thus, it is clear that Section 123 casts the
burden of proof on the person from whom the goods are
seized or the owner of the goods, for proving that the
goods are not smuggled goods. Accordingly, it is up to
such person to show that the goods are not of foreign
origin and hence not smuggled or that the goods are of
foreign origin but not smuggled goods, having been
lawfully acquired.
8. One must be mindful of the fact that Section
123 initially vests the burden of proof on the revenue
before shifting it towards the assessee. Three conditions
must be fulfilled by the revenue for discharging their
onus before applicability of Section 123 of the Act, that
is, firstly seizure of goods to which this section applies,
secondly, seizure must be under the Customs Act and
thirdly, seizure on the reasonable belief that they are
smuggled goods. When these three conditions are
fulfilled, the presumption of smuggled goods arises, and
the burden shifts to the assessee to show that they are

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CUSA No. - 1 of 2026
not smuggled goods.
9. Applying the aforesaid conditions for seizure of
three gold bars, we find that first and second conditions
are fulfilled. The third condition of ‘reasonable belief’ is
based on foreign marking on gold as well the clandestine
manner of transportation and statements of the
intercepted persons. Therefore, the initial burden that
was vested on the revenue was discharged.
10. Having noted the above legal position, we are
required to examine as to what was the statement of the
respondent, the intercepted persons and the refiner
about foreign marking gold. As could be seen from the
discussion and findings of the investigation in the show
cause notice as well as in the adjudicating order, a
plethora of inconsistency was brought to light.
11. The statements dated November 28, 2020 of
Narendra Hiralal Tiwari and Purmanand Ramchandra
Mishra under Section 108 of the Act were recorded
whereby they admitted carrying foreign origin smuggled
gold. The relevant paragraph from the findings in show
cause notice is quoted hereinbelow:-
“4.1. The accused persons, Shri Narendra Hiralal

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CUSA No. - 1 of 2026
Tiwari and Shri Purmanand Ramchandra Mishra
(Noticee no. 1 and 2) were intercepted by the
officers of DRI while carrying 2997 grams of
smuggled foreign origin gold value at rupees
1,31,16,791/-. Both the said accused persons, Shri
Nagendra Hiralal Tiwari & Shri Purmanand
Ramchandra Mishra, in their respective statements
dated 28.11.2020, admitted of carrying the said
foreign origin smuggled gold, which they had
received from Shri Anand Navalchand Pugaliya for
its delivery at Prayagraj. They were carrying the
recovered gold on the directions of Shri Anand
Navalchand Pugaliya. They are working for M/s
Pugaliya Jewellers and getting monthly salary. Both
of them denied having any valid document with
respect to purchase/import of the said smuggled
foreign origin gold, as recovered from their
possession. They stated that they were fully aware
that smuggling of gold is a punishable offence under
law, but they committed the said offence in lure of
money. Further, they accepted their act of carrying
smuggled gold on earlier occasion too and were
apprehended by the officer of the Koikata Customs
and a SCN was issued in this regard. On the basis of
statements of both the said persons, a follow up
enquiry was conducted on 28.11.2020 at the house/
business premises of Shri Anand Pugaliya, M/s
Navalchand Sardarmal Pugaliya Jewellers, Nagpur.”
12. Furthermore, the refiner in his statement
claims to have received 38 pieces of gold for converting
the same into three gold bars without any marking for
respondent. The relevant paragraph from the findings in
show cause notice is quoted hereinbelow:-
“4.6. Shri Vijay Anadrao Devkar in his statement
dated 22.09.2022 specifically mentioned that he
had received 38 pieces of gold and converted the
same into 3 bars of 1 kg each and without any
marka. He further tendered that he did not have
any marka (dye) of 1 kg and had only one mould of
1 kg. On being shown the photographs of seized
gold bars, Shri Vijay Anandrao Devkar confirmed

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CUSA No. - 1 of 2026
that he had not given the gold shown in photograph
(marked one kg) to any person in last two years.
He further stated that Shri Anand Pugaliya did not
give him any order of "marka gold"
*
4.15 Further, Shri Vijay Anandrao Devkar of M/s
Devkar Refinery submitted in his statements that
all his reply letters were prepared by Shri Anand
Pugaliya and he simply signed them upon being
insisted by Shri Pugaliya, it is worthwhile to
mention that as per the said letters of Shri Vijay
Anandrao Devkar, 38 gold pieces were sent by Shri
Anand Pugaliya for conversion. In other words, Shri
Anand Pugaliya through Shri Vijay submitted that
38 gold pieces were converted into gold bars,
whereas, in his statements, Shri Anand Pugaliya
kept reiterating that only 35 gold pieces were sent
for conversion to the refinery. The submissions of
Shri Anand Pugaliya are therefore contradictory in
nature and facts and hence raise bonafide
suspicion. The gold, as recovered and seized by the
DRI officers contained the marks and identification
as "PAMP SUISSE" & "VALCAMBI SUISSE" which
happens to be of Switzerland origin and as per the
investigation conducted, the statements of Vijay
Ananadrao Devkar, the refiner from whom the said
Gold Bars said to have been procured after casting
the 38 cut pieces, as stated by Anand Pugaliya in
his defence is nothing but an afterthought and has
no bearings.”
13. On the contrary, respondent in his statement
dated February 28, 2021 stated that he had handed over
35 pieces of gold to the refiner for melting and converting
into three bars. The relevant paragraph from the findings
in show cause notice is quoted hereinbelow:-
“3.20 Whereas summon dated 23.02.2021 (RUD-
33) was issued to Anand Navalchand Pugaliya to
appear before the investigating team on
03.03.2021. In response of the same, a letter dated

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CUSA No. - 1 of 2026
28.02.2021 (RUID-34) was received from him
submitting that-
“......He further submitted the receipt dated
25.11.2020 of labour charges for conversion of 35
small pieces of gold into 3 gold bars in order to
send 2997 grams jewellery to Allahabad (Prayagraj)
from Nagpur, with his 2 employees i.e. Shri
Nagendra Tiwari & Purnanand Ramchandra Mishra,
for the purpose of manufacturing of jewellery of a
particular design, as required by customers…...”
14. Moreover, respondent who asserts lawful
ownership of the seized gold in his statement dated April
22, 2021 stated that he had purchased the gold from
Safari bullions and Jewellers Jasraj Shantilal Baid
whereas in a statement dated June 2, 2021 and June 4,
2021 he stated to have purchased the gold from Safari
bullions only. The relevant paragraph from the findings in
show cause notice is quoted hereinbelow:-
“4.9. Shri Anand Pugaliya in his statement dated
22.04.2021, to a specific query stated that the gold
seized by the officers of DRI, Lucknow was
purchased from two different sellers namely Safari
Bullion & Jewellers Jasraj Shantilal Baid, but in his
statement dated 02.06.2021 & 04.06.2021 he
stated that the said gold was purchased from Safari
Bullion only.”
15. During investigation, the adjudicating officer
had observed certain inconsistencies. The observation in
the show cause notice were as follows:
“ 4.10 Shri Anand Pugaliya merely submitted some
purchase invoices of gold to create confusion and

