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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 ..... domestic terminal of Indira Gandhi International (IGI) Airport, Delhi by the Officers of DRI.The team identified and intercepted Shri Dharmender Kumar at domestic terminal 1C of IGI Airport, New Delhi. There was already an intelligence that Shri Dharmender Kumar is an employee of M/s. ND Diamonds having a branch office and Bank Street, Karol Bagh. During the initial enquiry said Shri Dharmender Kumar admitted that he was carrying 10 gold bars of 1kg each having foreign markings. Accordingly, the notice of personal search under Section 102 of Customs Act, 1962 (the Act) was served upon him. The search was conducted in the presence of two independent punchas. Vide the Panchnama dated 07.03.2014 following articles were recovered from Shri Dharmender Kumar: (i) Boarding pass of Indigo flight in the name of Shri Dharmender Kumar (ii) Baggage claim tag affixed on the back side of the body in the name of Shri Dharmender Kumar itself. (iii) Stock transfer voucher issued by M/s. ND Diamonds, Kolkata dated 25.02.2014 for stock transfer of fine gold (.995 purity) from Kolkata to New Delhi having weight of 10255.640 gms. (iv) Stock transfer voucher for gold weighing 10,000 gms dated 06.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity of smuggling. Accordingly, all 10 gold bars were seized under Panchnama dated 06.03.2014 in terms of Section 110 of the Act on a reasonable belief that the gold bars have been smuggled into India in violation of provisions of Customs Act and hence were liable for confiscation in terms of Section 119 of the Act. Thereafter searches were conducted at the premises of M/s. ND Diamond, Karol Bagh as well as at their Kolkata office on 07.03.2014 itself. The Kolkata Office was again searched on 10.03.2014. Searches were also conducted in following premises: (i) Maa Ambay Jewellers, Kolkata in presence of its partner Shri Pradeep Gupta on 11.03.2014. (ii) Ms. Anjali Gupta, Kolkata on 11.03.2014 in presence of its Director Shri Prabir Kumar Banik. (iii) M/s. Magna Projects, Kolkataon 14.03.2014 in presence of its Director Shri Shashi Kant Shinde. (iv) Premises of M/s. Ganesh Refinery on 13.03.2014 in presence of Shri Madhukar Sonama Bhagat who denied his personal search. 1.4 Statements of all of persons concerned were also recorded. Documents recovered during search of various premises including sales bills, stock registers, material issue vouchers, purchase bill of find gold and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Shri Kamal Kant Kulthia is looking after the business of the firm at Kolkata office and his brother Shri Manoj Kulthia is looking after the business of firm at Delhi office. The firm is also a holder of IEC certificate duly issued vide DGFT Authority on the strength of which the firm is a regular importer of gold ornaments into India. The firm is also mentioned to be registered with sales tax authorities. It is further mentioned that in normal course of business the appellant purchases bullion as well as old ornaments from different customers/traders. The old gold ornaments get melted through different job workers for being converted into gold bars for purpose of trades. These gold bars, whether purchased from the authorized dealers or obtained by melting jewellery are sold by the appellant in the normal course of business. Stock of bullion is regularly being transferred between Delhi and Kolkata office of the firm through their authorized employees under duly issued stock transfers/vouchers/challan. 3.1 On 06.03.2014 Shri Dharmender Kumar, the employee of the appellant was carrying 10 gold bars in a normal course of business. Valid stock transfer voucher in this regard was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation. The notices served upon the appellant had no cogent and legally admissible evidence to point out that the subject gold is the smuggled gold. The statements relied for substantiating the charge are alleged to be mutually contradictory and contrary to the documents on record. Hence the allegations are vague and are based on assumption and pre-sumptions. The order under challenge based on such allegations is therefore liable to be satisfied. 3.2 Learned counsel further impressed upon that the allegations about seized gold since appear to be as smuggled into India to having foreign markings are also baseless. Hence Section I23 of the Act has wrongly been invoked. The onus was of the department to prove the allegations of smuggling. The findings are liable to be set aside on the ground also. The adjudicating authority has ignored the submission that the certain wrong and baseless facts were got recorded in the statement of Shri Dharmender Kumar at the behest of DRI officers. Shri Dharmender Kumar has subsequently retracted the said statements. The emphasis on retracted statement to be an admission of smuggling is absolutely wrong and is liable to be set aside the plea th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her fact on record which corroborates the Modus Operandi narrated by Shri Dharmender Kumar as one of the another employee of appellant Shri Govind Agarwal was intercepted by DRI, Lucknow from whom was seized 4kg gold of foreign markings but appellant got him abducted. Such unscrupulous and covert activity resorted by the appellant coupled with the act of transfer of gold bars with defaced serial numbers on the pretext of just stock transfer vouchers instead of providing valid import documents and tutoring his employee to erase the foreign markings to avoid the enforcement agencies clearly establishes the appellant's mala fide intent to commit illegal act of acquiring and disposing the smuggled gold. These activities were sufficient for the reasonable belief of the DRI officers for the impugned gold to be smuggle one. Hence Section 123 of the act has rightly been invoked by the investigating authorities and the adjudicating authorities have rightly held that the burden of proving that the impugned gold was not smuggled one was on the appellant being, the owner of said gold bars. 4.2 Since the appellant have failed to produce any document proving licit import of the recovered gold, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson from whose possession the said goods were seized or onthe person who claims to be the owner of such seized goods to prove the Customs Officers that the said goods are not smuggled goods and were procured through licit channels/means. 