2023 (5) TMI 940 - AT - Customs

Smuggling - seizure of gold bars/pieces weighing 3999.590 gms - smuggled into India from Bangladesh without any legal documents - benefit of presumption under section 123 of Customs Act 1962 - Burden to prove - reliability of retracted statements of the co-accused to establish the guilt of the Appellants when the procedure prescribed under section 138B of the Customs Act was not followed - penalty u/s 112(a) and(b) and 114 AA of the Customs Act 1962. Whether evidences available on record prove that the gold bars/pieces were smuggled into India from Bangladesh without any legal documents? - HELD THAT - The Appellant stated that the gold pieces/bars were seized on the reasonable belief that they were smuggled into India from Bangladesh. The Adjudicating authority has relied upon the decision of the Hon ble Supreme Court in the case of GOPALDAS UDHAVDAS AHUJA AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 2004 (7) TMI 10 - SUPREME COURT for effecting the seizure on the ground of reasonable belief . However the said case is distinguishable on the ground firstly that the subjected case was during the breathing period of Gold Control Act wherein possession of primary gold even unmarked had a thrust of burden upon the Assessee. When the Gold Control Act was repealed without a saving clause the said decision under the Gold Control Act has no relevancy under the Customs Act Currently under the Customs Law the burden has been thrust upon the Department and the presumption under Section 123 of the Customs Act has no application in the present case as the gold seized is of Indian origin - the Appellants stated that to form a reasonable belief that the goods are smuggled from Bangladesh there must be irrefutable evidence to prove that allegation. In the present case there is no such evidence available to prove that the goods were of foreign origin and smuggled into India from Bangladesh. The reasonable belief on which the DRI officers presumed that the gold bars/pieces were of smuggled nature is not supported by any corroborative evidence. There is no document available on record to establish that gold bars/pieces were smuggled into India from Bangladesh. The impugned order has concluded that the said gold bars/pieces were smuggled into India only on the basis of assumptions and presumptions without any concrete evidence to substantiate this claim. Hence the material evidence available on record does not establish that the gold bars/pieces were smuggled into India without any valid documents. Accordingly answer to this question is negative. Under the facts and circumstances of this case whether the benefit of presumption under section 123 of Customs Act 1962 goes in favour of Revenue? - HELD THAT - It is observed from the Test report that the gold bars/pieces were of purity 99.5 99.6 and 99.8 only. Normally foreign origin/foreign marked gold will be of purity 99.99. There is no foreign mark available on the gold seized. They were seized from Shri Rajesh Kumar Yadav and Shri Umanath at the Gaya railway station. The Appellants claimed that the gold bars/pieces were purchased domestically from M/s Chandan Enterprises Delhi under Invoices 3 and 5 dated 01/01/20 and 03/01/20. The Appellants stated that the the gold bars/pieces in question were sent to Kolkata to the goldsmiths for making of jewellery. The investigation ignored their claim and charged that the Appellants failed to give name addresses contact number of the persons/goldsmiths to whom the said goods were sent for exchanging the same into gold jewellery. The Appellants claimed that the gold bars/pieces were purchased from M/s Chandan Enterprises. Delhi. The investigation has not verified the documents submitted by them in support their claim of domestic purchase of the gold bars/pieces. They brushed aside the evidences submitted by the Appellants by citing some mismatch in the dates. One of the reasons cited for ignoring the invoice was that the invoices were not carried along with them by the persons who carried the gold. Not having the invoices at the time of seizure cannot be areason to ignore their claim. The documents produced could have been verified to find out the veracity of their claim. On the contrary the investigation could not provide any evidence to establish the smuggled nature of the gold - In the absence of any such evidence the burden of proving that the gold bars/pieces were not smuggled one cannot be thrust upon the Appellants. The burden under Section 123 of Customs Act to prove that the gold is not smuggled one does not lie on the Appellants in this case. Accordingly answer to the question is negative. Whether the retracted statements of the co-accused can be relied upon to establish the guilt of the Appellants when the procedure prescribed under section 138B of the Customs Act was not followed? - HELD THAT - The Impugned Order mainly relied upon the statements of the Noticees 1 to 5 to establish the foreign origin nature of the gold. Other than the statements there is no other evidence available on record to show that the gold were smuggled into the country from Bangladesh. It is incorrect to rely only on the statements of the co-accused without any corroboration to prove the smuggled nature of the gold. It is a settled law that the statement of the coaccused cannot be relied without any independent corroboration. The Tribunal in the cases of PR. COMMISSIONER OF CUSTOMS (PREV.) DELHI VERSUS SH. AHAMED MUJJABA KHALEEFA 2018 (5) TMI 1681 - CESTAT NEW DELHI dismissed the appeal of Revenue holding that jewellery not bearing any foreign marking other than statement of passenger no other proof produced by Revenue to substantiate the claim that jewellery were smuggled into India - the gold bars/pieces cannot be confiscated based on the retracted statements alone. Accordingly answer is negative. Whether penalties imposed on the Appellants under section 112(a) and(b) and 114 AA of the Customs Act 1962 are sustainable in this case? - HELD THAT - Under section 112 (a) and (b) penalty is imposable when the person is found to be dealing with goods for which prohibition is in force or the goods are liable for confiscation. The gold bars/pieces dealt by the Appellants were established to be of Indian origin and hence not prohibited goods. The gold bars/pieces were seized at Gaya railway station fromShri Rajesh Kumar Yadav and Shri. Umanathwho were carrying the gold and are employees of Manoj Kumar Seth and Balwant Raj Soni. They were carrying the gold which were domestically purchased and hence there is no offence established against them.Manoj Kumar Seth and Balwant Raj Somi are the partners of the jewellery shop Gandhi and Sons and they claimed the ownership of the seized gold vide their letter dated 21/01/20 - The investigation has not brought in any evidence to counter this claim. Hence there are merit in the argument of the Appellants that penalty is not imposable on them under section 112(a)and(b) of Customs Act 1962. Under section 114 AA of Customs Act 1962 penalty is imposable when a person makes false or incorrect statement or declaration. The investigation has not brought in any evidence to establish that Manoj Kumar Seth has intentionally made false statement or declaration warranting penalty under section 114AA of Customs Act 1962. Hence penalties under sections 112(a) and (b) and 114 AA of the Customs Act 1962 are not imposable in this case. Accordingly answer is negative. Appeal allowed.

