2025 (5) TMI 1627 - AT - Customs

Smuggling - confiscation of the gold Silver Ingots and seizure of cash - sale proceeds - imposition of penalties - business of cash - No document to show licit import and possession of the gold - knowledge or reason to believe - burden of proof - HELD THAT - As far as the confiscation of the gold is concerned there is no contest at all by any of the appellants. Rahul is contesting only confiscation of the cash seized from M/s Kiran Forex Pvt. Ltd. and the confiscation of the silver and the penalty imposed on him. As far as the silver is concerned even before us the submission of learned counsel for Rahul is that it does not belong to M/s Kiran Forex Pvt. Ltd. and it also does not belong to Rahul. It is the submission that it belongs to wife of Rahul. The case of the department is that this silver was found along with the cash at M/s Kiran Forex Pvt. Ltd. and is suspected to be the sale proceeds of the smuggled gold and hence was liable for confiscation. There is no claim whatsoever by the wife of Rahul. We therefore find that neither Rahul nor M/s Kiran Forex Pvt. Ltd. have any locus standi to claim the seized silver. As far as the seized currency is concerned the submission of the learned counsel is that it belonged to M/s Kiran Forex Pvt. Ltd. and it was a part of its business proceeds. The case of the department is that it was sale proceeds of smuggled gold. In this case the only smuggled gold in question is the one which was seized from Aman and Shyam. Confiscation of this gold is not contested. This gold was not sold by Rahul because it was seized before Rahul could lay his hands on it. It is true that Rahul had in his statement mentioned that he had earlier obtained about 90 kg. gold and had sold it in the market. The question which arises is whether this cash would be the sale proceeds of some gold which was smuggled earlier and sold in the market. While section 123 of the Act shifts the burden of proof in respect of gold such reversal is not applicable to the sale proceeds of smuggled goods under section 121 of the Act. In other words the cash is not covered by section 123 of the Act. It can be confiscated if there is evidence that it was the sale proceeds of smuggled gold. In this case we do not find any evidence to establish that some smuggled goods was sold by the Rahul and the cash which was seized was the sale proceeds of the smuggled goods so sold. Therefore we find that the cash which was seized from M/s Kiran Forex Pvt. Ltd. deserves to be released to it. It also needs to be noted that M/s Kiran Forex is in the business of money changing i.e. exchanging Indian Rupees for foreign currency and vice-versa. It is not unusual for it to have cash. As far as the penalty on Shri Rahul is concerned it is relatable to the gold which has been confiscated under section 111 of the Act. The total gold which was confiscated was 12.1 kg. valued at Rs. 3, 71, 07, 550/-. Section 112 of the Act provides for imposition of a penalty not exceeding the value of the goods or Rs. 5, 000/- whichever is greater in respect of those goods on which any prohibition is in force. We therefore find that the penalty of Rs. 95, 00, 000/- imposed on Rahul is fair and proper and calls for no interference. Penalty of Rs. 45, 00, 000/- was imposed on Shyam under section 112 of the Act which is relatable to the confiscation of 6.1 kg. of gold bars valued at Rs. 1, 86, 87, 350/- seized from him and confiscated. The penalty of Rs. 45, 00, 000/- is less than a third of the value of the confiscated goods and it calls for no interference. Penalty of Rs. 45, 00, 000/- imposed on Shri Aman under section 112 of the Act for bringing 6 kg. valued at Rs. 1, 84, 20, 200/-. Considering the value of goods and the role played by Aman we find that the penalty imposed on him is fair and proper and does not call for any interference. Thus the impugned order is modified to the extent that the seized cash of Rs. 10, 79, 300/- shall be released to M/s Kiran Forex Pvt. Ltd. Rest of the impugned order is upheld. Appeal No. C/50728 of 2019 filed by Shri Rahul is partly allowed by releasing the cash to M/s Kiran Forex Pvt. Ltd. Appeal No. C/50729 of 2019 filed by Shri Aman and Appeal No. C/50730 of 2019 filed by Shri Shyam are rejected.

Summary

The core legal questions considered in this judgment are:

1. Whether the confiscation of gold bars seized from the appellants was justified under the Customs Act, 1962, given the evidence of smuggling and possession without legal documents.

2. Whether the confiscation of silver ingots and Indian currency seized from the premises of M/s Kiran Forex Pvt. Ltd. was lawful, specifically whether the silver and cash constituted smuggled goods or sale proceeds of smuggled goods under the Customs Act.

3. Whether the penalties imposed on the appellants under section 112 of the Customs Act, 1962, were appropriate and justified based on the facts and evidence.

4. Whether due process was followed in providing the appellants with an opportunity to be heard and access to relied upon documents during adjudication proceedings.

Issue-wise Detailed Analysis

1. Confiscation of Gold Bars

The legal framework governing confiscation of smuggled goods is primarily section 111 of the Customs Act, 1962, which authorizes confiscation of goods imported or exported in contravention of the Act. Section 123 shifts the burden of proof to the person in possession of gold to prove licit possession.

