Foreign-Marked Nearly 20 Kg Gold Seized in Town Area Not Presumptively Smuggled Without Corroborative Evidence: Delhi HC quashes Penalty [Read Order]

In a recent ruling, the Delhi High Court held that foreign-marked gold seized in a town area cannot be presumed to be smuggled in the absence of corroborative evidence, and that penalty proceedings under the Customs Act abate on the death of the accused.

The appeal was filed by the Commissioner of Customs (Preventive) challenging an order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dated 31 October 2022. The respondent, Rajesh Kumar, was a bullion broker operating in Kucha Mahajani, Chandni Chowk, Delhi, and was engaged in selling gold on a consignment basis.

On 14 October 2016, officers of the Directorate of Revenue Intelligence conducted a search at the respondent’s premises and recovered nearly 20 kilograms of gold of foreign origin, valued at about ₹6.46 crore, along with a large amount of Indian currency. Based on the seizure, the Additional Commissioner of Customs passed an Order-in-Original on 31 January 2019 confiscating the gold and currency and imposing a penalty on the respondent under Section 112(b) of the Customs Act.

The respondent challenged this order before CESTAT. By its order dated 31 October 2022, the Tribunal set aside the confiscation and penalty, observing that the case involved a town seizure and not a seizure from a customs area or near an international border.

The tribunal observed that the investigation had not produced any definite evidence to show that the gold was smuggled, and that mere possession of foreign-marked gold without supporting evidence was insufficient to establish smuggling. It also observed that mens rea, which is required for imposing penalty under Section 112(b), had not been established.

Aggrieved by the Tribunal’s order, the Customs Department filed an appeal before the Delhi High Court. During the pendency of the appeal, Rajesh Kumar passed away on 4 November 2025. The Department also informed the Court that the seized gold had already been disposed of on 31 March 2019.

The Department's counsel argued that neither the respondent nor another alleged seller had claimed ownership of the seized gold, and on that basis contended that the Tribunal should not have set aside the confiscation. They also argued that the confiscation could survive even if penalty proceedings did not.

The Division Bench comprising Justice Prathiba M. Singh and JusticeShail Jain observed that the Tribunal had set aside the confiscation on the ground that there was no evidence to prove that the gold was smuggled, particularly as it was a town seizure with no established link to cross-border movement. The court also observed that, in any event, the penalty imposed on the respondent could not survive after his death and would abate.

The court explained that since neither party was claiming rights over the gold and the gold had already been disposed of, the questions of law framed in the appeal no longer required adjudication.

The court set aside the Tribunal’s order only to the extent it interfered with confiscation, while clearly holding that the penalty stood abated due to the respondent’s demise.

The appeal was disposed of accordingly, and all pending applications were also closed.

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