2023 (5) TMI 147 - AT - Customs

Smuggling - recovery of Gold - foreign origin - illegally imported into Indian Territory or not - invocation of burden to prove u/s 123 of the Customs Act, 1962 - Confiscation - penalty Whether Section 123 of the Customs Act, 1962 is invocable in the given set of circumstances? - HELD THAT - The burden of proof shifts under Section 123, when (a) there must be goods to which the section appliers; (b) the goods must have been seized; and (c) the seizure must be under a reasonable belief that they are smuggled goods. Reverting to the facts of the present case, it is observed that at the time of interception and preparing of Panchanama about recovery of gold from Shri Gudipati Subba Reddy and Shri Pathan Jaffar Sadik, they both in their statement as was recorded under Section 108 of Customs Act, 1962, admitted that the gold in their possession was actually a gold of foreign origin, however, it got remelted for erasing the foreign markings but 99.9% purity mark was still got embossed thereupon. They also admitted to have no documents for proving that they were legally possessing that quantity of gold in several number of uneven pieces. These particular admissions, are sufficient to invoke the theory of reverse burden of proof i.e. the burden of proof that the gold recovered is not the smuggled on lies upon Gudipati Subba Reddy and Pathan Jaffar Sadik in terms of Section 123 of Customs Act, 1962. The statement got recorded by customs officer is the material piece of evidence which can be used as substantive evidence connecting the deponent with the contravention of the customs act - there are no reason to reject the statement of both the appellants from whose possession the gold in question was recovered about admitting the gold to be a foreign origin - the findings arrived at by the adjudicating authorities below that Section 123 Customs Act, 1962 has rightly been invoked, is accepted - thus it is held that Section 123 of the Customs Act, 1962 has rightly been invoked by the department. Whether the gold recovered in question was actually the gold of foreign origin illegally imported into Indian Territory and thus is liable for confiscation? - HELD THAT - There appears no evidence to prove the gold recovered from Shri Gudipati Subba Reddy is the gold which got melted by Shri Shaik Imtiyaz. This observation receives corroboration from the statement of Shri Shaik Imtiyaz that shape of remelted gold given to Shri Gudipati Subba Reddy was always used to be uniform in one shape and the pieces were never used to be uneven broken or cut. He even stated that he cannot remember that he had melted a large quantity as that of 2000 grams of gold on 06.10.2020. Similarly Shri Jadhav Duryodhan also acknowledged melting gold for Shri Pathan Jaffar Sadik but he also has emphasized that he always used to return the melted gold into one piece of uniform shape instead of those being into several pieces of cut and uneven shape - Apparently and admittedly the gold recovered from the possession of Shri Gudipati Subba Reddy was in the form of two gold bars and six small uneven and cut pieces and the one recovered from Shri Pathan Jaffar Sadik was in the shape of one bar and three small uneven cut pieces of gold. These observations are sufficient for me to hold that even the retracted version receives no cogent proof rather it is highly insufficient to prove that the recovered gold was actually of Indian origin or was being traded by legal means. The only document which has come up on record is in the form of two invoices, one issued by M/s. Penava Gold and another from M/s. Badradri Bullion Jewelers. But the description of gold in those invoices does not match to the description of the gold recovered - Perusal thereof shows that each piece has some embossed inscription as contrary to the statement of the appellants that the impugned gold was FT gold out of old ornaments. None of the statement recorded during investigation has any explanation about those embossed inscriptions on the recovered gold pieces. Nor there is any evidence to justify the 999 purity marka thereupon. The gold of Indian origin is generally of 916 purity (22 carat). Bureau of Indian standards has certified BIS 916 22 carat, BIS 958 23 carat, BIS 750 18 carat, the 999 quality is the 24 carat gold. It is 22 carat gold which is used in ornaments. Hence for India, the most popular quality of gold is BIS 916 instead of 999. Admittedly the recovered gold was of 999 quality. Apparently the melters of the gold have acknowledged that FT gold that is the gold received after melting the ornaments is generally of 95 to 99.5 purity. One of the melter has apparently gone to the extent of admitting that FT gold can never have 999 purity. None of the appellants have placed on record any evidence showing as to how the gold recovered from them was having 999 purity - there are no reason to differ with the findings of the adjudicating authority below that all the appellants had full knowledge of the impugned gold to be the gold of foreign origin and knowingly they were dealing with the same for monetary benefits. Their act gets definitely covered under Section 111 of the Act making the recovered gold liable for confiscation. It is accordingly held that confiscation of recovered/seized gold is rightly ordered. Whether appellants are liable for penalty? - HELD THAT - It is clear that the appellants in this case had acquired possession of such gold which they could not prove to be of India origin. There has been no denial that they were purchasing the gold at the cheaper rate which rather corroborates that they were in possession of smuggled gold. Section 112(b) of the Act is wide enough to penalise even a person acquiring possession or in anyway dealing with the goods which he knows or has reason to believe are liable for confiscation under Section 111. Thus it is held that the appellants had rendered them liable for imposition of penalty. Three of the questions of adjudication as framed earlier stands decided in favour of the Revenue and against the appellant - Appeal dismissed.

Summary

Issues Involved:
1. Whether Section 123 of the Customs Act, 1962 is invocable in the given set of circumstances.
2. Whether the gold recovered in question was actually the gold of foreign origin illegally imported into Indian Territory and thus is liable for confiscation.
3. Whether appellants are liable for penalty.

Summary of Judgment:

Issue 1: Invocation of Section 123 of the Customs Act, 1962
Section 123 of the Customs Act postulates the theory of 'reverse burden of proof.' The burden of proof shifts under Section 123 when: (a) there must be goods to which the section applies; (b) the goods must have been seized; and (c) the seizure must be under a reasonable belief that they are smuggled goods. The appellants admitted that the gold in their possession was of foreign origin and had no documents proving legal possession. These admissions were sufficient to invoke the theory of reverse burden of proof, shifting the burden to the appellants to prove the gold was not smuggled. The statements recorded under Section 108 of the Customs Act are admissible as substantive evidence. Thus, Section 123 of the Customs Act, 1962, was rightly invoked by the department.

Issue 2: Gold of Foreign Origin and Liability for Confiscation
The appellants' delayed retraction of their initial statements and the lack of evidence to support their claims of legal possession of the gold were insufficient to prove the gold was of Indian origin. The gold recovered was of 999 purity, which is typically of foreign origin, and not the usual 916 purity found in Indian gold. The appellants failed to provide documentary evidence to prove the gold was legally imported or purchased. Therefore, the gold was liable for confiscation under Section 111(d), 111(p), and 111(i) of the Customs Act, as it was found concealed and there was no proof of legal importation by designated agencies.

Issue 3: Liability for Penalty
The appellants acquired possession of gold they could not prove to be of Indian origin and were purchasing gold at cheaper rates, indicating it was smuggled. Section 112(b) of the Customs Act penalizes anyone dealing with goods they know or have reason to believe are liable for confiscation under Section 111. The appellants' actions fell under this provision, making them liable for penalties. The findings of the adjudication authorities below were upheld, and penalties on all appellants, including the owner of the Hyundai Xcent used for transportation, were deemed justified.

Conclusion:
In view of the entire discussion, the three questions of adjudication were decided in favor of the Revenue and against the appellants. Consequently, all six appeals were dismissed.

[Order pronounced in the open court on 02.05.2023]