The Court examined the statements of the appellants Aman and Shyam, who were intercepted at New Delhi Railway Station carrying gold bars without any legal import documents. Both admitted that they were carriers employed by Rahul, the owner of M/s Kiran Forex Pvt. Ltd., to bring smuggled gold from Kolkata, sourced from a person named Babulal Bhai. Rahul's own statement corroborated this, admitting to receiving and selling approximately 90 kg of smuggled gold through his business.

The evidence included the intercepted gold bars, statements of the appellants, and corroboration by an employee who introduced Aman and Shyam to Rahul. The Court found no contest to the confiscation of the gold bars by any appellant, and the evidence clearly established smuggling and illegal possession.

The Court applied section 123, noting the reversal of burden of proof in respect of gold, and concluded that confiscation was justified. The appellants failed to provide any evidence to rebut the presumption of smuggling.

2. Confiscation of Silver Ingots and Indian Currency

Section 111 of the Customs Act authorizes confiscation of smuggled goods, while section 121 provides for confiscation of sale proceeds of smuggled goods.

The silver ingots weighing 3.184 kg were seized from M/s Kiran Forex's premises. Rahul's counsel admitted that the silver did not belong to Rahul or the company but to Rahul's wife, who had not made any claim for its release. The Department contended that the silver was found alongside cash suspected to be proceeds of smuggled gold and hence liable for confiscation.

The Court found no locus standi for Rahul or M/s Kiran Forex to claim the silver and upheld its confiscation.

Regarding the seized Indian currency amounting to Rs. 10,79,300/-, Rahul contended it was part of the business cash of M/s Kiran Forex, a money-changing enterprise. The Department argued it was proceeds of smuggled gold sales.

The Court analyzed section 121, which mandates confiscation of sale proceeds of smuggled goods sold by a person with knowledge or reason to believe the goods were smuggled. However, unlike section 123, section 121 does not shift the burden of proof; the Department must establish that the cash was proceeds of smuggled goods.

The Court found no evidence that the seized cash was proceeds of smuggled gold sales. The gold seized from Aman and Shyam was confiscated before Rahul could sell it, and no proof was presented that the cash related to any prior smuggled gold sales. Given M/s Kiran Forex's legitimate business in currency exchange, holding cash was not unusual.

Therefore, the Court held that the cash should be released to M/s Kiran Forex Pvt. Ltd.

3. Penalties Imposed on the Appellants

Section 112 of the Customs Act authorizes imposition of penalties up to the value of goods or Rs. 5,000, whichever is greater, for prohibited goods.

Rahul was penalized Rs. 95,00,000/- related to the confiscation of 12.1 kg of gold valued at Rs. 3,71,07,550/-. Aman and Shyam were each penalized Rs. 45,00,000/- corresponding to the confiscated gold in their possession.

The Court found the penalties proportional and fair given the value of the confiscated gold and the appellants' roles. The penalty on Rahul was less than one-third of the gold's value, and penalties on Aman and Shyam were similarly reasonable. No interference was warranted.

4. Procedural Fairness and Opportunity to be Heard

The matter was remanded by this Tribunal earlier due to concerns about denial of documents and opportunity to be heard. In the denovo proceedings, the Department supplied all relied upon documents with acknowledgments. Despite multiple personal hearings being fixed-six in the original proceedings and three in the denovo proceedings-the appellants failed to appear or contest on merits.

The Court noted that the appellants' claims of non-receipt of documents were addressed by the Department's repeated supply of documents and acknowledgments. The appellants did not specify which documents were missing nor appeared for hearings. The Court held that adequate opportunity was provided, and the appellants' failure to avail themselves of it justified proceeding with adjudication.

Treatment of Competing Arguments

The appellants contested only specific aspects: Rahul challenged confiscation of silver, cash, and penalty; Aman and Shyam challenged only penalties. The Department relied on statements, seizure evidence, and procedural compliance to support confiscation and penalties.

The Court accepted the Department's position on gold confiscation and penalties, rejected the claim over silver due to lack of ownership claim, and found insufficient evidence to uphold confiscation of cash, ordering its release. Procedural objections by appellants were negated by the Department's compliance and appellants' non-appearance.

Significant Holdings

"Section 121 of the Customs Act reads as follows :- 'Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation.'"

"While section 123 of the Act shifts the burden of proof in respect of gold, such reversal is not applicable to the sale proceeds of smuggled goods under section 121 of the Act."

"We find that neither Rahul nor M/s Kiran Forex Pvt. Ltd. have any locus standi to claim the seized silver."

"The penalty of Rs. 95,00,000/- imposed on Rahul is fair and proper and calls for no interference."

"In all nine opportunities of personal hearing were provided to the appellants - six during the earlier proceedings and three during the denovo proceedings and none appeared on behalf of any of the appellants."

The Court's final determinations were:

- The confiscation of 12.1 kg of gold bars from Aman and Shyam was lawful and upheld.

- The confiscation of silver ingots was upheld due to lack of claim and ownership by appellants.

- The confiscation of Indian currency was set aside and the cash was ordered to be released to M/s Kiran Forex Pvt. Ltd. due to absence of evidence linking it to sale proceeds of smuggled goods.

- Penalties imposed on Rahul, Aman, and Shyam under section 112 were upheld as reasonable and justified.

- Procedural fairness was satisfied by the Department's supply of documents and multiple opportunities for hearing, which the appellants failed to utilize.