2025 (4) TMI 321 - AT - Customs

Confiscation of seized Gold Bars - levy of penalty u/s 112(b)((1) and section 135 of th Customs Act 1962 - burden of proof - denial of cross-examination of the Government Railway Police Force (GRPF) officers - violation of principles of natural justice - HELD THAT - From the Test Report it is seen that except for Sl No.17 and 20 none of the gold bars fall under the category of 24 carats. Further in respect of all the 26 pcs the fineness of gold is ranging from 995.7 to 998.9. The Assay Report does not state anything to the effect that any Foreign Markings have been found. As seen from the Seizure Report also nothing emerges to the effect that the seized gold had any Foreign Markings. In such a case the reasonable belief that the gold is of foreign make is liable to be doubted since the Assay Test Report dated 5th April 2017 as well as the Seizure Report do not speak anything about the Foreign Marking and the purity is not that of International Standard of gold bars. Now coming to the appellant s claim as the owner of the gold this can be rejected by the Revenue only if the Revenue proves the Reasonable belief by way of proper evidence. So long it is not proved to be smuggled gold of foreign origin the Revenue does not have the authority to confiscate the same. As has been seen from the Seizure Memo as well as the Show Cause Notice issue the appellant has been mentioned as Owner - In this case the appellant does not fall under Section 123 (1) (b) but he falls under Section 123 (1) (a) (i) the person from whose possession the goods are seized. Therefore in case the seizure and confiscation is held as not legal and proper the goods are to be returned to the person from whose possession the goods were seized. The appellant is not required to prove that he is the owner of the gold. Therefore even on this count the goods are required to be returned to him. It is more or less clear that the gold is not of foreign origin it also has lesser purity / fineness than the standard foreign gold bar. The ownership issue favours the appellant on two counts referred to above. However the cross-examination of the GRPS who are the first persons to seize the goods would be crucial to throw more light on the entire transaction. Hence the opportunity to cross-examine these officials should be given to the appellant. Conclusion - The result of the cross-examination along with the detailed observations of the Tribunal are to be taken into consideration by the Adjudicating authority while passing his considered Order. Appeal disposed off by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the confiscation of the 26 gold bars under Section 111 of the Customs Act, 1962, was justified in the absence of conclusive evidence of foreign origin or smuggling.

2. Whether the imposition of penalties under Section 112(b)(i) and Section 135 of the Customs Act, 1962, on the appellant was appropriate.

3. Whether the denial of cross-examination of the Government Railway Police Force (GRPF) officers constituted a violation of the principles of natural justice.

ISSUE-WISE DETAILED ANALYSIS

1. Confiscation of Gold Bars under Section 111

- Relevant legal framework and precedents: Section 111 of the Customs Act, 1962, allows for confiscation of goods believed to be smuggled. Section 123 shifts the burden of proof to the person from whom goods are seized to prove they are not smuggled.

- Court's interpretation and reasoning: The Court noted the absence of foreign markings and the lack of proximity to an international border, which weakened the presumption of smuggling. The Assay Report did not confirm foreign origin, and the purity was not of international standard.

- Key evidence and findings: The gold was seized by GRPF and handed over to Customs. The Assay Certificate indicated fineness ranging from 995.7 to 998.9, but no foreign markings were found. The Seizure Inventory named the appellant as the owner.

- Application of law to facts: The Court found that the absence of evidence of foreign origin and the lack of reasonable belief of smuggling meant the confiscation was not justified under Section 111.

- Treatment of competing arguments: The appellant argued that the burden of proof did not shift due to lack of evidence of foreign origin. The department argued the appellant failed to prove legal origin. The Court sided with the appellant, emphasizing the absence of evidence.

- Conclusions: The confiscation of the gold was not justified due to lack of evidence of foreign origin or smuggling.

2. Imposition of Penalties under Sections 112(b)(i) and 135

- Relevant legal framework and precedents: Section 112(b)(i) deals with penalties for improper importation, while Section 135 addresses penalties for smuggling.

- Court's interpretation and reasoning: The Court found that penalties could not be imposed without establishing the smuggled nature of the goods. The appellant's possession did not automatically imply smuggling.

- Key evidence and findings: The appellant was in possession of the gold, but no evidence linked it to smuggling activities.

- Application of law to facts: The absence of evidence of foreign origin or smuggling rendered the penalties under Sections 112(b)(i) and 135 inappropriate.

- Treatment of competing arguments: The department relied on the appellant's possession and alleged confession. The appellant contested the confession's validity and the lack of evidence. The Court found in favor of the appellant.

- Conclusions: The penalties were not justified due to the lack of evidence of smuggling.

3. Denial of Cross-Examination of GRPF Officers

- Relevant legal framework and precedents: The principles of natural justice require fair opportunity for defense, including cross-examination of witnesses.

- Court's interpretation and reasoning: The denial of cross-examination was deemed a violation of natural justice, as it deprived the appellant of the opportunity to challenge the basis of the seizure.

- Key evidence and findings: The request for cross-examination was denied despite being recorded during the personal hearing.

- Application of law to facts: The inability to cross-examine GRPF officers meant the appellant could not fully defend against the seizure claims.

- Treatment of competing arguments: The appellant argued for the necessity of cross-examination to establish facts. The department did not provide reasons for denial. The Court supported the appellant's position.

- Conclusions: The denial of cross-examination was a violation of natural justice, warranting a remand for further proceedings.

SIGNIFICANT HOLDINGS

- The Court held that "reasonable belief" of foreign origin must be supported by evidence, and mere possession does not suffice for confiscation or penalties.

- The burden of proof under Section 123 does not shift without evidence of foreign origin, especially in a liberalized economy with legal gold imports.

- The denial of cross-examination of GRPF officers constituted a violation of natural justice, necessitating a remand for further proceedings.

- The appeal was disposed of by way of remand, directing the Adjudicating authority to allow cross-examination and consider the Tribunal's observations within three months.