2019 (3) TMI 457 - HC - Customs

Seizure of contraband Gold - whether seized goods or not - confiscation - burden of prove - section 123 of CA - Held that - In case of seizure of gold even without markings the burden is upon the person who has custody of the gold under Section 123 of the Act to prove that the gold was legally acquired. The statement recorded under Section 108 of the Act could be safely relied upon in the proceedings against respondents. The unmarked gold recovered from the possession of two persons and their statements as to the source of the gold was sufficient to have a reasonable belief that the gold is smuggled. The two persons who were carrying the gold had nothing in their possession to prove the legitimacy of the gold they carried. The fact that the gold bars and pieces did not have any marking on them is suspicious and it points to a concerted effort to erase the markings on them. The burden under Section 123 which is only of a reasonable belief; is effectively discharged by the Department who initiated action on the basis of the seizure and the recorded statements of the detained persons. The mere fact that the interception and seizure was not affected in an international border or near an airport or seaport is irrelevant since the statements of the intercepted persons clearly indicate that they were asked to avoid such means of transport and stick to the normal modes of public transport. The assertion was that the gold found on the two employees were that purchased by the Company at Mumbai; which details are available in the registers maintained by the Company. The stock of refined gold and gold ornaments as seen from the stock register produced at the time of investigation substantially varied from the abstracts of the stock registers produced before this Court where Om Prakash Khatri approached for anticipatory bail. The explanation offered for the anomalies was that some gold possessed by sales men were not accounted for. This clearly belies the veracity of the registers produced in the course of investigation. The Tribunal was not justified in upsetting the findings of the first appellate authority - appeal allowed.

Summary

Issues Involved:
1. Justification of the Tribunal's finding on the Department's failure to establish that the seized gold was smuggled.
2. Justification of the Tribunal's decision to quash the entire order of confiscation.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal's finding on the Department's failure to establish that the seized gold was smuggled:

The Tribunal found that the Department did not discharge its burden of proving that the gold bars and jewelry seized from the two persons were smuggled. The Tribunal observed that the gold bars lacked standard size, shape, or weight and had no markings. It also noted that the two persons were not intercepted at an airport, seaport, or international border, which would typically warrant action under Section 110 of the Customs Act. The Tribunal relied on the Supreme Court's decisions in *Collector of Customs, Madras v. D.Bhoormall* and *Collector of Customs (Preventive) v. Shri Ganesh Enterprises* to conclude that the Department needed to prove that the seized gold was smuggled. The Tribunal criticized the Department for not examining the twelve persons from whom the respondents allegedly purchased gold and for not demanding customs duty from the apprehended persons.

2. Justification of the Tribunal's decision to quash the entire order of confiscation:

The Tribunal quashed the adjudicatory order, stating that the Department did not provide sufficient evidence to prove the gold was smuggled. However, the High Court found that the Tribunal's reliance on the decision in *D.Bhoormall* was misplaced, as Section 123 of the Customs Act places the burden of proof on the person from whose possession the goods were seized. The High Court emphasized that the reasonable belief that the gold was smuggled was sufficient under Section 123. The statements of the two salesmen, recorded under Section 108 of the Act, indicated that the gold was smuggled, and these statements could be relied upon by the Department. The High Court also noted that the Tribunal ignored the chemical examination results, which showed that the gold bars were of 99.8% purity, further supporting the Department's reasonable belief.

The High Court found that the Department had effectively discharged its burden of proof under Section 123 by demonstrating a reasonable belief that the gold was smuggled. The intercepted individuals failed to provide satisfactory explanations or documents to prove the legitimacy of the gold. The Tribunal's decision to quash the confiscation order was therefore unjustified.

Conclusion:

The High Court allowed the appeals, set aside the Tribunal's impugned order, and restored the first appellate authority's order, which confirmed the confiscation of the gold bars and pieces. The High Court concluded that the totality of evidence and circumstances justified the Department's actions, and the appellants failed to discharge their burden of proof under Section 123 of the Customs Act.