Summary

The core legal questions considered by the Tribunal are as follows:

(i) Whether the evidence on record establishes that the gold bars/pieces were smuggled into India from Bangladesh without valid legal documents?

(ii) Whether, under the facts and circumstances of the case, the benefit of presumption under Section 123 of the Customs Act, 1962 favors the Revenue?

(iii) Whether the retracted statements of co-accused can be relied upon to establish the guilt of the appellants when the procedural safeguards under Section 138B of the Customs Act, 1962 were not followed?

(iv) Whether the penalties imposed on the appellants under Sections 112(a), 112(b), and 114AA of the Customs Act, 1962 are sustainable?

Issue-wise Detailed Analysis

(i) Whether the gold bars/pieces were smuggled into India from Bangladesh without legal documents?

The relevant legal framework includes the Customs Act, 1962, particularly provisions relating to seizure and confiscation of smuggled goods. The Department relied on the reasonable belief of officers under Section 110 for seizure, citing the Supreme Court decision in Gopal Das Uddhav Das Ahuja v. UOI, which allowed seizure on reasonable belief. However, the Tribunal distinguished that case as it pertained to the Gold Control Act, which is no longer applicable, and noted that under the current Customs Act, the burden is on the Department to establish smuggling.

The appellants argued that there was no evidence of foreign origin or smuggling, as the gold lacked foreign markings and was of purity levels (99.5% to 99.8%) lower than typical foreign gold (usually 99.99%). They contended that the gold was domestically purchased from M/s Chandan Enterprises, Delhi, supported by invoices, which the Department failed to verify properly. The appellants also relied on authoritative case law emphasizing that "reasonable belief" requires objective material and cannot be based on mere suspicion or presumption. They cited decisions such as Tata Chemicals Ltd. v. Commissioner of Customs, Assistant Collector of Customs v. Charan Das Malhotra, and Shanti Lal Mehta v. UOI, which underscore the necessity of corroborative evidence for seizure and the temporal requirement that reasonable belief must exist at the time of seizure.

The Court noted that the Department's case rested largely on assumptions and uncorroborated statements without concrete evidence of smuggling or foreign origin. The absence of foreign markings, the failure to verify purchase invoices, and the lack of any direct evidence linking the gold to Bangladesh smuggling led the Tribunal to conclude that the material evidence does not establish smuggling.

Conclusion: The evidence does not prove that the gold bars/pieces were smuggled into India from Bangladesh without legal documents. The answer to this issue is negative.

(ii) Whether the benefit of presumption under Section 123 of the Customs Act, 1962 applies in favor of the Revenue?

