Gold seizure is invalid absent Customs’ independent reasonable belief of foreign origin.

On 26 May 2024, the Government Railway Police Service (GRPS) intercepted Kanheya Lal at Guwahati Railway Station and recovered four gold biscuits weighing 664.02 grams from him.

The GRPS seized the gold and later handed it, along with Kanheya Lal, to Customs officers.

The seizure inventory recorded no foreign markings on the biscuits, apart from a “W” marking on one biscuit.

Kanheya Lal stated that Prakash Chand Soni had given him the gold for delivery to Bal Kishan Soni.

Bal Kishan Soni claimed ownership and produced nine tax invoices for gold ornaments purchased in October 2023, which he said had been melted and converted into the seized biscuits.

The adjudicating authority absolutely confiscated the gold under Sections 111(b) and 111(d) of the Customs Act, 1962, and imposed penalties under Section 112.

The Commissioner (Appeals) rejected the appellants’ appeals, leading to these connected appeals before the Tribunal.

Whether the seizure of the gold was supported by a “reasonable belief” under Section 110(1) of the Customs Act, 1962, that it was liable to confiscation.

Whether the gold was liable to confiscation and the appellants liable to penalties, in light of the absence of evidence of foreign origin and the purchase documents produced by Bal Kishan Soni.

Section 110(1) of the Customs Act, 1962 permits seizure only where the proper officer has reason to believe that the goods are liable to confiscation; that belief must rest on objective material and the officer must apply an independent mind.

The Tribunal relied on Union of India v. Mohammed Nawaz Khan for the requirement of subjective satisfaction founded on objective material, and on Gian Chand v. State of Punjab for the principle that suspicion alone does not justify seizure and that foreign origin must be supported by substantive evidence.

The Tribunal also cited Union of India v. Mahesh Raj for the proposition that the burden under Section 123 arises only when there is prima facie evidence of foreign origin.

Where the claimant produces purchase documents that the Revenue does not discredit, the claimant may discharge the burden under Section 123; the Revenue must then establish that the gold was smuggled.

Confiscation under Sections 111(b) and 111(d), and penalties under Section 112, could not be sustained in the absence of a basis to treat the gold as smuggled.

The gold was first seized by the GRPS and subsequently handed to Customs.

The seizure records did not identify foreign markings, and the sole “W” marking on one biscuit did not establish foreign origin.

The Tribunal found that Customs had accepted the seizure without independently forming a reasonable belief, based on objective evidence, that the gold was of foreign origin and smuggled.

It therefore held that the statutory basis for seizure under Section 110(1) was absent.

Further, Bal Kishan Soni produced purchase invoices and related documents supporting his claim that the gold originated from ornaments he had purchased and melted.

As the Revenue had not discredited those documents, the Tribunal held that the appellants had discharged the relevant burden and that the Revenue had failed to prove smuggling.

It directed that the gold be released to the appellant and held that no penalties were imposable on the appellants.

The impugned order was set aside, and all three appeals were allowed with consequential relief, if any.