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CUSA No. - 1 of 2026
till date he has not provided/or is able to provide
the particular invoice and corresponding entry in
stock register which is related to the said 35 cut
gold pieces.
4.11 The documents/stock register submitted by
Shri Anand Pugaliya, nowhere mentions the
outward entry of 38 or 35 pieces of gold pieces
which were handed over to the refiner Shri Vijay
Anandrao Devkar and no inward entry of the
converted 03 gold bars which were returned by
him, which raises suspicion on the origin of said
gold.
*
4.16 The same document regarding receipt of gold
pieces and its conversion into 3 bars by Shri Vijay
Devkar was submitted by Shri Anand Pugaliya and
Shri Vijay Devkar, and by providing the same
document, both the persons are claiming different
numbers of gold pieces sent for conversion, i.e. 35
and 38 respectively, which strongly raises
suspicion.”
16. Based on the aforesaid statements and relied
upon documents, the adjudicating authority had passed
an extensive order in relation to seized gold bars whereby
he had held that the seized gold is smuggled gold of
foreign origin and liable for confiscation under Section
111 of the Customs Act. The relevant paragraphs of the
order passed by adjudicating authority have been
delineated below:-
“5.1.1 As per records I find that on 28.11.2020, the
officers of Directorate of Revenue Intelligence IDRI
Lucknow Zonal Unit, Lucknow intercepted Shri
Nagendra Hiralal Tiwari and Shri Pumanand
Ramchandra Mishra while they were carrying 2997
grams of smuggled foreign origin gold valued at Rs.

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CUSA No. - 1 of 2026
1,31,16,791/. Both the said accused persons were
travelling in a bus with registration number as
UP70-GT-1095, destined from Nagpur to Prayagraj.
Shri Nagendra Hiralal Tiwari & Shri Pumanand
Ramchandra Mishra in their respective statements
dated 28.11.2020 categorically admitted of carrying
the said foreign origin smuggled gold, which they
had received from Shri Anand Navalchand Pugaliya
for its delivery at Prayagraj. They were carrying the
gold, as recovered from their possession, on the
directions of Shri Anand Navalchand Pugaliya of M/s
Pugaliya Jewellers, Nagpur. They are working for M/
s Pugaliya Jewellers and getting monthly salary.
Both of them denied having any valid document
with respect to purchase/import of the said
smuggled foreign origin gold, as recovered from
their possession. They stated that they were fully
aware that smuggling of gold is a punishable
offence under law, but they committed the said
offence in lure of money. Further, they accepted
their act of carrying smuggled gold on earlier
occasion too and were apprehended by the officer
of the Kolkata Customs and a SCN was issued in
this regard. On the basis of statements of both the
said persons, a follow up enquiry was conducted at
the house/office premises of Shri Anand Pugaliya,
M/s Navalchand Sardarmal Pugaliya Jewellers,
Nagpur. Shri Purnanand Ramchandra Mishra used
to reside with his family in the house of Shri Anand
Pugaliya which was confirmed by Shri Anand
Pugaliya in his statement tendered under Section
108 of the Customs Act, 1962. The purity,
weighment and value of recovered gold has been
ascertained by the government, approved Valuer
Shri Pankaj Agarwal of "Pankaj's Jewel Art
Creation" Mutthiganj, Katghar Road, Prayagraj
having Reg no. CAT VIII/03/ALD/02, 353. Three
samples of the recovered gold were also drawn for
testing in CRCL lab on which the
ChemicalExaminer, Gr-II, CRCL, New Delhi
confirmed vide letter dated 15.12.2020 that the
seized goods as gold having gold content 99.67%,
99.56% and 99.35%
5.1.2 In this issue. I have considered the statement
dated 28.11.2020 of Shri Nagendra Hiralal Tiwari St
Shri Hiralal Tiwari (Noticee No. 1) recorded under
section 108 of Customs Act' 1962 and I find

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CUSA No. - 1 of 2026
following parts of his statement are relevant to
decide this issue-
(a) He affirmed the narrations & proceedings as
recorded in Panchnama dated 28.11.2020 and the
seizure of goods as detailed in said Panchnama.
(b) He tendered that on 27.11.2020 Shri Anand
Pugaliya gave him two gold bars weighing 1998
grams wrapped with brown colour cello tape which
were smuggled into India through Chhatrapati
Shivaji Maharaj International Airport, Mumbai and
directed him to deliver the same to some person in
Prayagraj but did not provide any other detail of
that person.
(c) On being asked how he came to know that the
goods wrapped in brown coloured tape was foreign
origin gold he replied that he had been involved in
smuggling of foreign origin gold on earlier occasion
also and the gold, as recovered was given to him
by Anand Pugaliya only.
(d) Purnanand Ramchandra Mishra is also involved
in smuggling On direction of Anand Pugaliya,.
(e) Such foreign origin gold secretly reaches
Mumbai airport from abroad. Thereafter, foreign
seal or identification of such gold is altered by
melting it or scratching of the foreign marka and
then it is sent to other places of the country.
(f) They were involved in carrying of smuggled
foreign origin gold and therefore they do not have
any documents related to it, and neither any
related papers or documents were provided to him
by his owner.
(g) Purnanand Ramchandra Mishra and he are
cousins and both are working at Anand Pugaliya's
shop. They are simultaneously involved in
smuggling of foreign origin gold.
(h) On being asked about smuggling of foreign
origin gold on earlier occasions by him, the other
persons involved & the places where it was done,
he answered that he did this act of smuggling of
foreign gold on several occasions along with

