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2025 (5) TMI 587 - AT - CustomsConfiscation of gold - imposition of penalty - existence of reasonable belief or not - shifting of burden of proof - section 123 of the Customs Act 1962 - HELD THAT - In cases not covered by section 123 the burden of proving that any goods are smuggled rests on the Revenue because it is Revenue that asserts that they are smuggled. In this case it is found that the belief under which the officers have seized the gold is the information which they had received and the test report. There is nothing on record to show that there is anything else based on which they formed the opinion that the gold and other goods were of smuggled origin. The information which was received by the officers was confidential information and it is not part of the evidence. It helped the officers start the investigation and examine the goods. That by itself cannot give an officer reasonable belief that any goods were of smuggled origin. The second document which they had was the test report which categorically states that it cannot be determined if the gold is of foreign origin or of Indian origin. Conclusion - The entire case was built on the basis of seizure without reasonable belief that the goods in question were smuggled goods. Once such belief does not exist section 123 would not apply and it is for the department to establish that they were smuggled goods. There is no evidence whatsoever in the entire case that the seized goods were smuggled goods. The impugned order upholding the OIO insofar as it pertains to the confiscation of the gold of the appellant and imposition of penalty on the appellant is set aside - Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Reasonable Belief for Seizure and Application of Section 123 of the Customs Act Relevant legal framework and precedents: Section 123 of the Customs Act shifts the burden of proof to the person from whose possession the goods were seized if the goods are seized under a reasonable belief that they are smuggled goods. The section applies specifically to gold and its manufactures, among other notified goods. Court's interpretation and reasoning: The Tribunal examined whether the officers had a reasonable belief at the time of seizure. The officers acted on confidential intelligence regarding domestic transportation of foreign-origin gold without proper documents. However, such intelligence was not part of the evidence and served only as a trigger for investigation. The test report from the Government-approved jeweller confirmed the purity of gold as 24 carat but explicitly stated, "It cannot be determined whether the gold is foreign or Indian origin." This undermined the basis for reasonable belief that the gold was smuggled. The Tribunal held that mere confidential information and a test report not establishing foreign origin could not constitute reasonable belief. Key evidence and findings: The test report's note stating the inability to determine the origin of gold and absence of any foreign markings on the gold bars or biscuits were critical. Also, no other evidence was on record to support the claim of smuggling. Application of law to facts: Since the reasonable belief was absent, Section 123 was wrongly applied to shift the burden of proof to the appellant. The burden remained on the Revenue to prove smuggling, which they failed to do. Treatment of competing arguments: The Revenue relied on the intelligence and the test report indicating foreign origin in particulars, but the Tribunal emphasized the contradictory note in the report and lack of concrete evidence. Conclusion: The seizure was unjustified, and Section 123 did not apply. The burden of proof was on the Revenue, which was not discharged. Issue 2: Confiscation and Penalty under Sections 111 and 112 of the Customs Act Relevant legal framework and precedents: Sections 111(d), 111(l), and 111(j) empower confiscation of goods in cases of smuggling or prohibited importation. Sections 112(a) and 112(b) provide for penalties in such cases. Court's interpretation and reasoning: The Tribunal found that confiscation and penalties were predicated on the assumption that the gold was smuggled. Since the seizure itself was without reasonable belief and Section 123 was misapplied, the foundation for confiscation and penalty was flawed. Key evidence and findings: The appellant produced documentary evidence, including an invoice dated 14.03.2015 showing lawful purchase of the gold by the appellant's grandfather, and statements explaining the chain of custody and legitimate possession. Application of law to facts: The appellant's evidence was not properly considered by the lower authorities. The Tribunal gave weight to the invoice and statements, noting that the appellant consistently maintained lawful possession and non-foreign origin of the gold. Treatment of competing arguments: The Revenue rejected the appellant's submissions and documents, but the Tribunal found no valid reason to disbelieve the appellant's evidence, especially given the lack of contrary proof. Conclusion: The confiscation and penalty were not sustainable and were set aside. Issue 3: Burden of Proof and Evidentiary Standards Relevant legal framework and precedents: The burden of proof lies on the Revenue to establish smuggling unless shifted by Section 123. The standard requires reasonable belief before seizure and clear evidence thereafter. Court's interpretation and reasoning: The Tribunal emphasized that confidential intelligence alone cannot constitute reasonable belief. The test report's inability to determine origin negated the claim of smuggling. The appellant's documentary evidence was credible and unrebutted. Key evidence and findings: The invoice for purchase of pure gold, statements of the appellant and related persons, and the absence of any foreign markings or documents indicating illicit importation. Application of law to facts: The Tribunal held that the Revenue failed to meet its evidentiary burden and that the appellant successfully rebutted any presumption of smuggling. Treatment of competing arguments: The Revenue's reliance on intelligence and unsubstantiated assumptions was insufficient to meet the burden. Conclusion: The burden of proof was not discharged by the Revenue, and the appellant was entitled to relief. 3. SIGNIFICANT HOLDINGS The Tribunal held:
Core principles established include:
Final determinations:
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