2025 (3) TMI 857 - AT - Customs

Sale proceeds of gold smuggled into India - Seizure of Currency - Confiscation under Section 121 of the Customs Act 1962 - penalties imposed on the individuals - HELD THAT - The learned Commissioner in the impugned order though acknowledged at para 34 of the order that the investigation has not been able to produce evidences regarding smuggling of gold or linking the seized currency directly to smuggled gold; however making a generalized remark held that smuggling of goods including the gold is primarily an offence that takes place at the border / frontier and it is almost impossible to distinguish or identify smuggled goods from licitly imported ones once they move into the domestic tariff area. Further he observed that the currency must have been the sale proceeds of smuggled gold. The said finding of the learned Commissioner is devoid of merit inasmuch as no evidence has been placed on record by the Revenue in discharging the onus which squarely rests on the department to establish that there has been smuggling of gold into the country and the recovered/seized currency of Rs.1.29 crores from the possession of these four passengers were sale proceeds of the smuggled gold. Needless to mention that burden lies heavily on the Revenue to establish that the currency seized was the sale proceeds of the smuggled gold. Similar view has been expressed by the Tribunal in the cases of Wall Street Finance Ltd. Vs. CC 2006 (9) TMI 437 - CESTAT MUMBAI and CC (Preventive) Mumbai Vs. Sadashiv R. Lele 2005 (5) TMI 176 - CESTAT MUMBAI . The case records reveal that the Revenue even could not able to trace or bring on record the statements of the person who handed over the currency to these four persons at Chennai as mentioned in the notice. The statements furnished by the four persons on 05.09.2013 were retracted on the next day i.e. on 06.09.2013. Therefore in the said circumstances it is necessary to establish through the corroborative and independent evidence about the smuggling of the gold and the currency seized from the four persons is the sale proceeds of the smuggled gold. The loose slips recovered from the four persons indicating the quantity of gold and the rate itself do not reveal that the seized currency has got any connection with proceeds of the smuggled gold. No doubt it leads to some doubt/suspicion in the circumstances when recovery of huge cash concealed by the said four persons was made but that itself is not sufficient. Therefore it is difficult to accept the conclusion of the learned Commissioner following principle of preponderance of probability that the currency seized form these four persons are sale proceeds of the smuggled gold and liable for confiscation under Section 121 of Custom Act 1962. Since the currency seized from the four persons could not be proved to be the sale proceeds of the smuggled gold the same are required to be released to the owner i.e. Shri K.V. Kunhimohammed. Consequently penalty imposed on all the appellants cannot be sustained. The impugned order is set aside and the appeals are allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment was whether the Indian currency amounting to Rs.1.29 crores seized from four individuals on a train was the sale proceeds of smuggled gold and thus liable for confiscation under Section 121 of the Customs Act, 1962. The related question was whether penalties imposed on the individuals and an alleged accomplice, Shri K.V. Kunhimohammed, were justified.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework primarily involved Section 121 of the Customs Act, 1962, which allows for the confiscation of sale proceeds from smuggled goods. The burden of proof lies with the Revenue to establish a connection between the seized currency and smuggled goods. Several precedents were cited by both parties, emphasizing the necessity for the Revenue to provide substantial evidence to support claims of smuggling and illicit proceeds.

Court's interpretation and reasoning:

The Tribunal noted that the Commissioner had acknowledged the lack of direct evidence linking the seized currency to smuggled gold. The Tribunal emphasized the necessity for the Revenue to prove the connection between the currency and smuggled goods, which was not sufficiently demonstrated in this case. The Tribunal referred to the principle of "preponderance of probability" but found that the evidence presented did not meet even this standard.

Key evidence and findings:

The evidence included the seizure of Rs.1.29 crores in Indian currency from four individuals, statements recorded under Section 108 of the Customs Act, and paper slips with writings in Tamil. The individuals initially admitted the currency was from smuggled gold but later retracted their statements, claiming duress. The Tribunal found that the Revenue failed to trace or present the person who allegedly handed over the currency, nor did it establish the smuggling of gold into India.

Application of law to facts:

The Tribunal applied Section 121 of the Customs Act, emphasizing the need for the Revenue to establish a clear link between the seized currency and smuggled goods. The Tribunal found that the Revenue did not meet this burden of proof, as the evidence was insufficient to establish the currency as proceeds from smuggled gold.

Treatment of competing arguments:

The Tribunal considered the arguments from both sides. The appellants argued that the Revenue did not provide sufficient evidence, and the initial statements were retracted. The Revenue argued that the circumstantial evidence and the modus operandi suggested the currency was from smuggled gold. The Tribunal sided with the appellants, finding the evidence inadequate to support the Revenue's claims.

Conclusions:

The Tribunal concluded that the Revenue failed to establish that the seized currency was the sale proceeds of smuggled gold. Consequently, the confiscation of the currency and the penalties imposed were not justified.

3. SIGNIFICANT HOLDINGS

Core principles established:

The Tribunal reaffirmed the principle that the burden of proof lies with the Revenue to establish a connection between seized currency and smuggled goods. The requirement for substantial evidence was emphasized, and mere suspicion or circumstantial evidence was deemed insufficient.

Final determinations on each issue:

The Tribunal set aside the impugned order, allowing the appeals and ordering the release of the seized currency to Shri K.V. Kunhimohammed. The penalties imposed on the appellants were also annulled.

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