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CUSA No. - 1 of 2026
Purnanand Ramchandra Mishra on the direction of
his owner Anand Pugaliya but he do not want to say
anything about any other persons involved in
smuggling or the places. However, he accepted
about smuggling of foreign origin gold done by him
at Kolkata.
(i) Anand Pugaliya informed him and his companion
that this gold is of foreign origin and its marking
has been scratched/erased so as to hide its identity
of being foreign origin. Anand Pugaliya also
informed both of them that legal documents of the
same cannot be prepared.
5.1.3 In order to discuss this issue. I considered
the statement dated 28.11.2020 of Sri Purnanand
Ramchandra Mishra following parts of his statement
are relevant to decide this issue-
(a) He affirmed the narrations & proceedings as
recorded in Panchnama dated 28.11.2020 and the
seizure of goods as detailed in said Panchnama.
(b) On being asked about the gold recovered under
Panchnama dated 28.11.2020, he informed that on
27.11.2020, Shri Anand Pugaliya gave him a gold
bar weighing 999 grams wrapped with brown
coloured cello tape, and was smuggled into India
through Chattrapati Shivaji Maharaj International
Airport, Mumbai.
(c) Shri Anand Pugaliya directed him to deliver it to
some person in Prayagraj but had not provided any
detail of that person. Shri Anand Pugaliya told him
that after reaching Prayagraj, that person will
contact Purnanand Ramchandra Mishra through
phone.
(d) He was also informed by Anand Pugaliya that
another person working with him in his shop,
namely Shri Nagendra Tiwari was also in possession
of 2 bars of smuggled gold, which were also
brought similarly into India, will accompany him
from Nagpur to Prayagraj in the same bus.
(e) On being asked whether le knew that the gold
wrapped with brown coloured tape, which was
given to him by Anand Pugaliya, is of foreign origin,

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CUSA No. - 1 of 2026
he replied that Shri Anand Pugaliya had informed
him at the time of offering him the job that he has
to deliver foreign origin gold to different places. He
had done smuggling of gold for his boss Anand
Pugaliya on earlier occasions as well. He further
informed that Shri Anand Pugaliya never gave him
any documents related to the gold.
(f) On being asked about any paper or bill related
to the gold recovered from him, he replied that the
gold recovered from him is of foreign origin which
was brought into India by smuggling so he did not
had any paper, bill etc. related to the same. Shri
Anand Pugaliya had also not provided any
documents related to the same.
(g) On being asked his relation with Nagendra
Tiwari, he replied that they are cousins and both
are working at Pugaliya Jewellers' shop and do
smuggling of foreign origin gold on the direction of
their boss Anand Pugaliya.
(h) On being asked whether he knew that carrying
of smuggled gold is illegal and punishable under the
provisions of Customs Act, he replied that he is
aware that this is a punishable offence but had
done the same in the greed of money on the
directions of Anand Pugaliya.
5.1.4 On its basis above statements, I find that the
seized gold is of foreign origin and it was recovered
without the support of any licit documents hence
found illegal.
5.1.5 On the other side, Shri Anand Pugaliya in his
statement dated 22.04.2021 stated that the gold
seized by the officers of DRI, Lucknow was
purchased from two different sellers namely Safari
Bullion & Jewellers Jasraj Shantilal Baid, but in his
statement dated 02.06.2021 & 04.06.2021 he
stated that the said gold was purchased from Safari
Bullion only. Hence the source of receipt of seized
gold has been doubtful.
5.1.6 I also find that Shri Anand Pugaliya submitted
some purchase invoices of gold to create confusion
and he has not provided the particular invoice and
corresponding entry in stock register which is

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CUSA No. - 1 of 2026
related to the said 35 cut gold pieces.
5.1.7 I find that in the stock register submitted by
Anand Navaichand Pugaliya, the name of
Em/artisan of Prayagraj where the foreign origin
gold seized by DRI was being sent for carrying out
job work, is not mentioned. No job work
receipt/challan was provided by all the three
noticees, which was issued in the name of Raju
Bhai, the artisan situated in Prayagraj, as per the
GST rules.
5.1.8 I find that submission of Anand Navalchand
Pugaliya related to 3 recovered bars of foreign
origin gold (weighing total 2997 grams) is
fabricated in the said gold was received from Shri
Vijay Anandrao Devkar of M/s Devkar Refinery after
conversion of 35 pieces of gold pieces. However,
Shri Vijay Anandrao Devkar specifically submitted
that he received 38 pieces of gold and he converted
the same into 3 bars weighing 1 kg each and
without any marka. The refiner Shri Vijay had not
received any instruction regarding conversion of
gold pieces into bars having any specific marka.
Further, the refiner did not even had the capability
to engrave marka of 1 kg as he did not had any dye
of the same as per his statement dated 22.09.21
under section 108 of the Customs Act' 1962.
5.1.9 I find that receipt of gold pieces and its
conversion into 3 pars by Shri Vijay Devkar was
submitted by Shri Anand Pugaliya and Shri Vijay
Devkar, and by providing the same document, both
the persons are claiming different numbers of gold
pieces sent for conversion, i.e. 35 and 38
respectively, which strongly raises suspicion.
5.1.10 There is no dispute that in the instant case
foreign origin gold, were seized from the possession
of Noticees No. 1 and No. 2 and in their voluntary
statements rendered under Section 108 of the
Customs Act, both of them had confessed of
transporting this smuggled Gold and also could not
produce any licit document to contradict the
allegation. Thus, I am firmly of the opinion that this
case is squarely covered under the ambit of Section
123 of the Customs Act 1962…………….

22
CUSA No. - 1 of 2026
5.1.11. In this matter, I find the that defence reply
of Sri Anand Pugaliya is received in this office on
04.01.2022, wherein he reiterated that he had
submitted certain documents during investigation
which were related to purchase of 3 bars of one kg
gold from M/s Safari Bullions, Mumbai. I find that
Sri Anand Pugaliya had submitted following
documents along with his letter dated 14.01.2021
addressed to SIO, DRI, Lucknow;-
i. Copy of GST Registration Certificate of M/s.
Anandkumar Navalchand Pugaliya
ii. Copy of documents pertaining to GST of M/s.
Anandkumar Navalchand Pugaliya from April 2020
to October 2020.
iii. Copy of 11 Tax Invoices pertaining to purchase
of gold from June 2020 to November 2020.
iv. Copy of 5 Tax Invoices pertaining to purchase of
Silver in the month of November 2020.
v. Copy of Gift Deed executed by Shri. Navalchand
Pugaliya in favour of Miss Mansi Anand Pugaliya
whereby gifting her 30.172 Kilograms of Silver.
vi Copy of delivery Challan and labour charge paid
for conversation of small pieces of gold into 3 bars.
vii. Copy of Trading Account, Balance Sheet, Profit
& Loss Account, Account Statement, Cash Book of
M/s. Anandkumar Navalchand Pugaliya.
viii. Copy of details of Sale & Purchase Ledger of M/
s. Sardarmal N. Pugaliya HUF Firm from
01/04/2020 to 28/11/2020.
ix. Copy of Sale & Purchase Ledger of M/s.
Anandkumar Navalchand Pugaliya of Silver and
Gold from 01/04/2020 to 28/11/2020 alongwith
Stock Ledger.
x. Copy of Stock Statement of M/s. Anandkumar
Navalchand Pugaliya & M/s. Sardarmal N. Pugaliya
HUF Firm.
xi. Copy of Bank Statement of M/s. Anandkumar

