2024 (8) TMI 214 - AT - Customs

Smuggling - gold bars of foreign origin - reasonable belief by the Customs Officers that such gold bars were liable for confiscation on the date of seizure or not - whether the Department has been able to establish conclusively that said gold bars were of foreign origin and were smuggled initially and subsequently re-melted and affixed with false markings? - presumptions available under Section 123 of CA. Whether there was a reasonable belief by Customs Officers that such gold bars were liable for confiscation on the date of seizure? - HELD THAT - Since there were many consignments containing different types of gold and jewelleries and in view of certain un-specified intelligence/information, there could have been a reasonable belief by the Department that certain goods were of offending nature and were liable for confiscation under the Customs Act. However, what is important to note is that in order to invoke Section 123, the seizure of the gold has to be under reasonable belief that it was smuggled gold. When the gold was covered under proper documents like job work gold invoice vouchers and GST purchase invoice etc., as apparent from Panchanama, there did not exist any reasonable belief that the said golds were smuggled in nature, on the date of seizure. Therefore, merely on presumption without any tangible documents or belief, invokation of the Section 123 for the purpose of shifting the onus of burden cannot be sustained - though the goods which were seized under the reasonable belief that they were liable for confiscation under the Customs Act and CGST Act, there was no sufficient material available to the customs officials on the date of seizure to form a reasonable belief in respect of appellants gold that they were smuggled gold or were of foreign origin. Presumption under Section 123 - HELD THAT - In the case of COLLECTOR OF CUS., MADRAS VERSUS NATHELLA SAMPATHU CHETTY 1961 (9) TMI 3 - SUPREME COURT Hon ble Supreme Court, inter alia, observed in para 44 that reasonableness of the belief has to be judged by all the circumstances appearing at that moment. Therefore, even though subsequently they would have found some evidence to suggest that one of the documents might not be authentic document for coverage of the impugned gold, at the time of seizure, there was no material ground to hold such a belief. Therefore, in the given set of facts, I do not find that Section 123 was invokable. Whether Department was able to establish that said gold bars were of foreign origin and were smuggled and subsequently re-melted as held by the Original Adjudicating Authority? - HELD THAT - Since Section 123 is not invokable in the present case, therefore, onus was on the Department to conclusively prove that the gold in question were smuggled and subsequently re-melted etc., as concluded by the Original Adjudicating Authority and upheld by the Appellate Authority. There is also force in the submissions of the appellant that they have never claimed that the golds were purchased from MMTC and in fact the Adjudicating Authority has also held that it is case of a wrong marking to mislead Customs. Therefore, the Adjudicating Authority accepts that these markings were not of foreign origin. Therefore, when the markings were not of the foreign origin and fact that gold of purity 999 can be sold in domestic market under legitimate invoices etc., the Customs needs to have proved with sufficient evidence that the gold was actually made out of re-melted gold bar initially smuggled into India. There is no evidence to that effect in the show cause notice. Thus, the conclusion drawn by the adjudication is based on presumptions and surmisings. The Department has not been able to prove conclusively that the said gold bars were of foreign origin which were subsequently smuggled and re-melted and were carrying fake markings. Since Section 123 cannot be invoked and appellants had already discharged the initial burden by disclosing the source of legitimate purchase, it was for the Department to carry out further investigation and establish that such golds were actually smuggled gold and were liable for confiscation under the Customs Act 1962. Thus, in the facts of the case, the confiscation and more so absolute confiscation of the seized gold is not legally tenable and therefore the order of the Commissioner (Appeals) upholding the absolute confiscation is required to be set aside. Since, the seized goods were not liable for absolute confiscation, the penalty is also not imposable on the appellant. The order of the Commissioner (Appeals) is set aside - Appeal allowed.

Issues Involved:
1. Seizure of 400 grams of gold bars of alleged foreign origin.
2. Reasonable belief of Customs Officers regarding the liability for confiscation.
3. Establishment of the gold bars being of foreign origin and smuggled.
4. Invocation of presumptions under Section 123 of the Customs Act.
5. Legitimacy of absolute confiscation and imposition of penalty.

Issue-wise Detailed Analysis:

1. Seizure of 400 grams of gold bars of alleged foreign origin:
The appellant, M/s Raj Jewellery Mall, challenged the absolute confiscation of 400 grams of gold bars valued at Rs. 20,98,400/- under Sections 111(d) and 111(f) of the Customs Act, 1962. The Adjudicating Authority had imposed a penalty of Rs. 4,20,000/- under Section 112(b)(i) of the Customs Act. The gold was seized by Customs Officers at the Air Cargo Complex, Shamshabad, based on specific intelligence, which led to the examination of consignments containing gold without proper documentation.

2. Reasonable belief of Customs Officers regarding the liability for confiscation:
The Customs Officers acted on intelligence and seized the gold bars, suspecting them to be smuggled. The appellant argued that the gold was transported under proper documents, including a job work voucher and a GST purchase invoice. The Tribunal noted that the seizure was made without distinguishing which law (Customs Act or CGST Act) was applicable, and there was no reasonable belief that the gold was smuggled on the date of seizure.

3. Establishment of the gold bars being of foreign origin and smuggled:
The Department's case relied on the denial by M/s Shubham Jewellers of having supplied the impugned gold bars to the appellant. The Adjudicating Authority concluded that the gold bars were of foreign origin, re-melted, and affixed with fake markings. However, the Tribunal found that there was no conclusive evidence to prove that the gold bars were smuggled or of foreign origin, and the Department failed to carry out further investigation to establish this.

4. Invocation of presumptions under Section 123 of the Customs Act:
The Tribunal held that the invocation of Section 123, which shifts the burden of proof to the appellant, was not justified. The seizure was not made under a reasonable belief that the gold was smuggled. The Tribunal referenced several judgments, including Indru Ram Chand Bharvani Vs Union of India, emphasizing that reasonable belief must be based on material evidence, which was lacking in this case.

5. Legitimacy of absolute confiscation and imposition of penalty:
The Tribunal concluded that the absolute confiscation of the gold bars was not legally tenable. The appellant had provided legitimate purchase documents, and the Department failed to prove that the gold was smuggled. Consequently, the penalty imposed on the appellant was also deemed unjustified. The order of the Commissioner (Appeals) upholding the absolute confiscation and penalty was set aside.

Conclusion:
The appeal was allowed, setting aside the order of absolute confiscation and penalty, and granting consequential benefits to the appellant. The Tribunal emphasized the need for concrete evidence to support the seizure and confiscation of goods under the Customs Act.

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