CESTAT Sets Aside Customs Confiscation of Gold Jewellery & Silver Granules: Rules Suspicion Without Proof of Foreign Origin Cannot Trigger Section 123 Burden
It held that without concrete proof of smuggling, the burden under Section 123 of the Customs Act cannot shift to the assessee, making the confiscation and penalties unsustainable.
In a recent ruling the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench dismissed the Revenue’s appeal. They upheld the Commissioner (Appeals)’ order setting aside the confiscation of 15 kg of gold jewellery and 1.7 kg of silver granules seized by the Directorate of Revenue Intelligence (DRI).
The Tribunal held that mere suspicion or uncorroborated statements cannot establish foreign origin. So, the burden of proof under Section 123 of the Customs Act, 1962, could not be shifted to the assessee without concrete evidence of smuggling.
The case arose from an August 2020 interception at Kolkata’s NSCBI Airport, where DRI officials seized consignments booked through Sequel Logistics Pvt Ltd and alleged to be part of a smuggling network operating between Bangladesh and India. The seized items, 271 yellow‑metal strips and bangles of 24‑carat purity, were valued at ₹8.19 crore.
The DRI claimed that the gold had been smuggled from Bangladesh and melted locally to disguise its foreign origin, relying primarily on the statement of Vijay Kumar alias Pintu, an employee of Mundhra Jewellers Pvt Ltd and Mundhra Bullion Pvt Ltd. The adjudicating authority had ordered absolute confiscation and imposed penalties of ₹2 crore each on Abhishek Mundhra, Ashish Mundhra, and their companies.
The appellant, Revenue, argued that a reasonable belief under Section 110 existed, and the burden of proof under Section 123 shifted to the respondents.
Respondents argued that the appeal was based on assumptions and presumptions, without cogent evidence of smuggling, and the melting gold bars does not reduce purity; the allegation of deliberate reduction was speculative.
The Tribunal bench comprising Ashok Jindal (Judicial Member)and K. Anpazhakan (Technical Member) found that the Department failed to establish any “reasonable belief” under Section 110(1) of the Customs Act, 1962, or to prove the foreign origin of the seized goods. The order noted that the gold bore no foreign markings, had purity between 99.5 % and 99.7 %, and was supported by GST invoices and manufacturing vouchers evidencing domestic purchase and job‑work movement between Kolkata and Chennai.
Citing Supreme Court precedents including Union of India v. Mohammed Nawaz Khan (2021) 10 SCC 100 and Ganesh Das v. Collector of Central Excise [1994 (70) ELT 441 (SC)], the bench held that mere suspicion or uncorroborated statements cannot justify seizure or shift the burden under Section 123.
The bench observed that “There is no reasonable belief that existed in this case for seizure of the gold bangles and silver granules in question under Section 110 of the Customs Act, 1962,” and concluded that confiscation and penalties under Sections 111(b), 111(d), and 112(b) were legally unsustainable.
Accordingly, the appeal filed by the Revenue was rejected.
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