23
CUSA No. - 1 of 2026
Navalchand Pugaliya
5.1.12 I have carefully examined every document
and found that none of the document could
establish the valid purchase of the gold recovered
on 28.11.2020 from Shri Nagendra Hiralal Tiwari
and Shri Poornanand Ram Chandra Mishra. Hence, I
find that the given documents have no relevance in
this issue.
5.1.13 In view of foregoing discussions, I find that
the seized gold weighing 2997 grams valued at Rs.
1,31.16.791/- which was recovered from Shri
Nagendra Hiralal Tiwari and Shri Poornanand Ram
Chandra Mishra on 28.11.2020 is smuggled gold of
foreign origin and liable for confiscation under
Section 111 (a), (b), (h) & (m) of the Customs Act,
1962.”
(Emphasis added)
17. A volte-face from the findings of adjudicating
authority was observed at the appellate stage before the
Commissioner (Appeal) whereby the Commissioner
(Appeal), setting aside the confiscation of three gold
bars, had observed that mere foreign markings on the
gold does not establish the smuggled nature of the gold.
Moreover, the respondent who claimed his legal
ownership over the gold bars had also submitted the GST
paid purchase invoice duly certified by chartered
accountant whose entry has also been reflected in the
stock ledger. The relevant paragraphs of the order
passed by Commissioner (Appeal) in relation to three
gold bars are delineated below:

24
CUSA No. - 1 of 2026
“On the first issue, I find that the appellant no. 3
has claimed his legal ownership of the goods and
contended that he had submitted the relevant
documents viz. purchase invoices, stock register,
balance sheet, sale & purchase ledger etc. in
relation to the seized gold to the department during
the course of investigation but the adjudicating
authority denied the same due to the reason that
he has not provided the particular invoice and
corresponding entry in stock register. The appellant
no. 3 has produced before me the GST paid
purchase invoices in relation to the recovered three
gold bars duly certified by the Chartered
Accountant. The details of the same are as under:
S.
No.
Name of
GST
Number of
Invoice
Number
Invoice
Quantity
the GST
Supplier
Date
the
invoice
supplier
Safari
1. Safari
Bullions,
27AAMPJ11
1414 05.08.2020 2000
grams
2. 4603 20.10.2010 1000
grams
3. 7299 18.11.2020 1000
grams
4. 7850 23.11.2020 1000
grams
Q1ZE
Zaveri
Bazar,
Mumbai
The entry of above purchases have also been duly
reflected in the stock ledger produced before me by
the appellant no. 3 for the period under dispute
duly certified by the Chartered accountant, which
substantiates the contention of under genuine and
valid GST paid purchase invoices and the entries of
the same were duly accounted for in the stock
ledger. In view of that I find that the burden of
proof in the instant case with reference to the
provisions of Section 123 of the Customs Act, 1962
has been duly discharged by the appellant no. 3 at
the first available opportunity and the department

25
CUSA No. - 1 of 2026
has not controverted over the genuineness of the
documents produced by the appellant no. 3. I find
that when all the documentary evidences in relation
to the seized gold are present, mere foreign
marking of the gold does not establish the
smuggled nature of the goods. Now the onus lies
with the department to prove the smuggled nature
of the goods which they could not establish except
that the gold biscuits has foreign marking on them.
In such circumstances, by no stretch of imagination
the seized goods can be termed as 'smuggled'. In
view of that I hold that absolute confiscation of
2997 gms. of Gold is not sustainable and is vacated
herewith.”
18. The aforesaid order of Commissioner (Appeal)
went into appeal before the CESTAT, whereby the order
passed by Commissioner (Appeal) was affirmed by
simpliciter replication of the latter’s order and observing
that the burden of proof cast upon the respondent was
duly discharged by production of GST paid invoices
certified by chartered accountant and it was expected
that the revenue contradict the veracity of said invoices.
The relevant paragraph of the order passed by CESTAT in
relation to three gold bars are delineated below:-
“12. For the first issue discerned by the learned
Commissioner (Appeals) about the liability to
confiscation of the 03 gold bars for which necessary
documents viz. invoices duly accounted for in the
books of account were tendered before the
Adjudicating Authority, we note that no reasons
whatsoever have been pointed out to ignore/refute

26
CUSA No. - 1 of 2026
the same. There are no comments on the veracity
of these documents. The learned Commissioner
(Appeals) has duly recorded that the said three
invoices produced were GST paid invoices and also
certified by the Chartered Accountant. The details
of the same are as under:-
S.
No.
Name of
GST
Number
Invoice
Number
Invoice
Quantity
the GST
Supplier
Date
of the
invoice
supplier
Safari
1. Safari
Bullions,
27AAMPJ11
1414 05.08.2020 2000
grams
2. 4603 20.10.2010 1000
grams
3. 7299 18.11.2020 1000
grams
4. 7850 23.11.2020 1000
grams
Q1ZE
Zaveri
Bazar,
Mumbai
13. We are of the view that there was no fault in
the action of the Respondent in submitting a
Certificate from the Chartered Accountant to that
effect and their anxiety to establish their case can
be understood. It may have been done by way of
ex abundanti cautela. The fact that the said
purchase invoice have been recorded in the books
of accounts and were produced before the
authorities at the first available instance goes in as
an important proof of legitimate procurement of
gold in question. Moreover, the said gold bars were
purchased under proper invoices having discharged
their tax liability. Strangely there has been no
finding recorded on this aspect by the Adjudicating
Authority and the Revenue has simply chosen to
find fault with findings of the Commissioner
(Appeals) based on unrelated facts like past history
of co-accused etc. It is settled law that suspicion
howsoever grave cannot take the place of proof.
We are of the view that the Respondents have
sufficiently discharged the onus cast upon them in
law and Revenue has not been able to
disprove/contradict the direct evidence furnished by
the Respondent. When necessary documents and
evidence for procurement of gold were tendered to
corroborate its licit acquisition all that is required
for the Revenue is to negate the said evidence, as a
result of valid direct proof contradicting the same.

