Mumbai CESTAT Sets Aside 12-Kg Gold Confiscation, Finding Unexamined Statements And No Independent Proof Of Smuggling

On 20 January 2016, DRI officers intercepted two passengers travelling from Kolkata to Mumbai and seized 12 gold bars weighing 12 kg.

The passengers’ statements allegedly described the gold as smuggled from Bangladesh, but they later retracted them.

The appellant, proprietor of Maa Kali Jewellers, also retracted his statement after his premises were searched.

The Department alleged that the gold was smuggled and separately estimated that the carriers had transported 618 kg of gold on earlier journeys, by multiplying 103 alleged journeys by an assumed 6 kg per journey.

The adjudicating authority ordered confiscation and imposed penalties; the Commissioner (Appeals) upheld that order after the matter was remanded for a decision on the merits.

The appellant challenged the confiscation and penalties, relying on the absence of a proper basis for the Section 123 presumption, the retracted statements, and documentary records supporting a lawful source for the gold.

Under Sections 110 and 123 of the Customs Act, 1962, seizure requires a reasonable belief, founded on relevant material available at the time, that the goods are liable to confiscation; the Section 123 burden shifts only when its foundational requirement is met, and suspicion alone is insufficient.

Sections 111(b), 111(d), and 111(l) require proof of the statutory grounds for confiscation; penalties under Sections 112(a) and 112(b) require evidence connecting the person’s conduct to goods liable to confiscation, while Section 114AA requires proof of the specified making, signing, or use of a false or incorrect document or declaration.

Section 138B governs the relevance of statements in Customs Act proceedings and requires compliance with its statutory conditions before such statements may be relied upon; the judgment relied on Additional Director General v. It’s My Name Pvt. Ltd., Commissioner of Central Excise, Meerut-I v. Parmarth Iron Pvt. Ltd., and Andaman Timber Industries v. Commissioner of Central Excise on the procedural safeguards and cross-examination of witnesses whose statements form the basis of an adverse order.

The Tribunal also relied on Assistant Collector of Customs v. Charan Das Malhotra and Balanagu Naga Venkata Raghavendra v. CC Vijayawada on the need for reasonable grounds to support seizure and the Section 123 presumption.

The Tribunal found no adequate independent material showing that, when the gold was seized during domestic travel, the officers had a reasonable basis to believe it had been smuggled; the bars bore no foreign markings, and the Department had not connected them to a specific importation.

It therefore held that Section 123 could not cure the evidentiary gap.

The appellant’s purchase, stock, voucher, refinery, and VAT-verification records were relevant and had not been satisfactorily rebutted, although the VAT report alone did not establish the provenance of the particular seized bars.

The relied-upon statements were not tested in accordance with Section 138B, and the requested cross-examination was not granted; the Tribunal considered the statements, without sufficient independent corroboration, inadequate to establish smuggling or the appellant’s culpability.

The alleged past transportation was likewise unsupported: travel records did not prove that each journey involved 6 kg of smuggled gold, and the calculation rested on unproven assumptions.

It also rejected the alleged past transportation of 618 kg as unsupported by corroborative evidence and set aside the consequential penalties under Sections 112(a), 112(b), and 114AA.

The impugned order was set aside and the appeal allowed.