The Hyderabad bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has deleted the penalty under section 112 of the Customs Act after the taxpayer provided an explanation regarding the source of money used for the purchase of gold.
The Appellant Kogatam Sadik Basha is carrying on jewellery business mainly as goldsmith at Proddutur, YSR Kadapa District under the name and style of M/s Sadik Jewellers. Mr. Kaluva Hari Obulesu, the employee of Appellant while carrying 2 gold bits totally weighing 697 gms was intercepted by the Customs Officers of Tirupathi while on train
He was found to be carrying gold. On being asked to produce documents regarding the legal possession of gold, he failed to produce any document. In his statement during punchnama proceedings Mr. Kaluva Hari Obulesu stated that on 21.02.2020 he collected an amount of Rs. 30 lakhs from his employer – Sadik Jewellers and proceeded to Yerraguntla RS and purchased tickets to Chennai and back. On reaching Chennai he proceeded to the shop of Mr. Hari Gopal located at NSC Bose Road, behind Kakada Ram Prasad Sweet House, Sowcarpet, Chennai. He handed over an amount of Rs. 30 lakhs to Mr. Hari Gopal and in return received gold of 697 gms comprising two bits. He had boarded the LTT Express for return.
Further, stated that he does not have any invoice or valid document for the purchase of gold. The Customs Officer called the jewellery appraiser for verification who certified vide certificate dated 25.02.2022 that the two bits (one big and one small) are gold bits totally weighing 697 gms have purity 999 and determined the value at Rs. 30,01,979/- (at the rate of Rs. 4307 per gram).
During the course of investigation, statement of Mr. Kaluva Hari Obulesu was recorded on 26.02.2020 wherein he interalia stated that he was working with M/s Sadik Jewellers on monthly salary of Rs. 1,000/- per month. For each trip for purchasing gold, his employer gives him Rs. 1,400/- towards the expenditure. He is doing the work of carrying cash and bringing gold for the last some months, as and when Mr. Sadik Basha asks him. Further stated that on an average, he visited Chennai 3 times in a month for purchasing gold. He further stated that they regularly purchase gold from Mr. Hari Gopal at Chennai, but he never issues any invoice/bill. He was always required to carry cash and hand over the same to Mr. Hari Gopal at Chennai and bring gold from him. On the big gold bit, he has seen the marking engraved being ‘999’. Further stated that he knows that carrying gold and cash should not be done without proper documents.
Mr. K S Basha representing the appellant recorded who interalia stated that he had handed over cash of Rs. 30 lakhs to Mr. Kaluva Hari Obulesu for purchase of gold from Mr. Hari Gopal at Chennai. He also stated that he had earlier also on some occasions purchased gold from Mr. Hari Gopal. He had initially asked Mr. Hari Gopal to give him Bill for the purchases made but he denied. He has no option but to purchase gold in cash to compete in the market.
Mr. Pradeep Saxena representing the revenue that the Appellant was dealing in smuggled gold as his employee was found to be carrying 697 gms of gold and they could not produce any documents regarding the possession of gold, Show Cause Notice dated 22.09.2020 was issued proposing to confiscate the 2 bits of gold (re-melted and transformed with spurious marking) weighing 697 gms totally valued at Rs. 30,01,979/- seized under panchnama dated 25.02.2020 proposing confiscation under Section 111 (a), (b) and (d) of the Customs Act with further proposal to confiscate the packing material and further penalty was also proposed under Section 112 (a) and (b) & under Section 117 of the Customs Act. Penalty was also proposed on this appellant – Mr. K. S. Basha under Section 112 (a) and (b) and Section 117 of the Customs Act.
The bench found that admittedly, the seizure of the 2 gold bits is a town seizure at Renigunta Railway Station when the employee of the appellant was on-board the train. Further, admittedly the 2 gold bits totally weighing 697 gms were of irregular shape and size, having no foreign markings. Further, the person who was in possession at the relevant time – Mr. Kaluva Hari Obulesu had stated that he had purchased the said gold at Chennai and was carrying it to Proddutur for his employer/appellant. Further found that there was no basis on which the Customs Officer could have formed an opinion that the gold is of foreign origin and/or smuggled in nature.
Further, found that both the appellant and his employee Mr. Kaluva Hari Obulesu have stated that the gold has been purchased at Chennai from Mr. Hari Gopal against payment made in cash. They also gave the proper address and location of Mr. Hari Gopal at Chennai. The appellant also explained the source of money for the purchase of gold. Further find that revenue have rejected this contention on the basis of a report received from Chennai Customs, that when their person went to enquire from Mr. Hari Gopal, he could not locate him.
The single member bench of the tribunal comprising Anil Choudhary (Judicial member) allowed the appeal and set aside the impugned order. The appellant shall be entitled to consequential benefit including return of the confiscated gold and if the gold has already been disposed of by the Department, shall be entitled to receive the sale proceeds with interest as per rules.
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