Indian currency cannot be confiscated under Section 121 without proof linking it to smuggled-goods sales.

During searches conducted on 17–18 October 2022 at the respondent’s residential and business premises, Indian currency amounting to ₹1,68,95,000 was seized—₹84,95,000 from his residence and ₹84,00,000 from his office. No gold, bullion, foreign packaging, or document evidencing illicit importation was recovered

The respondent initially stated that the office cash was connected with transactions in foreign-origin gold biscuits and old gold ornaments, but subsequently explained that it represented legitimate bullion-trading receipts and customer booking advances, supported by sales registers, GST returns, bill books, and customer KYC records. Three customers summoned by the department confirmed making cash payments towards bullion purchases or booking advances

The adjudicating authority ordered absolute confiscation of the currency under Section 121 of the Customs Act, 1962, and imposed a ₹10,00,000 penalty under Sections 112(a) and 112(b)

The Commissioner (Appeals) found that the statutory requirements for confiscation and penalty had not been established but nevertheless remanded the matter for de novo adjudication

The Revenue appealed against the remand, while the respondent filed a cross-objection challenging the remand and supporting the findings against confiscation and penalties

1. Whether Section 123 of the Customs Act, 1962, applied to the seized Indian currency and shifted the burden of proof to the respondent.

2. Whether the requirements of Section 121 of the Customs Act, 1962, for confiscation of sale proceeds of smuggled goods were established.

3. Whether the penalties imposed under Sections 112(a) and 112(b) of the Customs Act, 1962, were sustainable.

4. Whether the Commissioner (Appeals) could remand the matter for de novo adjudication and whether such remand directions could be sustained.

Section 123 of the Customs Act creates an exception to the ordinary burden of proof only for goods specified in Section 123(2) or separately notified by the Central Government; Indian currency is not a notified category, and therefore the initial burden remained on the Revenue.

Section 121 permits confiscation of currency only where it is proved to be the sale proceeds of smuggled goods sold by a person having knowledge or reason to believe that the goods were smuggled; this requires proof of the smuggled character of the goods, their sale, the seller’s requisite knowledge, and a direct nexus between the sale and the seized currency.

Sections 112(a) and 112(b) require an established act, omission, abetment, or knowing dealing in particular goods liable to confiscation under Section 111.

The Tribunal relied on Tulsi Das Agarwal v. CC, Kanpur , Ramchandra v. CC , Hem Raj Soni v. CCE, Jaipur , Ratan Kumar Saha v. CC , Ghissihibhai Pravinkumar v. CC, Mumbai , and K.V. Kunhimohammed v. CC (Prev.), Kochi , which establish that unexplained possession of Indian currency, without evidence linking it to the sale of identified smuggled goods, does not justify confiscation under Section 121.

The Tribunal further held that remand cannot be used to construct a fundamentally deficient case by introducing a new consignment, transaction, buyer, seller, or evidentiary nexus absent from the original proceedings.

The Tribunal held that Section 123 did not apply because the seized property was Indian currency, not gold; consequently, the Revenue had to establish the ingredients of Section 121.

The department failed to identify any particular smuggled gold consignment, its source, date or mode of importation, seller, buyer, quantity, sale consideration, or identifiable portion of the seized currency linked to such sale.

Mere possession of a substantial cash amount or inconsistencies in the respondent’s explanations could justify inquiry but could not independently establish that the money was sale proceeds of smuggled goods.

The respondent’s documentary records and the statements of three customers corroborated his explanation that the money arose from bullion transactions and booking advances; those statements could not be rejected merely because they were recorded pursuant to summons on the same day.

Since no specific goods liable to confiscation under Section 111 or any act or omission relating to such goods was established, the penalties under Sections 112(a) and 112(b) also lacked the necessary factual foundation.

The unrelated seizure proceedings at Bollapalli could not substitute proof in the present case, as each show-cause proceeding must stand on its own allegations and evidence.

Although the remand directions themselves could not be sustained, the absence of remand power did not justify revival of an otherwise unproven confiscation and penalty order.

It set aside the directions for de novo adjudication, the absolute confiscation of ₹1,68,95,000 under Section 121, and the penalties imposed under Sections 112(a) and 112(b).

The seized currency was directed to be released forthwith to the person lawfully entitled to it, along with consequential relief, subject to any restraint or requirement under another applicable enactment.