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TMI Blog2024 (10) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... s as was held in Bapalal v. Collector of Central Excise [ 1964 (3) TMI 103 - HIGH COURT OF GUJARAT ] - in the present case, there was reasonable belief with the DRI officers about the impugned gold to have been the smuggled one. However, since there were no foreign markings on three out of 10 seized gold bars and Shri Dharmender Kumar had stated about those to be melted out of old gold jewellery. The very basis of reasonable belief of smuggling i.e. the foreign origin of the 3 bars is missing. In the light of this discussion Hence, there are no infirmity when section 123 has been invoked by the investigation agencies. with respect of 7 gold bars having foreign markings for remaining three gold bars the burden was on the department to prove that those are also of foreign origin. Whether there is any evidence on a record proving that the order of confiscation is not sustainable? - HELD THAT:- Having come to the conclusion that the gold seized of which the appellant claimed to be the owner if fails to prove by any valid documents of its purchase, gold has to be treated as 'prohibited goods' and gold falls under the category of 'dutiable goods' and if the liability to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 112 is reduced to Rs.7 Lakhs and penalty under Section 114AA reduced to Rs.7 Lakhs. Consequent to entire above discussion, the order under challenge is modified by setting aside confiscation of 3 gold bars which has no foreign markings. The penalty is also reduced under Section 112 to Rs.7 Lakhs and also under Section 114AA to Rs.7 Lakhs. Rest of the impugned order, is hereby upheld. The department shall release the 3 gold bars within 15 days of receiving the present order. The appeal is partly allowed. - DR. RACHNA GUPTA, MEMBER (JUDICIAL) AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Navneet Panwar, Advocate for the Appellant Shri Rakesh Kumar, Authorized Representative for the Respondent ORDER The appeal has been filed to assail the Order-in-Appeal No. 272/2019-2020 dated 06.06.2019 vide which the order confiscating 10kg of gold (10 gold bars of one kg each) with the blue colour suitcase which was used to conceal the said gold along with cash amount of Rs.50,000/- and imposing penalties under Section 112 and 114 AA of the Customs Act, 1962 has been upheld. 1.1 The facts, in brief, relevant for the adjudication are as follows: The Zonal Unit Delhi of Directorate of Revenue I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere without any marking and engravings and were plain on both the sides. The value of the recovered gold was assessed at Rs.2,72,57,350/-. On being enquired Shri Dharmender Kumar had admitted that the said gold bars had been brought illegally into India. His employers have instructed him to tamper the serial number or either heat up the face of gold bars to make them plain without any engravings to avoid the deduction of smuggled nature of the said gold bars and to cover the illicit movement of the same under the issue voucher. Rs.50,000/- was admitted to be received from Shri Shankar Lal Soni as his renumeration for carrying the said smuggled gold bars from Kolkata to Delhi. The said admission was considered sufficient by DRI officers to have reasonable belief that the gold is smuggled one. Also that the gold is notified that they invoked Section 123 of the Customs Act, 1962 (hereinafter referred as Act). According to this section, the burden to prove in such circumstance that the said gold bars were not smuggled nature lies on the person from whose possession the same is recovered or on the person who claims to be the owner thereof. 1.3 Shri Dharmender Kumar failed to produce any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 1.5 Based on these observations, vide Show Cause Notice No. 34/2014 dated 05.03.2015, the gold weighing 10,000 gms valued at Rs.2,72,57,350/- was proposed to be absolutely confiscated under Section 111(b) and 111(d) of the Act. The seized material including the Samsonite trolly, two pillows, old and used socks and old newspapers used for concealment of the said gold were also proposed to be confiscated under Section 119 of the Act. Rs.50,000/- was also proposed to be confiscated being the renumeration for carrying the smuggled gold, in terms of Section 121 of the Act. Shri Dharmender Kumar, Shri Kailash Kumar Agarwal, Shri Kamal Kant Kulthia, Shri Manoj Kulthia and Shri Shankar Lal Soni all were proposed to be imposed with the penalty under Section 112 and 114AA of the Act. The said proposals were initially confirmed vide the Order-in-Original No. 15/2016 dated 31.03.2017. Appeal against the said order has been rejected vide the impugned Order-in-Appeal. Being aggrieved the appellant is before this Tribunal. 2. We have heard Shri Navneet Panwar, learned counsel for the appellant and Shri Rakesh Kumar, learned Authorized Representative for the Department. 3. Learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervations were made by the magistrate which inter alia included that the case appears to be that of illegal custody and of foul play byDRI officers. The ADG, DRI was directed to file a report and also directed to appear in person on 10.03.2014 by the Magistrate. DRI assailed the said order before Hon bleHigh Court of Delhi, however theHon ble High Court refused to expunge the said observations, except, it directed the trial court/magistrate to reconsider the observations in the light of report submitted by ADG, DRI. However no plausible explanation was afforded in the report filed by ADG, DRI, rebutting the noticed conduct of the officers and the manner in which the investigation was conducted by them. In view thereof the Chief Metropolitan Magistrate vide order dated 13.08.2014 refused to expunge the observations of the duty magistrate against the DRI officers. It is further mentioned that nothing relevant could be recovered by the investigating team despite conducting raids at the several places including the premises of Shri Ganesh Refineries who admitted about melting and refining the gold jewellery of the appellant. Despite same and the documentary evidence regarding local pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Departmental Representative that the appellant did not have any document of licit possession of the impuned foreign origin gold bars to prove that the gold was not smuggled one. His employee Shri Dharmender Kumar(the carrier) admitted, in his voluntary statement recorded under section 108 of the Act, that the gold bars were smuggled and that the same were not brought into India through any legal channel. In fact, he was cleared enough to disclose that defacing the serial number was a modus operandi of the appellant in order to get saved from enforcement agencies while illegally importing foreign marked gold bars and transferring them from Kolkata to Delhi under the manipulative stock transfer vouchers. Learned Departmental Representative has impressed upon that though Shri Dharmender Kumar had retracted his statement but still no documentary proof in support of the retraction was ever provided to the department. Otherwise also, it is the settled law that retraction from the statements tendered under section 108 of the Act, if any, has to be addressed to the same authority. In the present case, retraction was recorded at a subsequent stage before a different authority. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following questions are opined to be adjudicated: (i) Whether the department has rightly invoked Section 123 of the Customs Act, 1962? (ii) Whether there is any evidence on a record proving that the order of confiscation is not sustainable? 6. Question no. 1 Foremost we need to look into Section 123 of the Act which reads as follows: Section 123 - Burden of Proof in certain cases (1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be - (a) In a case where such seizure is made from the possession of any person, (i). on the person from whose possession the goods were seized; and (ii). If any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person; (b) In any other case, on the person if any, who claims to be the owner of the goods so seized. (2) This section shall apply to gold [and manufactures there of], watches and any other class of goods which the Central Government by notification in the Official Gazette specify. 6.1 Section 123 of the Customs Act 1962, enshrines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 123 is wrongly applied and the presumption there under is raised, without the condition precedent there under having been satisfied, the entire inquiry and the order passed therein would be vitiated. In Collector of Customs v. Sampathu Chetty reported as 1962 SCR (3) 762 SC 316 has dealt with Supreme Court under the old Sea Customs Act. Section 178-A of the old Customs Act of 1878 holding that when the concerned authority was satisfied that the seizure was made in reasonable belfief that the goods seized were the goods that have been smuggled, tat the rule of evidence (the doctrine of reverse burden) laid down by Section 178-A come into operation. The Hon ble Court also clarified that the the object of Section 178-A was the prevention and eradication of gold smuggling. which was widely prevalent, and in view of the fact that without a law in that form and with that amplitude smuggling might not be possible of being effectively checked. Hence the restrictions imposed under Section 178-A being in the interest of genera public cannot even be held violative of Article 19 (1) (f) (g) of Constitution of India. Section 123 of the Customs ct, 1962 is para material of said Section 178-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found concealed in socks wrapped in paper two pillows in the suitcase were used to conceal those bars. (iii) Seven bars had foreign markings with defaced serial numbers. Three bars were plain without any engraving or serial no. (iv) The bars got assessed as made of gold. (v) Except the self made stock vouchers, no document of legal import of foreign bars was found with Shri Dharmender Kumar. (vi) Lastly Shri Dharmender Kumar admitted about M/s. N D Diamonds to have been involved in smuggling of gold with the Modus Operandi of defacing the serial numbers to avoid enforcement agencies. (vii) He also admitted for the stock vouchers to be the manipulative documents to guise the Act of smuggling god. The above noticed facts are sufficient for us to hold that there was reasonable belief with the DRI officers about the impugned gold to have been the smuggled one. However, since