2023 (9) TMI 142 - AT - Customs

Smuggling - Confiscation of gold / gold jewellery - burden to prove - interpretation of Section 111(d) and (l) of the Customs Act, 1962 - HELD THAT - There are no concrete evidence, much less any evidence at all to indicate that the gold jewellery that were seized / confiscated were of foreign / Singapore origin. Even the Assayers have not specifically identified the presence of any mark to the effect that the goods in question were of foreign / Singapore origin - there are no material placed on record as to how a gold jewellery could be identified as Singapore make. From the facts of the case, admittedly, the gold / gold jewellery were not seized during the course of import and nor has the Revenue proved that the goods in question were of foreign / Singapore origin. Had the Assayers been subjected to cross-examination, perhaps they would have revealed as to the basis for their conclusion as to the source of the goods in question, but in any case, neither the mahazar nor even the Assayers report give any proof that any of the gold jewellery involved had any mark as to their foreign origin and hence, the burden under Section 123 ibid. remains on the Revenue. On going through the documents placed on record, the Order-in-Original and the Show Cause Notice, it appears to us that the Department has not pursued the investigation after issuing the Show Cause Notice and the only effort seems to be that since no valid import documents could be produced by the first appellant-person carrying the gold, the same were deemed to be smuggled into India - It was not the intention of the Government to bring back the Gold (Control) Act albeit by a backdoor entry, by notifying gold under Section 123 ibid. The Revenue, therefore, is required to prove that the gold jewellery were of smuggled nature, even when it is notified under Section 123. The officers of the Department had no reasonable belief that the gold jewellery seized were smuggled and therefore, they have not discharged their primary responsibility of forming a prima facie / reasonable belief under Section 123 ibid., without which, the burden of proof could not shift to the appellants from whom the goods in question have been seized. Aspect of cross-examination - HELD THAT - The investigation concluded the seized jewellery as foreign jewellery only basing on these Assayers certificates, as reproduced supra, and the basis for their appraisal is not forthcoming, as to whether it is on the basis of their experience or on account of the model, purity or any other characteristic which differentiates Indian jewellery from Singapore jewellery. The methodology adopted to arrive at such a determination and as to whether any known processes / methods have been adopted have not been stated. Further, on all the jewellery, there are no foreign markings and hence, there is no reasonable basis to conclude these to be of imported origin - the burden of proof does not shift to the appellants, but the burden lies on the investigating agency to prove that the seized jewellery were of foreign origin. This is a case where the appellants have been penalized for an alleged activity which, according to the Revenue, has resulted in confiscation of the allegedly imported goods. When, therefore, a Show Cause Notice is issued by the DRI, a reasonable belief is required to be established before alleging any activity in the nature of smuggling. In the case of town seizure, the initial burden is always on the Revenue to prove as to what prompted it to reasonably believe that the gold / gold jewellery in question were smuggled / of foreign origin. The confiscation of the gold / gold jewellery from the appellants is bad in law, the Revenue has also failed to establish / prove that any of the gold / gold jewellery confiscated from the appellants had any marking as to its foreign origin and that the Revenue acted in a haste and without reasonable belief that the impugned goods were smuggled - the Revenue has not established that the goods in question were liable for confiscation in any manner known under law. Nor has the Revenue placed any piece of evidence on record to even suggest that the gold jewellery that were seized had any marking as to their foreign origin and hence, there was no import at all. The penalty under Section 112 not being automatic, cannot be imposed in the facts of this case, on the appellants - impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Confiscation of gold/gold jewellery.
2. Imposition of penalties under Section 112 of the Customs Act.
3. Validity of the investigation and evidence.

Summary:

Confiscation of Gold/Gold Jewellery:
The primary issue in these appeals was the challenge to the confiscation of gold/gold jewellery found and seized during the DRI investigation. The gold jewellery in question included 8.452 kgs. of 22ct. gold jewellery seized from the appellant at Chennai Airport, 2.409 kgs. of gold jewellery, 4.627 kgs. of gold bars/bits, and 10.011 kgs. of Indian-made gold jewellery seized from the appellant's residential premises, and 3 nos. of 1 kg. gold bars seized from M/s. Mundhra Jewellers.

The appellants contended that the seized gold jewellery did not have any foreign markings indicating they were of foreign origin. They argued that the burden of proof lay on the Department to establish that the gold jewellery was smuggled. The appellants also highlighted that the assayers' certificates did not specify any methodology or basis for determining the origin of the jewellery. The Tribunal found no concrete evidence to indicate that the seized gold jewellery was of foreign origin. The Tribunal emphasized that the burden of proof under Section 123 of the Customs Act remained on the Revenue, which was not discharged.

Imposition of Penalties:
The appellants challenged the imposition of penalties under Section 112 of the Customs Act. The Tribunal noted that the Revenue failed to establish that the goods were liable for confiscation under any provision of law. Consequently, the Tribunal held that penalties under Section 112 could not be imposed as the Revenue did not prove any improper importation.

Validity of Investigation and Evidence:
The appellants argued that the investigation was flawed as crucial witnesses, including the assayers, were not subjected to cross-examination. The Tribunal agreed, stating that the rejection of the request for cross-examination without any reasons undermined the credibility of the evidence. The Tribunal also noted that the statements of the appellants, which were initially inculpatory, were later retracted, and the Revenue did not provide sufficient evidence to support the initial statements.

Conclusion:
The Tribunal concluded that the Revenue did not have a reasonable belief that the seized gold jewellery was smuggled, and the burden of proof under Section 123 was not discharged. The Tribunal set aside the confiscation orders and the penalties imposed, allowing the appeals with consequential benefits as per law.