Section 123’s burden shifts only after an evidence-based reasonable belief that seized gold is smuggled.

Customs officers seized 26 gold pieces weighing 2,401.310 grams from Inder Singh at Guwahati Railway Station on 12 February 2024.

The Department alleged that the gold was smuggled and that Inder Singh carried it at Narpat Soni’s direction, relying principally on Inder Singh’s statement, concealment of the gold, absence of documents at interception and call-detail records.

Soni later claimed ownership and produced business, purchase, inheritance and stock records to explain the gold’s source.

The adjudicating authority ordered absolute confiscation and imposed penalties; the Commissioner (Appeals) upheld that decision. Both appellants appealed to the Tribunal.

1. Whether the appellants discharged the burden under Section 123 of the Customs Act, 1962, and whether the gold was liable to confiscation under Sections 111(b) and 111(d).

2. Whether Inder Singh’s statement dated 12 February 2024 was legally sufficient to establish the appellants’ involvement in smuggling.

Section 110(1) of the Customs Act 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 cannot be supplied retrospectively by Section 123.

Section 123 shifts the burden to the possessor and any claimant-owner only where specified goods, including gold, have been seized in the reasonable belief that they are smuggled.

Confiscation under Sections 111(b) and 111(d) requires a sufficient basis to establish importation and the relevant contravention; concealment or lack of documents, without more, does not establish foreign origin or illicit importation.

Section 112 requires proof of conduct bringing the person within its terms; seizure alone does not establish penalty liability.

The Tribunal also applied Section 138B’s safeguards for reliance on statements and considered Ganesh Das v. Collector of Central Excise, Commissioner of Customs v. Abdul Gani, Union of India v. Mohammed Nawaz Khan, Jeen Bhavani International v. Commissioner of Customs and Ambika International v. Union of India.

The seizure occurred at a railway station within India; the gold bore no foreign markings, and the Department produced no evidence tracing it to a foreign source, identifying an import route, or showing that the pieces had been melted after importation.

The Tribunal found that concealment, the absence of documents at interception and general intelligence about regional smuggling did not establish the necessary case-specific nexus.

It also found that Soni’s documentary account—including GST-backed purchases, stock records and a notarised Will—was capable of verification but had not been effectively disproved by the Department.

Inder Singh’s statement was materially undermined by hotel records showing only one earlier stay, the absence of corroborating travel or electronic records, the failure to identify the alleged intermediary, and his retraction and cross-examination testimony. In the circumstances, the statement could not safely support the allegations, particularly without compliance with Section 138B’s safeguards.

It further held that Inder Singh’s statement, considered with the other evidence, was insufficient to establish the appellants’ involvement in smuggling.

The Tribunal set aside the absolute confiscation of the gold and the penalties of ₹1,50,000 imposed on Inder Singh and ₹15,00,000 imposed on Soni; it set aside the impugned order and allowed both appeals with consequential relief in accordance with law.