27
CUSA No. - 1 of 2026
In fact we are of the view that Revenue has failed
completely in rebutting the evidence tendered by
the gold dealer and the Respondent Shri Anand
Navalchand Pugaliya.”
19. Learned counsel appearing on behalf of
appellant submitted that the invoices produced by the
respondent were domestic GST invoices and GSTR-2A
returns representing intra-state paper transactions but
that cannot validate genuine purchase as that would have
been discharged only by the production of Bill of entry or
duty payment at port of entry. It was further contended
that the statements of refiner and respondent were
inconsistent as respondent claimed that the three bars
were procured via melting and converting 35 pieces of
gold into three bars from a local refiner whereas refiner
stated that he received 38 pieces of gold and converted it
into three bars but he had not embossed any marking on
the bars as he did not have dyes for the same. He further
relies on the Supreme Court judgement in Collector of
1
Customs, Madras vs. D. Bhoormull to contend that
revenue is not required to prove smuggling with
mathematical certainty as circumstantial probability
supported by foreign markings is sufficient to cast onus
under section 123 on the assessee. He has further relied
1 (1974) 2 SCC 544

28
CUSA No. - 1 of 2026
2
on Hero Vinoth (Minor) vs. Seshammal , Vijay
3
Kumar Talwar vs. Commissioner of Income Tax , K.
Ravindranathan Nair vs. Commissioner of Income
4
Tax and Triveni Rubber and Plastics vs. Collector of
5
Central Excise to contend that the finding of CESTAT is
perverse, if it ignores the primary physical evidence.
20. Learned counsel appearing on behalf of the
respondent/noticee submits that under Section 123 of the
Act, initial burden is on the person from whose
possession goods are seized, however, once plausible
documentary evidence is produced, burden shifts to the
revenue. In the present case, since, the respondent had
submitted all the documentary evidence via submission of
books of accounts, copy of GSTR2A of the relevant period
along with CA Certificate, therefore, he has substantiated
that the goods were duly recorded. Moreover, the
revenue has not discredited such documentary evidence
anywhere in the Show cause notice or in the adjudication
order. By submission of such documents, the burden of
proof as required under Section 123 of the Customs Act
has been discharged by the respondent and the same
had been observed by Commissioner as well as CESTAT
2 (2006) 5 SCC 545
3 (2011) 1 SCC 673
4 (2001) 1 SCC 135
5 1994 Supp (3) SCC 665

29
CUSA No. - 1 of 2026
in their respective orders.
21. Learned counsel appearing on behalf of
respondent relies on Triveni Rubber & Plastics vs.
Collector (supra), Sumitomo Heavy Industries Ltd.
6 7
vs. O.N.G.C. , S.R. Tewari vs. U.O.I. , Vijay Kumar
8 9
Talwar vs. CIT and Hero Vinoth vs. Seshammal to
contend that reappreciation of evidence that has already
been considered by the Tribunal cannot be done by the
High Court as the Tribunal is the last fact finding body.
22. On a perusal of the respective orders passed by
the adjudicating authority and the Commissioner
(Appeals) and after sifting through the documents that
were produced before the adjudicating officer, it is clear
that the adjudicating authority had correctly observed
that the burden of proof under Section 123 of the
Customs Act was not discharged by the respondent.
23. The facts that the gold was being carried in a
surreptitious and clandestine manner without any
invoices, the statement given by the carriers, the
contradictory statement given by Mr. Anand Pugaliya
(owner of the goods), the statement given by the refiner
6 (2010) 11 SCC 296
7 (2013) 6 SCC 602
8 (2011) 1 SCC 673
9 (2006) 5 SCC 545

30
CUSA No. - 1 of 2026
Sri Vijay Anand Rao Devkar which is clearly at variance
with that of Mr. Pugaliya, the lack of specific invoices
corresponding to the three gold bars and the fact that
foreign markings were found on the three gold bars that
have not been explained by the owner of the gold and the
approved purity of gold ranging between 99.35% to
99.37% (purity only found in foreign gold) patently
establishes the presumption of smuggling of goods so as
to make it liable to confiscation under Section 111 of the
Act.
24. The respondent in his statement dated April 22,
2021 has stated that three gold bars were purchased
from two different sellers namely Safari Bullion and
Jewellers Jasraj Shantilal Baid but in his statement dated
June 2, 2021 and June 4, 2021 he stated that the said
gold bars were purchased from Safari Bullion only. The
respondent in his previous statement dated February 28,
2021 stated that the seized gold bars were procured after
conversion of 35 small pieces of gold into three bars by a
refiner, Shri Devkar. However, the refiner in his
statement dated February 8, 2021 has stated that
respondent had given him 38 pieces of gold weighing
approximately 3 kgs for converting them into 3 bars of 1

31
CUSA No. - 1 of 2026
kg each.
25. The story that has been tried to be established
by the respondent by producing GST invoice that he had
purchased gold with foreign marking from Safari Bullions
and simultaneously stating that the three gold bars were
produced by melting and converting 35 pieces of gold
into three bars is completely shattered by the unretracted
statement given by the refiner who clearly stated that he
had converted 38 pieces of gold into three bars without
any foreign marking as he did not have dyes for the
same. Moreover, on being shown the photographs of the
seized gold bars, the refiner vindicated that he had not
given the gold shown in the photograph to any person in
the last two years. The dichotomy between the
statements of respondent taken on different occasions
and with the statement of the refiner clearly establishes
that the gold that was seized was not the gold that had
been received after refining by the refiner. There is a
clear mismatch in facts that has not been answered by
the respondent. Secondly, the adjudicating authority has
categorically stated that the documents that were
submitted by the owner of the goods did not correspond
with the gold that had been seized. Even with respect to

32
CUSA No. - 1 of 2026
the invoices that were produced and relied upon by the
Commissioner (Appeals) to indicate that there has been
shift of burden of proof by the owner to the revenue is
without any basis in law as the invoices that have been
relied upon by the Commissioner (Appeal) did not specify
that the gold that had been purchased had foreign
markings. We find that two stands have been taken by
the owner which are in complete contradistinction to each
other. Firstly, he submits that gold bars were purchased
from a dealer namely Safari bullions, and secondly, he
submits that three gold bars were produced by the refiner
after melting and converting 35 pieces into three gold
bars of 1 kg each. It is to be specifically noted that no
explanation has been provided with regard to the ‘foreign
marking’ on the three gold bars.
26. It is flabbergasting to note the perfunctory
manner in which the Commissioner (Appeal) as well as
the CESTAT have dealt with the entire matter. A perusal
of the relevant portion of the order of the Commissioner
(Appeal) indicates that he has simpliciter shifted the
burden of proof from the assessee to the revenue on the
basis of invoices that were produced by the owner. It is
to be noted that the adjudicating officer after due