there were no foreign markings on three out of 10 seized gold bars and Shri Dharmender Kumar had stated about those to be melted out of old gold jewellery. We hold that very basis of reasonable belief of smuggling i.e. the foreign origin of the 3 bars is missing. In the light of this discussion Hence, we do not fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tinte being in force, would be liable for confiscation. Consequently, it would fall within the definition of 'smuggling under Section 2(39) which will render such goods liable to confiscation under Section 111 or Section 113 of the Act. 7.3 Having come to the conclusion that the gold seized of which the appellant claimed to be the owner if fails to prove by any valid documents of its purchase, gold has to be treated as 'prohibited goods' and gold falls under the category of 'dutiable goods' and if the liability to pay the customs duty is not discharged by necessary implication the seized gold becomes 'smuggled goods', are liable for confiscation under Section 111(d). Also absolute confiscation shall be justified where the trail of the events show that the possessor or owner of such gold is engaged in procuring gold of foreign origin in illegal. manner and the multiple stands taken by him on the face of it were false. 7.4 Hon ble Supreme Court in the case of Om Prakash Bhatia Vs. Commissioner 2003 (155) ELT 423 (SC) enunciated the meaning to the term prohibited goods' as defined by Section 2(33) and the authority of the Customs department to confisc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f with respect to 10 gold bars seized from Shri Dharmendra Kumar employee of the appellant has already been bifurcated. It has been held under Question No.1 that with respect to 7 bars having foreign markings the burden of proof is upon the appellant in terms of section 123 of the Act to prove that 7 of those were not smuggled gold. Whereas for the remaining three bars since there was nothing except those were also found with 7 foreign marked bars, it has been held that there was no circumstance to reasonably believe that 3 gold bars were also the smuggled gold. The burden of proof rest upon the department itself to prove that 3 gold bars were also smuggled. Hence we record separate findings for both 7 gold bars of foreing marking and 3 gold bars of nothing engraved (each weighing 1 kg) as follows: (i) Findings with respect to the 7 foreign marked bars: This is an admitted fact that these bars were seized from possession of Shri Dharmender Kumar, the employee of the appellant being concealed in his checked-in baggage while he was travelling from Kolkata to New Delhi. On being enquired, the only document justifying his possession was a stock transfer voucher issued by M/s. N D Diamo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyers used to transfer smuggled gold from Kolkata to Delhi under the cover of stock transfer challans to hoodwink the probable detection of smuggled nature of these gold bars by the law enforcing agencies. The serial numbers of bars were erased/tampered so as to make it is impossible for the law enforcing agency to tally their serial numbers from the records of supply unit. After the delivery of gold bars to the buyers those stock transfer challans used to be destroyed by them. 7.9 Shri Dharmender Kumar further mentioned that such stock transfer challans used to be prepared by Shri Shankar Lal Soni, the accountant of the appellant at Kolkata office who also was aware about the smuggled nature of these bars and he was working on the instructions of the appellant. The appellant has failed to produce the said witness and to examine him to discharge his burden. The admissions are the best evidences and required no further proof. This admission of the possessor of seized gold when read with statement of the owners of M/s. Maa ambay, M/s. Magna and M/s. Anjani gold jewellers, it becomes clear that 7 gold bars of foreign origin were not purchased by the appellant from these jewellers. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ganesh Refineries observing that there was no frame found for making 1kg bars. But the Panchanama itself clarifies that no frame even for one bar weighing 3.5 kg was recovered during that search. As already observe that whereas Shri Madhukar has admitted melting 4kg old Jewellery for the appellant. 7.11 The accountant of the appellant Shri Kailash Kumar Aggarwal has also corroborated that 3 pieces of gold of 1kg each were manufactured through job worker namely Ganesh Refinery, Kolkata. He further stated that Shri Dharmender Kumar is appellant s regular employee who used the carry Gold Bar and jewellery from Kolkata to Delhi and vice-versa. Thus we hold that there is sufficient corroboration to the appellant s testimony about 3 out of 10 gold bars were not procured from outside the country but got melted out of old jewellery with the appellants being in business of sale and purchase of gold ornaments as well. Department could not produce any evidence to falsify the said testimony on a record. No evidence has been produced by the department to show that 3 gold bars were also of foreign origin and the foreign markings as well as the serial numbers got defaced from these bars by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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