Failure to Record Statements: CESTAT quashes Gold Biscuit Confiscation [Read Order]

The Ahmedabad Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT)  quashed the confiscation of a 1 kg gold biscuit, ruling that the department failed to record relevant statements and provide sufficient evidence of smuggling.

Jyoti Jewellers,appellant-assessee, had sent a 1 kg gold bar for job work to M.H. Karbawala & Co., Mumbai. On November 16, 2013, an Angadia firm in Ahmedabad was intercepted, and two gold bars of 1 kg each were found. One bar, belonging to another party, was released, while the other, linked to Jyoti Jewellers, was seized by the Directorate of Revenue Intelligence (DRI) on May 6, 2014.

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The lower authorities upheld the confiscation but allowed its release on a ₹2,00,000 redemption fine. They also imposed a ₹1,00,000 penalty on the assessee and ₹50,000 on Hiteshbhai Dwarkadas Patel, a partner of Arvind Kantilal & Co., who was carrying the gold.

The authorities found that the assessee failed to prove the gold’s legitimate import, as the documents produced did not clearly link to the seized bar. The last two digits on the bar were unclear, and the assessee was found in violation of the Import Export Policy and the Customs Act, 1962. Despite citing case laws, the authorities maintained the confiscation and penalties.

The assessee's counsel argued that no statements were recorded to explain how the gold bar's last two digits became erased.

The revenue counsel argued that the assessee failed to prove the gold was legally imported. Citing Ravi Nakhat vs. Commissioner of Customs, it was contended that the defaced serial number indicated smuggling. The counsel claimed the assessee lacked proper documents, and the invoices appeared suspicious, failing to meet the burden of proof under Section 123 of the Customs Act, 1962.

A single member bench comprising Somesh Arora (Judicial Member) noted that at the time of the incident, foreign-marked gold was a restricted item, not prohibited. It observed that the gold was released upon payment of a redemption fine of Rs. 2,00,000, customs duty of Rs. 3,23,163, and a penalty of Rs. 1,00,000 on the other appellant.

The appellants admitted the gold was of foreign origin but produced a Bill of Entry from Kotak Mahindra Bank, claiming the purchase was legitimate. They showed that the transaction was recorded in their accounts and supported by challans used for sending and receiving the gold from a job worker who could not complete the work due to a labor shortage.

The appellate tribunal found that the department confiscated the gold because the last two digits of the serial number on the biscuits were unreadable, despite the first two being clear. It held that the department failed to investigate further or explain why the digits were unclear. No evidence of tampering or natural wear was presented.

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The bench ruled that since the appellants provided valid import documents, the burden of proof shifted to the department. It noted that the matching first two digits and consistent documentation indicated the gold was not smuggled. The tribunal concluded that the department’s case was based on suspicion and lacked proper evidence.

The appellate tribunal referred to the ruling in Dhanishtah Gold vs. CC, Ahmedabad [2019], which held that if the department failed to record statements of relevant persons after proof of legitimate acquisition was provided, the burden of proof shifted to them. It also cited the Calcutta High Court judgment in Commissioner of Customs (Prev) vs. Puni Dhapa Lokeswara Rao [2009], which stated that if the probability did not favor the customs authorities, they could not prove the seized gold was smuggled.

The CESTAT found the confiscation invalid due to the Bill of Entry likely matching the seized gold and the department’s failure to record relevant statements. It set aside the order and quashed the confiscation.

To Read the full text of the Order CLICK HERE

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