2025 (5) TMI 1623 - AT - Customs

Seizure of gold bars - absolute confiscation and penalties - gold of foreign origin - reasonable belief under Section 110 - Revenue failed to produce any documents - HELD THAT - We find that it is a case of town-seizure and no foreign marking on the gold and purity of the gold is also below 99.9%. In that circumstances it is the duty of the Revenue to show the reasonable belief why the gold in question is of foreign origin. The Appellants are not required to discharge their obligation under Section 123 of the Customs Act 1962. Moreover the Appellant No.(4) has claimed to be the owner of the gold in question and the said owner has shown the invoices for procurement of the said gold by producing his profit and loss account balance sheet income tax return and payment of GST on the said gold in question. In that circumstances the gold in question is not liable for confiscation. In view of this we hold that the confiscation of gold in question is not sustainable. As we hold that the gold in question is not liable for confiscation and the same is to be released to the Appellant No.(4). Further as the gold in question is not liable for confiscation no penalties are imposable on the Appellants. Hence the vehicle in question is also required to be released to the Appellant No.(1) Thus we set aside the impugned order and allow the appeals filed by the Appellants with consequential relief if any.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the 12 pieces of gold bars seized from the appellants are liable to confiscation under the Customs Act, 1962 on the ground that they are of foreign origin.

- Whether the Revenue had a reasonable belief under Section 110 of the Customs Act, 1962 to seize and confiscate the gold bars.

- Whether the appellants are liable to penalties under Sections 112(a)/(b) and 114AA of the Customs Act, 1962 for possession and attempted sale of the seized gold bars.

- Whether the vehicle used in transportation of the gold bars is liable for confiscation or redemption fine.

- Whether the appellants discharged their burden under Section 123 of the Customs Act, 1962 to prove the lawful possession and origin of the gold bars.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability of the seized gold bars for confiscation as foreign-origin goods

Relevant legal framework and precedents: Confiscation under the Customs Act, 1962 requires that the goods are imported or attempted to be imported without proper declaration or duty payment. Section 110 empowers seizure on reasonable belief that goods are liable for confiscation. The burden of proof to establish lawful possession and origin lies on the person in possession under Section 123. The purity and marking of gold bars are relevant to establish origin.

Court's interpretation and reasoning: The Court observed that the gold bars were seized in a town interception, not at a port or customs station, and the gold bars lacked any foreign markings. The purity of the gold was found to be 99.5% to 99.7%, which is below the 99.9% purity generally associated with imported gold bars. The Court emphasized that the Revenue must establish a reasonable belief that the gold was of foreign origin to justify seizure under Section 110. The appellants are not required to discharge the burden under Section 123 unless such reasonable belief is shown.

Key evidence and findings: The gold bars were tested at two centers, confirming purity between 99.5% and 99.7%. No foreign markings were found. The appellants produced documents through Appellant No.(4), the proprietor of M/s Rahul Jewellers, including stock records, income tax returns, balance sheets, profit and loss accounts, trade license, GST returns, and invoices evidencing lawful purchase and possession of the gold.

Application of law to facts: Since the Revenue failed to produce any evidence or documents to establish the foreign origin of the gold bars or a reasonable belief thereof, the seizure under Section 110 was not sustainable. The lawful ownership and procurement documentation presented by Appellant No.(4) further negated any presumption of illegal import or concealment.

Treatment of competing arguments: The Revenue relied on the interception and seizure under Section 110 on reasonable belief, but failed to substantiate the foreign origin claim. The appellants argued the absence of foreign markings and presented comprehensive ownership and procurement evidence. The Court favored the appellants' submissions given the lack of evidence from the Revenue.

Conclusions: The confiscation of the gold bars was held to be unsustainable, and the gold was ordered to be released to Appellant No.(4).

Issue 2: Imposition of penalties under Sections 112(a)/(b) and 114AA of the Customs Act, 1962

Relevant legal framework: Penalties under Section 112(a)/(b) are imposed for unlawful import or possession of prohibited goods, and Section 114AA penalizes concealment or attempt to evade customs duty.

Court's interpretation and reasoning: Since the confiscation of gold was not sustainable due to lack of proof of foreign origin, the foundation for imposing penalties under these provisions also failed. Penalties are contingent on the goods being liable for confiscation.

Application of law to facts: With the gold bars not liable for confiscation, no penalties could be imposed on the appellants.

Conclusions: The penalties imposed on the appellants were set aside.

Issue 3: Confiscation and redemption of the vehicle used in transportation

Relevant legal framework: Vehicles used in transporting smuggled or prohibited goods can be seized and confiscated under the Customs Act, but redemption is possible upon payment of fine.

Court's interpretation and reasoning: Since the gold bars were not liable for confiscation, the vehicle seizure lost its basis. The vehicle was ordered to be released to Appellant No.(1).

Conclusions: The vehicle was to be released without confiscation.

Issue 4: Burden of proof under Section 123 of the Customs Act, 1962

Relevant legal framework: Section 123 places the burden of proof on the person in possession to prove lawful ownership and that the goods are not liable for confiscation once the Revenue establishes seizure on reasonable belief.

Court's interpretation and reasoning: The Court held that the Revenue failed to establish reasonable belief under Section 110; therefore, the burden under Section 123 did not shift to the appellants. The appellants' evidence of lawful ownership was accepted.

Conclusions: The appellants were not required to discharge the burden under Section 123, and their ownership claim was accepted.

3. SIGNIFICANT HOLDINGS

"It is the duty of the Revenue to show the reasonable belief why the gold in question is of foreign origin. The Appellants are not required to discharge their obligation under Section 123 of the Customs Act, 1962."

"The gold in question is not liable for confiscation."

"As the gold in question is not liable for confiscation, no penalties are imposable on the Appellants."

"The vehicle in question is also required to be released to the Appellant No.(1)."

Core principles established include the necessity for the Revenue to establish reasonable belief of foreign origin before seizure under Section 110, the conditional nature of burden shifting under Section 123, and the interdependence of confiscation and penalty imposition under the Customs Act, 1962.

Final determinations:

• The confiscation of the 12 gold bars was set aside.
• The penalties imposed on the appellants were quashed.
• The vehicle seized was ordered to be released.
• The appeals filed by the appellants were allowed with consequential relief.