2019 (12) TMI 247 - AT - Customs

Smuggling - gold biscuits of foreign markings - unaccounted cash - seizure under Section 132 of the Income Tax Act - burden of proof that the goods were smuggled goods - HELD THAT - During the joint search operation by DRI and Income Tax official at the residence of the appellant, 17 gold biscuits were seized and out of 17 gold biscuits, 6 biscuits have markings of MMTC, PAMP and HDFC Bank on them. As per the RBI guidelines, the said organizations are authorized to import and sell gold. Therefore, the adjudicating authority has rightly held that the 6 gold biscuits were legally possessed and has not confiscated the same. As far as remaining gold biscuits are concerned, they have the foreign markings and the appellant while making statement to the DRI officer under Section 108 of the Customs Act has stated that they have purchased the said biscuits from M/s. Davanam Jewellers but the same has been refuted by the Davanam Jewellers when the Department made enquiry from them - Further, in his statement made twice before the DRI officer, he has not stated anything regarding the purchase of these biscuits from M/s. Sai Thirumala Jewellers and M/s. Adya Jewellers. He has not even named the jewellers in his statement at all. The invoices issued by these jewellers were brought on record for the first time while replying to the show-cause notice and therefore the Department could not investigate from the said jewellers regarding the authenticity of these invoices. Further, the retraction of the statement by a Sworn Affidavit is not valid because the said alleged affidavit was not produced before any authority and it was only executed before a Notary. Authenticity of invoices - HELD THAT - The purchase invoices from the local jewellers were not produced during the investigation. Therefore, the Department could not verify the authenticity of those invoices. There is no infirmity in the impugned order which is upheld - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Legality of the seizure of gold biscuits and unaccounted cash.
2. Applicability of Section 123 of the Customs Act, 1962.
3. Validity of the appellant's retracted statements and submitted invoices.
4. Burden of proof regarding the licit possession of gold biscuits.

Detailed Analysis:

1. Legality of the Seizure of Gold Biscuits and Unaccounted Cash:
The case revolves around the seizure of unaccounted cash in demonetized currency (?3.5 Crores) and 17 gold biscuits (1578.35 grams, valued at ?47 lakhs) from the appellant's premises. The appellant, in his statement under Section 108 of the Customs Act, 1962, admitted to possessing the gold biscuits without valid purchase documents or customs duty paid challans for 15 gold biscuits with foreign markings. The adjudicating authority confiscated 11 gold biscuits (1028.35 grams) under Section 111(d) of the Customs Act, 1962, and imposed a penalty of ?9,00,000 under Section 112(a) of the Customs Act, 1962.

2. Applicability of Section 123 of the Customs Act, 1962:
The appellant argued that Section 123 of the Customs Act, which shifts the burden of proof to the possessor of the goods to prove their licit import, does not apply as the goods were seized under the Income Tax Act, 1961. The appellant cited multiple case laws to support this argument, emphasizing that the burden of proof lies with the Department to establish that the goods were smuggled. However, the respondent countered that the gold was seized during a joint operation by DRI and Income Tax authorities, and the subsequent proceedings were under the Customs Act, making Section 123 applicable. The Tribunal upheld the applicability of Section 123, citing relevant case laws, including the decision in Gopaldas Udhavadas Ahuja Vs. Union of India, which validated the invocation of Section 123.

3. Validity of the Appellant's Retracted Statements and Submitted Invoices:
The appellant retracted his statements recorded under Section 108 of the Customs Act through a sworn affidavit, claiming coercion. He submitted purchase invoices for 15 gold biscuits from local jewellers (M/s. Adya Jewellers and Sai Thirumala Jewellers) and claimed that the remaining 2 gold biscuits were procured from HDFC Bank and Credit Suisse. The Tribunal found the retraction invalid as it was not produced before any authority and was only executed before a Notary. The invoices were deemed an afterthought as they were not produced during the investigation, preventing the Department from verifying their authenticity. The Tribunal noted that the appellant's initial statement did not mention these jewellers, undermining the credibility of the invoices.

4. Burden of Proof Regarding the Licit Possession of Gold Biscuits:
The Tribunal emphasized that the burden of proof under Section 123 lies on the person possessing the gold to prove its licit acquisition. The appellant failed to provide credible evidence linking the seized gold biscuits with the submitted invoices. The Tribunal cited the Kerala High Court's decision in Commr. of Customs, Cochin Vs. Om Prakash Khatri, reinforcing that the burden of proof is on the possessor of the gold. The Tribunal also referenced decisions where the possession of gold with foreign markings required the possessor to prove lawful import through proper documents, which the appellant failed to do.

Conclusion:
The Tribunal upheld the confiscation of the 11 gold biscuits and the penalty imposed, finding no infirmity in the impugned order. The appeal was dismissed, reaffirming the applicability of Section 123 of the Customs Act and the insufficiency of the appellant's evidence to prove the licit possession of the gold biscuits. The Tribunal's decision was pronounced in open court on 25/11/2019.