2025 (3) TMI 693 - AT - Customs

Smuggling of Gold - Town seizure - Confiscation - statements recorded un/s 108 of the Customs Act can be considered as conclusive evidence of smuggling or not - burden to prove - whether impugned order is based on assumption and presumptions? - applicability of Section 113 of the Customs Act - HELD THAT - No any allegations that seized gold were trying to export from India. Therefore Section 113 of the Customs Act is not applicable. It is a case of town seizure in which Customs Officers intercepted a person Shri Burri Yedukondalu and seized 850.39 grams gold in 10 pieces of irregular shape. The Customs Officer recorded statement of Shri Burri Yedukondalu under Section 108 of the Customs Act in which he stated that He is working as part time worker in M/s Dattatreya Associates in Durgi owner is Shri Kapalavai Naga Samba Siva Rao. As per the directions of his Associates in Durgi. His owner is Shri Kapalvai Naga Samba Siva Rao. His owner is paying him Rs. 20, 000/- per month excluding travel and food expenses. As per the directions of his owner i.e Shri Kapalavai Naga Samba Siva Rao (owner of M/s Dattatreya Associates in Durgi) on 17.10.2022 he started from Durgi to Nellore along with cash of Rs. 43, 50, 000/- given by owner and reached Nellore. Statement recorded under Section 108 of The Customs Act is admissible in evidence but such statement may be scrutinised in facts and circumstances of the case. It cannot be presumed that statement recorded by Customs Officer will be treated as gospel truth. Learned Counsel for the appellants argued that Department prepared a concocted story and witnesses are habitual/pocket witness. He produced a copy of Panchanama dated 20.03.2023 at 19.45 hrs onwards relating to place Prakasam District Andhra Pradesh in which a witness named Shri Gedela Nageswara Rao with same address. How it is possible a person will be available as a witness in so many places. It creates doubt on panchanama as well as statement as recorded. Conclusion - Revenue failed to prove reasonable belief that the seized gold is smuggled whereas appellants successfully proved that seized gold was not smuggled but prepared bars after melting old jewellery. Therefore absolute confiscation as well as imposing penalties are not justified. Appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the seized gold was smuggled into India and thus liable for confiscation under Section 111 of the Customs Act.

2. Whether the statements recorded under Section 108 of the Customs Act can be considered as conclusive evidence of smuggling.

3. Whether the burden of proof as per Section 123 of the Customs Act was appropriately applied and whether the appellants successfully discharged this burden.

4. Whether the method used to ascertain the purity of the gold was reliable and if it contributed to establishing the gold as smuggled.

5. Whether the penalties and confiscation imposed by the lower authorities were justified based on the evidence presented.

ISSUE-WISE DETAILED ANALYSIS

1. Nature of the Seized Gold

The relevant legal framework involves Section 111 of the Customs Act, which deals with the confiscation of improperly imported goods. The Tribunal analyzed whether the gold seized from Shri Burri Yedukondalu was smuggled, thereby justifying its confiscation under this section. The Department argued that the gold was smuggled based on the statements of the individuals involved and the absence of documentation. However, the appellants contended that the gold was melted from old jewelry and not of foreign origin.

The Court found that the Department failed to establish a reasonable belief that the gold was smuggled, as the statements did not conclusively prove the foreign origin of the gold. The Tribunal noted that the statements of the appellants were consistent and reasonable, supporting the claim that the gold was not smuggled but rather melted from old jewelry.

2. Admissibility and Reliability of Statements

Under Section 108 of the Customs Act, statements recorded by Customs Officers are admissible in evidence. However, the Tribunal emphasized that such statements must be scrutinized within the context of the case and cannot be presumed as absolute truth. The Tribunal noted discrepancies in the Department's narrative and questioned the credibility of the witnesses, such as the repeated use of the same witness in different cases, which cast doubt on the reliability of the statements.

The Tribunal concluded that the statements did not provide sufficient evidence to prove that the gold was smuggled, as there was no explicit admission of the gold being of foreign origin.

3. Burden of Proof

Section 123 of the Customs Act places the burden of proof on the person from whom goods are seized to prove that they are not smuggled. The Tribunal found that the appellants provided a satisfactory explanation for the gold's origin, supported by consistent statements that it was melted from old jewelry. The Department, on the other hand, failed to provide compelling evidence to shift the burden of proof back to the appellants.

4. Method of Testing Gold Purity

The Tribunal considered the method used to test the gold's purity, which was the touchstone method. Citing precedents, the Tribunal noted that this method is not foolproof and cannot definitively establish the gold's purity or origin. This undermined the Department's claim that the gold was smuggled based on its purity.

5. Justification for Penalties and Confiscation

The Tribunal evaluated whether the penalties and confiscation imposed were justified. Given the lack of conclusive evidence that the gold was smuggled, the Tribunal found that the penalties and confiscation were not warranted. The appellants successfully demonstrated that the gold was not smuggled, thus negating the basis for such punitive measures.

SIGNIFICANT HOLDINGS

The Tribunal held that the Department failed to establish a reasonable belief that the seized gold was smuggled. It emphasized that the burden of proof under Section 123 was not effectively shifted to the appellants, as they provided a plausible explanation for the gold's origin. The Tribunal also highlighted the unreliability of the touchstone method for determining gold purity.

The Tribunal concluded that the confiscation and penalties were unjustified and allowed the appeals. The appellant, Shri Kapalavai Naga Sambasiva Rao, was entitled to receive back the gold or its sale proceeds with interest if it had been disposed of. All penalties were set aside.

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