33
CUSA No. - 1 of 2026
diligence has categorically stated that these invoices that
were provided by the owner have no nexus with the gold
bars that were seized. The Commissioner (Appeal) has
jettisoned the other evidences in relation to the
statement of the carrier of gold, the statement of the
refiner, the contradictory statements made by the owner,
the genuineness of the invoices, the lack of specific entry
with regard to the gold that was seized in the books of
accounts of the owner and has simpliciter held that the
revenue did not controvert the genuineness of the
documents produced by the owner.
27. In our view, the entire exercise that has been
carried out by the Commissioner (Appeal) as well as by
the CESTAT is superfluous and without due application of
mind wherein relevant and cogent materials have been
overlooked and disregarded by both the Commissioner
and the CESTAT.
28. The Hon'ble Supreme Court in Commissioner of
10
Customs vs. Vijay Dasharath Patel has held that
High Court should intervene in the order passed by
Tribunal where material and relevant facts have been
ignored, legal principles have not been applied correctly
10 [2007] 2007 taxmann.com 1333 (SC)

34
CUSA No. - 1 of 2026
in appreciating evidence and decision has been arrived at
by taking into consideration irrelevant factors. The
relevant paragraphs of the judgement are quoted
hereinbelow:-
“22. We are not oblivious of the fact that the High
Court's jurisdiction in this behalf is limited. What
would be substantial question of law, however,
would vary from case to case.
23. Moreover, although, a finding of fact can be
interfered with when it is perverse, but, it is also
trite that where the courts below have ignored the
weight of preponderating circumstances and allowed
the judgment to be influenced by inconsequential
matters, the High Court would be justified in
considering the matter and in coming to its own
independent conclusion. (See Madan Lal vs. Mst.
Gopi & Anr. [AIR 1980 SC 1754].)
24. The High Court shall also be entitled to opine
that a substantial question of law arises for its
consideration when material and relevant facts have
been ignored and legal principles have not been
applied in appreciating the evidence. Arriving at a
decision, upon taking into consideration irrelevant
factors, would also give rise to a substantial
question of law. It may, however, be different that
only on the same set of facts the higher court takes
a different view. (See Collector of Customs, Bombay
vs. Swastic Woollens (P) Ltd. & Ors. [(1988) Supp.
SCC 796]; and Metroark Ltd. vs. Commissioner of
Central Excise, Calcutta [(2004) 12 SCC 505*].)
25. Even in a case where evidence is misread, the
High Court would have power to interfere. (See
West Bengal Electricity Regulatory Commission vs.
CESC Ltd. [(2002) 8 SCC 715]; and also
Commissioner of Customs, Mumbai vs. Bureau
Veritas & Ors. [(2005) 3 SCC 265].)
29. The Hon'ble Apex Court in the case of Arulvelu

35
CUSA No. - 1 of 2026
11
vs. State has defined 'perversity' and held that a
finding is perverse if it is not only against the weight of
.
evidence but is altogether against the evidence itself The
term perversity was defined by tracing various earlier
precedents, which is extracted hereinbelow:
"24. The expression "perverse" has been dealt with
in a number of cases. In Gaya Din v. Hanuman
Prasad ((2001) 1 SCC 501] this Court observed
that the expression "perverse" means that the
findings of the subordinate authority are not
supported by the evidence brought on record or
they are against the law or suffer from the vice of
procedural irregularity. 25. In Parry's (Calcutta)
Employees' Union v. Parry & Co. Ltd. [AIR 1966 Cal
31] the Court observed that "perverse finding"
means a finding which is not only against the
weight of evidence but is altogether against the
evidence itself. In Triveni Rubber & Plastics v. CCE
[1994 Supp (3) SCC 665: AIR 1994 SC 1341] the
Court observed that this is not a case where it can
be said that the findings of the authorities are
based on no evidence or that they are so perverse
that no reasonable person would have arrived at
those findings. 26. In M.S. Narayanagouda v.
Girijamma [AIR 1977 Kant 58] the Court observed
that any order made in conscious violation of
pleading and law is a perverse order. In Moffett v.
Gough [(1878) 1 LR Ir 331] the Court observed
that a "perverse verdict" may probably be defined
as one that is not only against the weight of
evidence but is altogether against the evidence. In
Godfrey v. Godfrey [106 NW 814] the Court defined
"perverse" as turned the wrong way, not right;
distorted from the right; turned away or deviating
from what is right, proper, correct, etc. 27. The
expression "perverse" has been defined by various
dictionaries in the following manner: 1. Oxford
Advanced Learner's Dictionary of Current English,
6th Edn. "Perverse. Showing deliberate
determination to behave in a way that most people
think is wrong, unacceptable or unreasonable." 2.
11 (2009) 10 SCC 206

36
CUSA No. - 1 of 2026
Longman Dictionary of Contemporary English,
International Edn. Perverse. Deliberately departing
from what is normal and reasonable. 3. The New
Oxford Dictionary of English, 1998 Edn. Perverse.
Law (of a verdict) against the weight of evidence or
the direction of the judge on a point of law. 4. The
New Lexicon Webster's Dictionary of the English
Language (Deluxe Encyclopedic Edn.) Perverse.
Purposely deviating from accepted or expected
behavior or opinion; wicked or wayward; stubborn;
cross or petulant. 5. Stroud's Judicial Dictionary of
Words & Phrases, 4th Edn. "Perverse. A perverse
verdict may probably be defined as one that is not
only against the weight of evidence but is
altogether against the evidence.”
(Emphasis added)
30. Furthermore, the Hon'ble Supreme Court in the
12
case of S.R. Tewari vs. Union of India has laid down
the attributes of perversity in the following manner:-
"30. The findings of fact recorded by a court can be
held to be perverse if the findings have been
arrived at by ignoring or excluding relevant
material or by taking into consideration
irrelevant/inadmissible material. The finding may
also be said to be perverse if it is "against the
weight of evidence", or if the finding so
outrageously defies logic as to suffer from the vice
of irrationality. If a decision is arrived at on the
basis of no evidence or thoroughly unreliable
evidence and no reasonable person would act upon
it, the order would be perverse. But if there is some
evidence on record which is acceptable and which
could be relied upon, the conclusions would not be
treated as perverse and the findings would not be
interfered with. (Vide Rajinder Kumar Kindra v.
Delhi Admn. [(1984) 4 SCC 635: 1985 SCC (L&S)
131: AIR 1984 SC 1805], Kuldeep Singh v. Commr.
of Police [(1999) 2 SCC 10: 1999 SCC (L&S) 429:
AIR 1999 SC 677], Gamini Bala Koteswara Rao v.
State of A.P. [(2009) 10 SCC 636: (2010) 1 SCC
12 (2013) 6 SCC 602

