2011 (8) TMI 1366 - HC - Customs

Summary

Issues Involved:
1. Confiscation of gold and Maruti Van.
2. Imposition of penalties.
3. Validity of statements recorded under Section 108 of the Customs Act.
4. Burden of proof under Section 123 of the Customs Act.
5. Application of Section 125 of the Customs Act regarding the option to pay a fine in lieu of confiscation.

Issue-wise Detailed Analysis:

1. Confiscation of Gold and Maruti Van:
The appeal was against the order of confiscation of 559.700 grams of gold and a Maruti Van under Sections 111(d), 120, and 115(2) of the Customs Act. The gold was seized on the belief that it was smuggled from Nepal, evidenced by the erasure of foreign markings and the presence of Chinese markings on one piece. The Tribunal upheld the confiscation based on the initial statements of the appellants, which indicated the gold was acquired from a broker in Urdu Bazar, Gorakhpur, and was intended for sale in Balaharganj.

2. Imposition of Penalties:
Penalties were imposed under Section 112 of the Customs Act, with the Joint Commissioner ordering a penalty of Rs. 15,000/- on the appellant and Rs. 10,000/- on Sanjay Soni, which was later reduced to Rs. 5,000/- by the Tribunal. The penalties were based on the involvement in the smuggling and transportation of the gold.

3. Validity of Statements Recorded under Section 108 of the Customs Act:
The statements recorded under Section 108 were pivotal. Initially, the appellant admitted purchasing gold from a broker who claimed it was from Nepal. However, in subsequent statements, the appellant claimed to have purchased the gold from Dhancholia & Sons, Delhi, supported by a receipt. The Tribunal and customs authorities relied on the initial statements, considering the retractions as unconvincing without proper corroboration.

4. Burden of Proof under Section 123 of the Customs Act:
Section 123 places the burden of proof on the accused to prove that the gold was not smuggled. The Tribunal held that the appellant failed to establish the lawful acquisition of the gold, as discrepancies existed between the number of pieces and the weight of gold shown in the receipt from Delhi and the gold seized. The Tribunal emphasized that if the gold was lawfully acquired, there would be no need to hammer the gold to remove foreign markings.

5. Application of Section 125 of the Customs Act Regarding the Option to Pay Fine in Lieu of Confiscation:
The judgment pointed out that the customs authorities and the Tribunal did not consider the mandatory requirement of Section 125, which provides an option to pay a fine in lieu of confiscation. This option should have been given to the appellants, as they were the apparent owners of the gold.

Conclusion:
The High Court found that the customs authorities and the Tribunal did not adequately consider the principles of law regarding the burden of proof and the reliance on statements under Section 108. The discrepancies in the statements and the lack of corroborative evidence were insufficient to discard the appellant's explanation. The High Court also noted the failure to provide an option to pay a fine in lieu of confiscation as required under Section 125. Consequently, the appeal was allowed, and the matter was remanded back to the Tribunal for reconsideration in accordance with the law and the observations made in the judgment.