2024 (5) TMI 730 - HC - Customs

Seizure of gold of foreign origin silver granules and Indian currency notes - confiscation u/s 111 (b), 111 (d) and 121 - Penalty u/s 112 (a) and/or 112 (b) and 117 - Smuggling - Burden to prove on co-noticees - Sale proceeds of smuggled gold and silver - huge amount of cash of Indian currency - Reliance on the statement - Presumptions of innocence - Retracted confession - whether the respondent and other co-noticees were able to establish the stand taken by them that the gold was obtained by them by purchasing old gold jewellery - HELD THAT - Though the respondent took a plea that the gold bars was made out of old gold jewellery purchased in cash it was a very faint plea which was raised by the respondent and the co-noticees. Assuming such a plea was required to be considered the onus is on the respondent and the co-noticees to establish with documents that the gold which was seized was from and out of the old gold jewellery purchased by cash. This aspect of the matter was never established by the respondent and the co notices. Therefore the learned tribunal erroneously shifted the burden on the department stating that the same has not been denied. The question of denial will come only if the onus is discharged by the respondent and the co-noticees as required u/s 123 of the Act. Thus without any document placed by the respondent and the co-noticees the tribunal could not have come to the conclusion that the department did not establish the same by cogent evidence. This finding is absolutely perverse and contrary to the scheme of Section 123 of the Act. The respondent and the other co-noticees would contend that the purity of the gold not been 99.9% it is established that it is not smuggled gold. Such conclusion cannot be arrived at in the absence of any proof to show that the gold was from and out of the gold jewellery which was purchased for cash. That apart merely because the statement is said to have been retracted it cannot be regarded as involuntary or unlawfully obtained. In this regard the revenue has rightly placed reliance on the decision of the Hon ble Supreme Court in Vinod Solanki Versus Union of India and Others 2008 (12) TMI 31 - SUPREME COURT . If the learned tribunal was of the view that the statement recorded under Section 108 of the Act was not admissible on account of the retraction that by itself cannot render the statement as involuntary. It is the duty casts upon the court to examine the correctness of the validity of the retraction the point of time at which the retraction was made whether the retraction was consistent and whether it was merely a ruse. These aspects have not been examined by the learned tribunal resulting in perversity. The mobile phones which were recovered and the call details record which were obtained have all been elaborately discussed by the adjudicating authority. This aspect has not been dealt with by the learned tribunal. The seizure cannot be denied by the respondent since the seizure list was drawn in the presence of two independent witnesses and the DRI officers and copy of which was handed over to the respondent and the other two co-noticees. Further we find there was nothing on record before the learned tribunal to hold that mere melting of old gold jewellery will yield gold of less purity and considering the quantity which has been seized it can never be the case of the respondent or the other two co-noticees that they have done the melting process at their residence as such melting requires expertise and also use of several chemicals. Thus the observations of the tribunal have to be held to be without any basis or foundational facts or documents. Thus we find that the order passed by the tribunal suffers from perversity and calls for interference. In the result the appeal is allowed and the order passed by the learned tribunal is set aside and the order passed by the adjudicating authority as affirmed by the appellate authority is restored. The substantial questions of law are answered in favour of the revenue.

Issues Involved:
1. Voluntariness and retraction of statements.
2. Claim of gold being melted from old jewellery.
3. Burden of proof u/s 123 of the Customs Act.
4. Purity of gold and its implications.
5. Confiscation of cash as sale proceeds of smuggled gold.
6. Applicability of precedents regarding smuggling and burden of proof.

Summary:

1. Voluntariness and Retraction of Statements:
The revenue questioned the tribunal's decision not holding the statements of the respondent as voluntary. The statements made on 07.08.2018, 08.08.2018, and 25.07.2019 were in the respondent's handwriting and vernacular, suggesting voluntariness. The tribunal erred in not considering the retraction as an afterthought since it was made almost a year later without mentioning any threat or coercion initially.

2. Claim of Gold Being Melted from Old Jewellery:
The tribunal accepted the respondent's claim that the gold was melted from old jewellery, despite no such claim being made during the investigation nor any documentary evidence produced. The tribunal's acceptance of this claim was erroneous as the respondent failed to provide any proof of the gold's origin.

3. Burden of Proof u/s 123 of the Customs Act:
Section 123 places the burden of proof on the person from whose possession the goods are seized to prove they are not smuggled. The tribunal incorrectly shifted this burden to the revenue, despite the respondent failing to discharge it. The adjudicating authority and appellate authority found that the respondent could not produce any documents to support the legal possession of the gold, thus failing to discharge the burden u/s 123.

4. Purity of Gold and Its Implications:
The tribunal held that the gold's purity being 99.5% instead of 99.9% indicated it was not smuggled. However, this conclusion was flawed without proof that the gold came from melted old jewellery. The tribunal's finding that the melting process could be done at home was also without basis, as such a process requires expertise and chemicals.

5. Confiscation of Cash as Sale Proceeds of Smuggled Gold:
The tribunal ruled that the revenue failed to establish the cash seized as sale proceeds of smuggled gold. However, the respondent admitted in statements recorded u/s 108 that the cash was from smuggled gold sales. The adjudicating authority and appellate authority upheld the confiscation of the cash based on these admissions and the lack of documents proving the cash's legal source.

6. Applicability of Precedents Regarding Smuggling and Burden of Proof:
The tribunal did not properly consider precedents like the Supreme Court's decision in Collector of Customs, Madras vs. D. Bhoormul, which states that the burden of proof lies on the person from whom goods are seized if believed to be smuggled. The tribunal's decision was perverse and contrary to the established legal framework.

Conclusion:
The High Court allowed the appeal, setting aside the tribunal's order and restoring the adjudicating authority's order as affirmed by the appellate authority. The substantial questions of law were answered in favor of the revenue.

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