CESTAT Rejects Revenue Appeal Over ₹93-Lakh Varanasi Gold Seizure, Citing No Foreign Marks or Independent Proof of Smuggling

On 9 November 2022, DRI officers intercepted Balbir Singh in Varanasi and seized seven gold pieces weighing 1,791.030 grams, valued at ₹93,13,356. The gold had no discernible foreign markings; the Government-approved valuer reported 99.5% purity.

Balbir Singh and Dharmendra Kumar, who claimed ownership, made statements alleging that the gold was smuggled from Bangladesh, but Dharmendra Kumar later retracted his statement. He also produced invoices, bank details and a gold-refining voucher to support domestic procurement.

The adjudicating authority ordered absolute confiscation and imposed penalties under Section 112(b) of the Customs Act, 1962. The Commissioner (Appeals) set aside the confiscation of the gold and the penalties. Revenue appealed against that decision.

Section 110 of the Customs Act requires a proper officer’s reasonable belief that goods are liable to confiscation; that belief must rest on tangible, objective material, not mere suspicion.

The burden under Section 123 shifts only where there is a prima facie basis to treat the goods as smuggled; absent that foundation, the Department retains the burden of establishing foreign origin and smuggling.

Confiscation under Sections 111(b) and 111(d), and penalties under Section 112, require evidence establishing the relevant customs contravention and the person’s connection to it.

The Tribunal also relied on the principle that a retracted statement, particularly one uncorroborated by independent evidence, cannot by itself establish smuggling.

It referred to Commissioner of Cus (Prev.), Patna v. Lalit Krishna Agarwal, Balwant Raj Soni v. Commissioner of Cus. (Prev.), Patna, Commissioner of Cus., Chennai-III v. Mohammed Ali Jinnah, and the Supreme Court decisions in Gian Chand v. State of Punjab, Union of India v. Mahesh Raj and D. Bhoormull

The Tribunal noted that this was a town seizure and that the gold bore no foreign markings or serial numbers. Its reported purity of 99.5% was not, by itself, evidence of foreign origin, since gold of comparable purity was available domestically.

The Department therefore had not shown the objective material necessary to form a reasonable belief of smuggling, and Section 123 could not shift the burden to the Respondents.

The statements were disputed and, in the Tribunal’s view, were not supported by independent or contemporaneous evidence establishing how the gold had crossed the border or otherwise proving its foreign origin.

The Tribunal also considered the invoices, payment record and refining voucher supporting the Respondents’ account of domestic procurement; it rejected the allegation that differences in invoice layout established fabrication.

In the absence of sufficient proof that the gold was smuggled, confiscation and the related penalties could not stand.

It upheld the Commissioner (Appeals)’ decision setting aside confiscation of the gold and the penalties imposed on both Respondents.

Revenue’s appeals were rejected, with consequential relief, if any, according to law; the cross-applications were disposed of accordingly.