Section 123 places the burden of proving that seized goods are not smuggled on the person from whose possession the goods were seized or on the owner claiming ownership, but only if the goods are seized on reasonable belief that they are smuggled. The Department argued that since the gold was seized on reasonable belief, the burden shifted to the appellants to prove lawful possession.

The appellants contended that Section 123 applies only to gold of foreign origin or foreign markings, which was absent here. They also argued that the gold was domestically purchased and thus not smuggled goods, making Section 123 inapplicable. The appellants supported their position by referencing several decisions, including Sanjeeb Kumar @ Pappu Kumar v. Jt CC and Balanagu Naga Venkata Raghavendra v. CC Vijayawada, which held that without foreign markings or evidence of smuggling, the burden does not shift to the accused.

The Tribunal observed that the Department failed to establish reasonable belief of smuggling and did not verify the domestic purchase invoices submitted by the appellants. The absence of foreign markings and the purity levels further supported the appellants' claim of domestic origin. Consequently, the Tribunal held that Section 123's presumption does not apply, and the burden of proof does not shift to the appellants.

Conclusion: The benefit of presumption under Section 123 does not apply in favor of the Revenue in this case. The answer to this issue is negative.

(iii) Whether the retracted statements of co-accused can be relied upon without compliance with Section 138B of the Customs Act, 1962?

The Department's case heavily relied on statements of co-accused persons, some of which were retracted. The appellants argued that such statements are fragile and cannot be the sole basis for conviction or penalty, especially when procedural safeguards under Section 138B (which requires examination of the person making the statement before admitting it as evidence) were not followed. They cited numerous precedents including Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate, Prakash Kumar v. State of Gujarat, and Surinder Kumar Khanna v. Intelligence Officer, DRI, which emphasize the necessity of corroboration and procedural compliance before relying on co-accused statements.

The Tribunal noted that the impugned order relied mainly on statements of the co-accused without independent corroborative evidence. The Department did not examine the co-accused during adjudication, violating Section 138B. The Tribunal referred to the principle that a confession or statement of a co-accused cannot be substantive evidence against another accused and can only be used to corroborate other independent evidence.

Given the absence of corroboration and procedural non-compliance, the Tribunal held that reliance on retracted co-accused statements was legally unsustainable.

Conclusion: Retracted statements of co-accused cannot be relied upon without following Section 138B procedures and without corroboration. The answer to this issue is negative.

(iv) Whether the penalties under Sections 112(a), 112(b), and 114AA of the Customs Act, 1962 are sustainable?

Section 112 imposes penalties on persons who deal with goods liable to confiscation or prohibited goods, while Section 114AA penalizes making false or incorrect statements or declarations. The Department imposed penalties on all appellants under these provisions.

The appellants argued that since the gold was of domestic origin and not smuggled or prohibited, no offence was established against them, and hence penalties were not sustainable. They contended that no evidence was brought to prove false declarations under Section 114AA.

The Tribunal analyzed the evidence and found that the appellants had submitted invoices for domestic purchase, which the Department did not adequately verify or rebut. The gold's purity and lack of foreign markings supported the domestic origin claim. There was no evidence of false statements or declarations by the appellants.

Accordingly, the Tribunal held that penalties were not imposable under Sections 112(a), 112(b), and 114AA as the essential elements for penalty were not established.

Conclusion: The penalties imposed under Sections 112(a), 112(b), and 114AA are not sustainable. The answer to this issue is negative.

Significant Holdings

"The impugned order has concluded that the said gold bars/pieces were smuggled into India only on the basis of assumptions and presumptions without any concrete evidence to substantiate this claim."

"The material evidence available on record does not establish that the gold bars/pieces were smuggled into India without any valid documents."

"Section 123 of Customs Act is applicable only to foreign marked gold. Also the gold bars/pieces seized is not of 99.99 purity. Since, there is no foreign mark available on the gold bars/pieces seized from the Appellants, the provisions of section 123 is not applicable in this case."

"The officers of the Department had no reasonable belief that the gold was smuggled and therefore they have not discharged their responsibility of forming reasonable belief under Section 123 without which the burden of proof will not shift to the person from whom the gold is seized."

"It is a settled law that the statement of the co-accused cannot be relied without any independent corroboration."

"The penalties under sections 112(a) and (b) and 114 AA of the Customs Act, 1962 are not imposable in this case."

The Tribunal ultimately set aside the impugned order of confiscation and penalty, allowing the appeals with consequential relief as per law.