6.2 In order to attract the provisions of Section 123 of the Customs Act, 1962, it is essential that the intercepting/investigating officers got reasonable belief about goods to be the smuggled goods. The term smuggled goods means goods of foreign origin which have been brought to India through illicit channels/means without payment of applicable duties. Most commonly Foreign Marked Gold in large quantities is being smuggled into India through land, sea and air routes through illicit channels/means, viz; by making payments through Hawala Channels by the smugglers. During the course of such gold smuggling, the smugglers will erase the Foreign Marks purity content marks and country of origin marks, embossed on the gold bars and will cut them into pieces of asymmetrical sizes so that its original form/shape is lost. This makes the job of the Customs Officers difficult to prove that the gold is smuggled one. In this background concept of everse burd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that sense the reasonable belief of the seizing officer is a prerequisite. for the statutory onus to arise. It is also true that at the stage of adjudication the reasonableness of the belief of the officer effecting the seizure that the goods are smuggled would be the subject matter of investigation by the adjudicating officer. Nevertheless it is maifest that at the stage of the adjudication (when only the rule of evidence laid down by the section comes into operation) the very facts which led the seizing officer to effect the seizure, as distinguished from their significance as affording a reasonable belief for the seizing officer to hold that the goods are smuggled, are before the adjudicating officer. These facts which justified the seizing officer to reasonably believe that the goods were smuggled would certainly import a rational connection between the facts on which the presumption is raised and the fact to be proved, so that whatever other constitutional infirmity might attach to the impugned provision, the lack of rational connection is not one of them. 6.4 For invoking Section 123 of the Act, it would be necessary, therefore, before any person could be called upon to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urden was on the department to prove that those are also of foreign origin. 7. Question no. 2 7.1 This question can be adjudicated in light of, Section 111 which provides for confiscation of the goods which are improperly imported into country. Clause (b) and (d) of which reads as light follows: Section 111- The following goods brought from a place outside India shall be liable to confiscation:- (b) any goods imported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the import of such goods; (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force." 7.2 For proper application of the above quoted Section 111 of the Act, we also need to look into following concepts: (i) Smuggling: As per Section 2(39) "smuggling", in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113. Therefore, if the gold bars in dispute are under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of goods under the Act or any other law for the time being in force, it would be considered to be prohibited goods; and (b) this would not include any such goods in respect of which the conditions, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either 'absolutely' or 'subject to such conditions' to be fulfiled before or after clearance, as may be specified in the notification, the import or export of the goods of any specified description. The notification can be issued for the purposes specified in sub- section (2). Hence, prohibition of importation or exportation could be subject to certain prescribed conditions to be fulfilled before or after clearance of goods. If conditions are not fulfilled, it may amount to prohibited goods." 7.5 This decision has been followed by Hon'ble Madras High Court in the case of Malabar Diamond Gallery P. Ltd s. Additional Director General, Directorate of Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the fine gold weighing 10 kgs to be in the form of bars (1 kg each). The document is absolutely silent to even reflect that 7 of them were of foreign origin. There is no denial of appellant also about foreign origin of the 7 bars i.e. the 7 bars were brought into India from the outside country. It has been specifically admitted that those have been illicitly brought into country. In such circumstances, in addition to the said voucher, since the burden was on the appellant to prove the licit possession, the appellant was supposed to have the import documents for bringing those seven bars into Indian territory. But except the oral statement of appellant himself that he has been purchasing the foreign origin gold from various other jewelers, there is nothing on record. The statements of the proprietor/partner of such jewellers namely Maa Ambay, and Magma jewellers have been perused. Though they have acknowledged that they were in the trade of gold bullion including the foreign marked bullion but the entire sale is mentioned to be on the basis of invoice carrying all requisite details about markings, serial numbers and any other embossing of a particular foreign brand. There is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot at all a document to prove the licit possession of foreign gold. Appellant's own employee has admitted for the bars having foreign markings to be the smuggled gold and that These were illicitly brought from the outside country to Kolkata as per the continuous modus operandi of the appellant to transfer the smuggled gold along with the stock transfer of his old gold. In view of these observation, we hold that appellant has failed to discharge the burden of proving licit possession of these 7 bars with Dharmender Kumar and that appellant is the licit owner thereof. The document would have been the import documents or at least the admission of person who would have validly imported the same. In absence thereof, burden of proof on the appellant stands undischarged. It stands establish that the 7 gold bars of foreign markings were the smuggled gold bars. As already explained above that gold becomes the prohibited good, in such circumstance, the same is liable to confiscation in terms of section 111(d). Hence, we find no infirmity in the order under challenge wherein absolute confiscation of these 7 gold bars has been ordered. 7.10 Coming to the remaining 3 bars found along wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of alleged tampering. In the show cause notice also no tampering has been alleged vis-àvis 3 bars weighing 1000 gms each as apparent from the table given in the Para 2.1 of the showcase notice. Resultantly, we hold that department has failed to discharge their burden to prove these three bars to be smuggled gold. Thus, these 3 bars cannot be called as smuggled gold. The order confiscating these 3 bars is therefore not sustainable. Same is hereby set aside. 8. Coming to the plea of penalty, since we upheld confiscation of 7 gold bars of foreign origin but set aside confiscation of 3 gold bars, we reduce the penalty imposed under Section 112 to Rs.7 Lakhs and penalty under Section 114AA 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 as above. [Order pronounced in the open court on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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