Clandestine concealment and high gold purity trigger Section 123 reverse burden regardless of seizure location.

On May 25, 2018, Customs officers intercepted Anil Kumar Gaur (Respondent No. 2) at Howrah Railway Station and recovered 1,999.90 grams of gold bullion concealed in a specially stitched cotton waist belt

In statements recorded under Section 108, Gaur admitted the gold was of foreign origin

Anil Kumar Soni (Respondent No. 1) later claimed ownership, asserting the gold was "indigenous," produced by melting 4.7 kg of old ornaments, and supported this with GST invoices

However, a CRCL report determined the gold had 99.6% purity—an industrial standard higher than typical local "Kachcha" gold (91-92%)

The Adjudicating Authority ordered absolute confiscation, but the CESTAT later set aside the order, characterizing the incident as a "town seizure" lacking foreign markings and dismissing the Section 108 confessions due to a delayed retraction

The Revenue appealed to the High Court

1. Whether the Department failed to establish "reasonable belief" for seizure under Section 123 of the Act in a "town seizure"

2. Whether a confessional statement under Section 108, retracted after 850 days, loses its evidentiary value

3. Whether the production of GST invoices for old ornaments without a documentary nexus to the industrial refining process is sufficient to discharge the reverse burden of proof

4. Whether the appeal was maintainable regarding monetary limits and the exclusionary "valuation" clause of Section 130

The Court applied Section 123 of the Customs Act, 1962, which shifts the burden of proof to the person from whom notified goods (like gold) are seized, provided there is "reasonable belief" they are smuggled

It relied on the "Prudent Man Test" from Collector of Customs v. D. Bhoormall, establishing that "reasonable belief" requires probability rather than mathematical certainty

Regarding Section 108, the court applied Illias v. Collector of Customs, holding that Customs officers are not "police officers," making such statements admissible substantive evidence

It further referenced Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs to clarify that "valuation" for assessment is distinct from "confiscation" for statutory violations

The Court found the CESTAT’s "town seizure" doctrine legally flawed, ruling that Section 123 applies regardless of geography; the clandestine concealment in a waist belt was sufficient to trigger "reasonable belief" for a prudent officer

The Court rejected the Respondents' "paper trail" of GST invoices, identifying a scientific "Identity Mismatch"—the Respondents provided documents for 22-carat scrap but possessed 99.6% pure industrial bullion without "melting memos" or "refinery slips" to explain the transformation

Regarding the Section 108 statements, the Court held the 850-day delay in retraction rendered it a "calculated afterthought"

On maintainability, the Court ruled that absolute confiscation is an enforcement action, not a valuation dispute, and since the case involved statutory interpretation of Section 123, it was "threshold-neutral" regarding monetary limits

The Court restored the Order-in-Original, upholding the absolute confiscation of 1,999.90 grams of gold

It confirmed a total penalty of Rs. 96,00,000 on Respondent No. 1 and Rs. 6,00,000 on Respondent No. 2

Additionally, the Court directed the Registry to forward the judgment to GST and Income Tax authorities to investigate the Respondents' potentially manufactured accounts