The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) quashed the confiscation of gold and the imposition of penalties due to the absence of a recorded reasonable belief that the gold was smuggled.
Coming to the facts of the present case, the Customs Preventive Branch received specific information that smuggled gold of foreign origin was being transacted at M/s. Gouri Gold House. Acting on this tip, a team of Customs officers, accompanied by two independent witnesses, conducted a search of the premises.
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During the search, they recovered 12 pieces of yellow metal, believed to be gold of foreign origin, along with purchase bills, sales records, and a mobile phone. The owner, Shri Prasanta Sarkar, was unable to produce licit documents for the gold, leading to its seizure under Section 110 of the Customs Act, 1962. The gold was later inventoried and seized at the Customs House, and Shri Prasanta Sarkar recorded a voluntary statement.
In his statement, Shri Prasanta Sarkar admitted that he had purchased some of the gold without proper documents, while other pieces were acquired through legitimate channels. He also claimed that the gold was purchased from local suppliers, including M/s. Vicky Jewellery Works Pvt. Ltd. and M/s. Paul Gold House and Sons.
The adjudicating authority ordered the absolute confiscation of the gold and imposed penalties on both Shri Prasanta Sarkar and his brother, Shri Shimul Sarkar, who was also involved in the business.
The appellants challenged the order before the Commissioner of Customs (Appeals), who dismissed the appeal as time-barred.
The counsel on behalf of the appellant contended that the seizure was invalid due to the absence of a recorded “reasonable belief” by the Customs officers that the gold was smuggled. The counsel submitted that such a belief is a crucial safeguard against arbitrary seizures and must be explicitly documented, as per Circular No. 01/2017.
The appellant’s counsel further contended that they had produced documents to support their claim of legitimate possession of the gold, thereby discharging their burden of proof under Section 123 of the Customs Act.
The Revenu’s counsel argued that the gold was notified goods under Section 123 of the Customs Act, and the burden of proving licit procurement lay with the appellants.
The CESTAT observed that the seizure memo did not record any “reasonable belief” that the gold was smuggled, as required under Section 110 of the Customs Act. The Tribunal noted that the absence of such a belief rendered the seizure proceedings invalid.
The bench observed that the appellants had produced documents to support their claim of legitimate possession, and there was no evidence to prove that the gold was smuggled. The Tribunal also found that the provisions of Section 111(b) and 111(d) of the Customs Act, which deal with the confiscation of goods imported in violation of specified routes or prohibitions, were not applicable in this case.
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The penalty as well as the confiscation of gold and the imposition of penalty was quashed and the CESTAT held that the impugned order was unsustainable in law.
The Tribunal noted that mere suspicion or the presence of foreign markings on gold does not establish illegal importation, especially when the appellants had provided documents to support their claim of legitimate possession.
The bench, comprising Ashok Jindal ( Judicial Member ), allowed the appeal filed by the assessee.
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