37
CUSA No. - 1 of 2026
(Cri) 372: AIR 2010 SC 589] and Babu v. State of
Kerala [(2010) 9 SCC 189: (2010) 3 SCC (Cri)
1179].)”
(Emphasis added)
31. One may also look into the Division Bench
judgment of the Calcutta High Court in Commissioner
of Customs Preventive Kolkata vs. Shri Anil Kumar
13
Soni wherein the High Court set aside the order passed
by the Tribunal as the Tribunal had disregarded the
evidentiary value of the Section 108 statement and
effectively reversed the statutory burden of proof on the
revenue without the same having being discharged by
the assessee. The relevant paragraphs of the judgment
are quoted herein below:
“12.1. In adjudicating the merits of these
consolidated appeals, we find a fundamental
subversion of the “Reverse Burden of Proof” at the
Tribunal level. Following a threadbare analysis of
the record, we conclude that the impugned order
suffers from fatal legal and factual infirmities. The
learned Tribunal proceeded on the erroneous
assumption that the Revenue must establish the
entire “smuggling chain” with mathematical
precision. Such an approach negates the legislative
intent behind Section 123 of the Act, which shifts
the onus of proof onto the claimant to rebut the
presumption of illicit origin once “Reasonable Belief”
is established. 12.2. We hold that the The learned
Tribunal's order is hit by the vice of perversity. By
disregarding the scientific impossibility of the
defence and the evidentiary sanctity of the Section
108 statements, the Tribunal effectively reversed
13 2026 SCC OnLine Cal 3106

38
CUSA No. - 1 of 2026
the statutory burden of proof without the
Respondents having discharged their legal
obligations. The protection of the “Venial Breach”
doctrine under Hindustan Steel Ltd. (supra) cannot
be extended to a foundational failure of proof
involving two kilograms of industrial-grade bullion.
A legitimate commercial transaction of such
magnitude is not transported secreted in a waist
belt, nor does it lack the requisite industrial
nomenclature of refinery documentation. 12.3.
Having traversed the factual matrix and the
statutory landscape, this Court is of the firm
opinion that the impugned order is not merely an
alternative view of facts, but a fundamental
miscarriage of justice rooted in a misapplication of
the law. 12.4. We reiterate the following conclusive
legal principles as the basis of our determination:
(a) We hold that “Reasonable Belief” is a
behavioural and material construct, not a
geographical one. The “Town Seizure” doctrine
cannot serve as a legal sanctuary for the illicit
transport of high-purity bullion. Once the modus
operandi— clandestine concealment—is established,
the jurisdictional trigger of Section 123 is complete.
(b) We reaffirm that a statement recorded in a
“deemed judicial proceeding” carries a presumption
of truth. A noncontemporaneous retraction,
appearing after a staggering 850 day interval, must
be discarded as a “calculated afterthought” unless
corroborated by independent medical or judicial
evidence of duress. (c) We hold that in matters of
bullion, Scientific Purity is the ultimate provenance.
A “paper trail” of GST returns for scrap ornaments
cannot bridge the identity mismatch between
jewellery alloys and 99.6% pure international-
standard bullion. The transition from scrap to 24-
carat bullion requires industrial electrolytic
refinement, not rudimentary local melting. The
failure to produce “Melting Memos” or “Refinery
Slips” is fatal to the discharge of the reverse burden
of proof.
13.1 Accordingly, the Substantial Questions of Law
are answered in the affirmative, in favour of the
Revenue. The impugned order of the The learned
Tribunal dated 22-11-2024, is found to be legally
unsustainable and perverse….”

39
CUSA No. - 1 of 2026
32. In fact the question of controversy arising here
is settled by the Supreme Court in Vijay Dasharath
Patel (Supra) , Arulvelu (Supra) and S.R. Tewari
(Supra) and the High Court in Shri Anil Kumar Soni
wherein it has been held that a finding of fact recorded
by the Tribunal does not give rise to a substantial
question of law merely because the High Court may
disagree with it. A substantial question of law arises when
vital material evidence has been overlooked by the
Tribunal, or when the Tribunal has made a patent error in
appreciation of the evidence, or when the finding reached
by the Tribunal is perverse in the sense that it could not
reasonably have been arrived at on the material before it.
Furthermore, if the Tribunal misdirected itself by
overlooking salient features of the case and reached an
erroneous conclusion, that constitutes a substantial
question of law and warrants interference by High Court
so as to prevent miscarriage of justice.
33. In the present case, it is clear that the
Commissioner (Appeals) as well as CESTAT have dealt
with the entire manner in a cavalier fashion and has
forsaken their responsibility with regard to the
examination of all the evidence that had been produced

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CUSA No. - 1 of 2026
and had been relied upon by the adjudicating officer.
34. The discussion in the foregoing parts clearly
brings to fore that the discharge of the onus under
Section 123 of the Act does not mean the mere
production of any document or set of documents relating
generally to the business activities of the owner of the
smuggled goods. It means the production of specific,
relevant, credible, and genuine documents that directly
and traceably establish the lawful acquisition of the gold
that are the subject matter of seizure. The mere
production of documents which are irrelevant adds
nothing to the discharge of the burden and does not shift
the evidentiary obligation towards the revenue.
35. We are, accordingly at consensus ad idem with
the observation and conclusion of the adjudicating
authority that the procurement of the seized gold bars is
highly suspicious and that the evidence produced by the
respondent is wholly insufficient to discharge the onus
cast upon them under Section 123 of the Customs Act.
The adjudicating authority correctly noted that the
invoices produced bore no specific nexus to the seized
gold bars, and correctly held that the respondent had
failed to discharge the burden of proving lawful

41
CUSA No. - 1 of 2026
acquisition of the specific seized articles.
36. The Commissioner (Appeals) and the Tribunal
fell into a manifest error of law as they did not consider
the clandestine manner under which the gold was
recovered, the foreign marking of gold, the
inconsistencies in the statement of the carriers, the
owner and the refiner. Furthermore, failure to observe
the purity of gold as well as the foreign marking is clearly
an act of perversity. The Tribunal characterization of
these discrepancies as mere ‘extraneous’ is perverse. The
observation of the Tribunal with regard to accepting the
GST invoices without regard to whether the same had a
nexus to the specific seized gold bars as sufficient to
discharge the burden under Section 123 is a patent error
of law. This approach is a fundamental misunderstanding
of the nature and scope of the burden of proof under
Section 123 of the Act. It conflates the mere production
of documents with the discharge of burden. Accordingly,
we hold the confiscation of gold to be justified. The
substantive questions of law I and II with regard to the
confiscated gold are answered in the affirmative.
37. With regard to the confiscated silver, we
observe that the provisions of Section 123 of the Act are

