2021 (2) TMI 612 - AT - Customs

Smuggling - Gold - Learned Commissioner did not allow cross examination of Senior DCM rejecting the contention of the appellants that Railway Authorities cannot confirm the travel or non-travel of the passengers - principles of natural justice - Imposition of penalty under sections 112 117 of the Customs Act. Cross examination of the Senior DCM - HELD THAT - It is a standard practice of the Indian Railways to finalise the status of waitlisted tickets while preparing the chart of passengers before departure of the train which shows whether the tickets of waitlisted passengers are confirmed or otherwise. After the journey begins, the Travelling Ticket Examiner (TTE) checks whether all the passengers had valid tickets and whether all reserved passengers have travelled and this information also goes into their official records. The letter produced by the Senior DCM merely reflects what the official records state and it is not his personal opinion. He did not make any statement regarding the nature of gold or that the passengers travelled with the gold, etc. All that was said in his letter was that the appellants had travelled in the train from Trissur to Vijayawada on the particular date. This was not his statement as an eye witness but a statement based on official records. There is nothing which the appellants can disprove by cross examination of the Senior DCM - the Learned Commissioner was correct in not allowing cross examination of the Senior DCM. Whether the Department had a reasonable belief as required under Section 123? - HELD THAT - The statements of the apprehended persons revealed involvement of on Shri Om Prakash Khatri director of M/s Panna Gold Impex Ltd. Apprehended persons indicated that these gold bars and pieces were smuggled into India from Kerala and they were to take them to Mumbai to be hand over to Shri Om Prakash Khatri. They also admitted having collected gold from Kerala on earlier occasions to deliver to Shri Om Prakash Khatri. Further, they said that they did not travel by flights to avoid security checking and customs checking. They further described in detail how they reached Kerala and who handed over the gold bars and pieces to them. They further asserted that the markings in the gold have been removed so as to conceal the identity of the smuggled gold and gold was also cut into small pieces and melted. The confiscation of the gold by the adjudicating authority was set aside by the Tribunal and on appeal by the Revenue the Hon ble High Court of Kerala, in the above factual matrix, has over turned the decision of the Tribunal. Therefore, it was not merely the purity of the gold in question but also the statements made during the investigation which formed the basis of the reasonable belief of the officers - In the present case, none of the statements recorded by the Department admit to or even suggest that the gold was smuggled gold. It has also not been brought out in the Show Cause Notice that the purity of the seized gold is such that it could only have been of foreign origin. It is true that the conduct of the appellants was suspicious inasmuch as the gold pieces were being carried in newspapers and a letter was found written to one Shri Vijay in Trissur for requesting the gold tobe handed over to the bearer of the letter. The Officers did not have a reasonable belief in the first place to assert that the seized primary gold was smuggled gold which is essential to shift the burden on to the accused under Section 123 - the officers of the Department had no reasonable belief that the gold was smuggled and therefore they have not discharged their responsibility of forming reasonable belief under Section 123 without which the burden of proof will not shift to the person from whom the gold is seized. The impugned order and show cause notice suffer from this infirmity and therefore the confiscation as well as the penalties need to be set aside. Redemption becomes irrelevant - penalties set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Cross-examination of the Senior DCM of Railways.
2. Reasonable belief under Section 123 of the Customs Act.
3. Confiscation of the seized gold.
4. Redemption of the seized gold.
5. Imposition of penalties under Sections 112 and 117 of the Customs Act.

Issue-wise Detailed Analysis:

1. Cross-examination of the Senior DCM of Railways:
The appellants argued that the principles of natural justice were violated as they were not allowed to cross-examine the Senior DCM of Railways, whose letter confirmed their travel from Trissur to Vijayawada. The Tribunal found that the letter from the Senior DCM merely reflected official records and was not his personal opinion. As per Section 80 of the Indian Evidence Act, there is a presumption of the genuineness of official records. The Tribunal concluded that cross-examination was unnecessary since the letter was based on official records, and there was nothing the appellants could disprove through cross-examination. Therefore, the Commissioner was correct in not allowing the cross-examination.

2. Reasonable belief under Section 123 of the Customs Act:
Section 123 of the Customs Act places the burden of proving that seized goods are not smuggled on the person from whose possession they were seized if there is a reasonable belief that the goods are smuggled. The Department's reasonable belief was based on specific information, a letter dated 22.06.2016, and the confirmation of the appellants' journey from Trissur to Vijayawada. However, the Tribunal found that none of the statements recorded during the investigation suggested that the gold was smuggled. The Tribunal distinguished this case from the case of Om Prakash Khatri, where the intercepted persons admitted to carrying smuggled gold. In the present case, there were no foreign markings on the gold, and the statements did not indicate smuggling. Therefore, the Tribunal concluded that the Department did not have a reasonable belief that the gold was smuggled.

3. Confiscation of the seized gold:
The Tribunal found that the Department failed to establish a reasonable belief that the gold was smuggled, which is essential to shift the burden of proof under Section 123. Given the lack of reasonable belief, the confiscation of the seized gold could not be sustained. The Tribunal noted that the suspicious conduct of the appellants and the contradictions in their statements were insufficient to form a reasonable belief that the gold was smuggled.

4. Redemption of the seized gold:
Since the confiscation of the seized gold could not be sustained, the issue of redemption became irrelevant. The Tribunal did not need to address whether the appellants should have been given an option to redeem the confiscated gold under Section 125 of the Customs Act.

5. Imposition of penalties under Sections 112 and 117 of the Customs Act:
The penalties imposed under Sections 112 and 117 of the Customs Act were based on the confiscation of the seized gold. Since the confiscation could not be sustained due to the lack of reasonable belief, the penalties also needed to be set aside. The Tribunal concluded that the penalties were incorrectly imposed.

Conclusion:
The Tribunal allowed the appeals, set aside the impugned order, and provided consequential relief. The key findings were that the Department did not have a reasonable belief that the gold was smuggled, the confiscation of the gold could not be sustained, and the penalties were incorrectly imposed. The Tribunal upheld the decision not to allow cross-examination of the Senior DCM of Railways, as the letter was based on official records.

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