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applicable only when it is established that the silver in
question is smuggled into India. In relation to the silver,
it may be noted that the silver was seized from the
residential as well as business premises of Mr. Pugaliya.
Neither the silver was seized when it was being
transported in a surreptitious manner nor the carriers,
who were intercepted, had tendered any statements with
regard to smuggling of silver. Furthermore, there was no
foreign mark on the silver that was seized. The reason
given by the adjudicating authority for seizure of the
silver bullion is that the seized silver was more than what
was shown available in the stock ledger. We are of the
view that unless the customs authorities are able to
clearly bring a nexus between the silver and its
smuggling, the burden of proof under Section 123 of the
Act would not shift on the respondent. We are of the
view that the views taken by the Commissioner (Appeal)
and the CESTAT with regard to the silver is based on
adequate material available on record including the stock
ledger, and GST paid puurchase invoices that were duly
certified by the chartered account.
38. The Constitution Bench of the Hon'ble Supreme
14
Court in Gian Chand vs. State of Punjab as well as in
14 1961 SCC OnLine SC 388

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CUSA No. - 1 of 2026
Collector of Customs vs. Nathella Sampathu
15
Chetty , while dealing with Section 178-A of the Sea
Customs Act, 1878 akin to Section 123 of the Customs
Act,1962, has settled the law that reasonable belief is a
sine quo non in relation to the power of seizure that the
statute confers on the officer. Reasonable belief must be
backed by sufficient evidence of smuggling and mere
suspicion is not sufficient to justify seizure, and the
prosecution must provide substantive evidence of foreign
origin. If there are no foreign markings or
documentation, the Customs authorities cannot simply
assume that the silver in question were smuggled goods.
39. In this regard, it is relevant to cite the
judgment of Delhi High Court in Shanti Lal Mehta vs.
16
Union of India wherein it was held that reasonable
belief must be based on some material, not mere
suspicion. The relevant paragraphs of the judgment are
quoted hereinbelow:
“ 69. Reasonable belief as required by section 110
refers to the point of time when the goods in
question are seized and not to a stage subsequent
to the act of seizure. ( M.G. Abrol v. Amichand , AIR
1961 Bom 227 (19). The condition precedent that
there was such a reasonable belief anterior to the
seizure must exist before the presumption under
15 1962 SCC OnLine SC 30
16 1982 SCC OnLine Del 303

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section 123 can be invoked............
*
76. The belief must be such as any reasonable man
in the circumstances of the case would entertain
about the existence or non-existence of a thing.
Simply because the goods were not accounted for
at that time does not necessarily mean that the
goods were smuggled goods. Unaccounted goods
may be stolen goods. Reasonable belief could be
entertained either on the basis of some external
inindicia or on the basis of some internal
information that the goods had been illegally
imported into India from Nepal or some other
foreign country either without payment of duty or in
contravention of any restriction or prohibition
imposed by statute. There was nothing to suggest
the foreign origin of the goods. There was nothing
to suggest the illegal importation of the goods into
the country.”
40. In the facts and circumstances of the case, we
observe that the initial burden of proof under Section 123
of the Customs Act was not satisfied, and therefore, the
burden of proof did not shift to the respondent. The
Customs authorities must first establish the foreign origin
before invoking the presumption of smuggling. So, we
are of the view that in this case, the responsibility was on
the Revenue to show that the silver in question was
smuggled into the country without payment of
appropriate duties of Customs thereon, which the
department failed to discharge in this case. Thus, we hold
that the burden of proof under Section 123 of the
Customs Act does not shift to the respondent so far as it

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relates to silver.
41. In relation to the confiscation of cash, it may
be noted that the cash was seized along with the silver
from the residential and business premises of Mr.
Pugaliya. In the instant case, the cash seized was in
Indian currency, which falls outside the ambit of Section
123 of the Customs Act, being a non-notified item.
Nevertheless, the same was held liable to confiscation on
the presumption that it constituted the sale proceeds of
smuggled gold and silver having regard to the
antecedents of owner viz pendency of proceedings under
the Benami Property Transactions Act, 1988. The
Revenue seized the cash merely on the basis of
suspicion, without there being any cogent evidence to
establish that it represented the sale proceeds of
smuggled gold and silver. Neither was the cash recovered
in a clandestine or secretive manner, nor was there any
evidence to suggest that the cash constituted the sale
proceeds of smuggled goods. In the absence of any such
reasonable basis, the presumption that the cash
represented the sale proceeds of smuggled goods was
not tenable and shifting the burden of proof onto the
respondent under Section 123 of the Act was not

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CUSA No. - 1 of 2026
justified. In this regard, we are in agreement with the
orders passed by the Commissioner (Appeals) and the
CESTAT.
42. In light of the above findings, the substantial
questions of law I and II are answered in the affirmative
with regard to the three gold bars and accordingly, we
direct the restoration of the order passed by the
adjudicating authority so far as it relates to the
confiscation of the gold bars. In relation to silver and
cash, the order passed by the Commissioner (Appeal)
and the CESTAT are correct, and therefore, the
substantial questions of law I and II are answered in the
negative with regard to the silver and cash. Ergo, the
order dated November 14, 2022 passed by the
adjudicating authority in so far as it relates to the three
gold bars is to be reinstated.
43. In relation to the penalties that have been
imposed on the owner of the goods, Mr. Anand
Navalchand Pugaliya and the two carriers being Nagendra
Hiralal Tiwari and Purmanand Ramchandra Mishra, it is to
be noted that the Commissioner (Appeals) had quashed
the entire penalties imposed upon the aforesaid three
persons. In order to bring quietus to the lis , the penalties

47
CUSA No. - 1 of 2026
imposed by the adjudicating officer are reduced to 50%
on the respondent in the three appeals before us, since
we have upheld the confiscation of gold only. Accordingly,
Custom Appeal No.2 and Custom Appeal No.3 are
disposed of in aforesaid terms.
44. With the above directions, the custom appeals
are partly allowed and, accordingly, disposed of .
(Shekhar B. Saraf,J.)
I agree
(Abdhesh Kumar Chaudhary,J.)
September 2, 2026
cks/-
Digitally signed by :-
CHANDRA KANT SINGH
High Court of Judicature at Allahabad,
Lucknow Bench