2025 (6) TMI 1193 - AT - Customs

Absolute confiscation of gold bars Indian Currency and a Hyundai i10 Car - levy of penalties u/s 112(b) of the Customs Act 1962 - existence of reason to believe that the said gold was smuggled or not - HELD THAT - In this case the appellant was intercepted on 29th March 2017 at Md. Ali Park Central Avenue Kolkata while he was travelling in a car bearing Registration No. WB-06/8713 Which was being driven by his driver namely Shri Manoj Kumar Bhagat. During the course of search the gold in question was recovered and no documents of licit procurement of the gold were found in the possession of the appellant. It is also a fact on record that the appellant was having foreign currency of USD 3400/-; some Indian currency was also seized from the person of the appellant. It is also a fact that the appellant was engaged in the sale and purchase of jewellery. The allegation of the Revenue is that the appellant has brought the said gold from Myanmar which is a smuggled one. Whether there is reasonable belief to seize the said gold or not? - HELD THAT - The said issue has been examined by this Tribunal in the case of Ajit Bhosle 2019 (8) TMI 1639 - CESTAT KOLKATA wherein it has been held in respect of seizure of gold in cut pieces having no marking and of different purity from melting house that since gold is freely imported in country and abundantly available in the market it cannot be held that the seized gold is a smuggled one which creates doubt and suspicion on the investigating authority. Further in the case of R.K. Swami Singh 2024 (5) TMI 19 - CESTAT KOLKATA the appellant had been intercepted at the outskirts of Imphal testing showed purity of gold as 995.2 mille which had no foreign marking; the appellant therein was not having any documents for licit importation and confiscation of gold was ordered under reasonable belief that foreign origin gold was smuggled into India without Customs duty. In the said case the intercepted person in initial statements in his own handwriting in the presence of two independent witnesses had stated that the gold had been handed to him by another person for transporting based on financial consideration but the same was retracted later on saying that it was not voluntary - It was also observed therein that there was no document on record to establish that the gold bars/pieces were smuggled into India without Customs duty payment and there was no evidence to counter the intercepted person s claim that the gold was domestically purchased by his father and thus inherited; therefore confiscation of gold under the presumption of the Customs Officer that the same was smuggled one was set aside. It is also seen that the gold in question is not having any foreign marking. The appellant has produced evidence of procurement of the said gold in question by way of an Affidavit executed by the mother of the appellant and the Wasiyatnama dated 28.02.2006. In view of these facts we find that the appellant has been able to explain the source of procurement of the gold in question which has been inherited from the appellant s mother through Wasiyatnama and who in turn has given the said gold to the appellant after converting her jewellery into gold - In these circumstances the gold in question cannot be absolutely confiscated. The Indian currency recovered during the course of investigation has not been proved by the Revenue to be the sale proceeds of smuggled goods. Consequently the Indian currency recovered during the course of investigation is also not liable for confiscation - Moreover the vehicle seized during the course of investigation is also not liable for confiscation as the same was not involved in any activity of smuggling by the appellant. Conclusion - The gold in question the vehicle in question foreign currency and Indian currency recovered from the appellant are not liable for confiscation and therefore the same are to be released to the appellant - no penalties are imposable on the appellant. The impugned order is set aside - appeal allowed.

Summary

The core legal questions considered by the Tribunal include: (1) Whether there was reasonable belief to confiscate the gold bars recovered from the appellant under the Customs Act, 1962, particularly under Sections 111(b), 111(d), and 112(b); (2) Whether the foreign currency and Indian currency seized along with the gold could be confiscated as proceeds of smuggled goods; (3) Whether the vehicle in which the appellant was travelling was liable for confiscation; and (4) The admissibility and sufficiency of evidence, including electronic evidence, to establish the smuggled nature of the gold and related items.

Regarding the first issue, the relevant legal framework involves Sections 110, 111(b), 111(d), 112(b), and 123 of the Customs Act, 1962, which empower authorities to seize and confiscate goods reasonably believed to be smuggled and impose penalties. The Tribunal examined precedents including decisions in Ajit Bhosle, R.K. Swami Singh, and Gurumukh Singh, which emphasize that mere suspicion or absence of foreign markings on gold is insufficient to form a reasonable belief of smuggling. The Court noted that the seized gold was found in the city, far from any international border, and lacked foreign markings. The purity of the gold was 99.5%, which did not conclusively establish foreign origin or smuggling, as standard foreign gold typically bears 999.9 mille purity. The appellant produced an affidavit and Wasiyatnama evidencing lawful inheritance and conversion of his mother's jewellery into the seized gold, which the Tribunal found credible. The Court also referred to the order of the Chief Metropolitan Magistrate, who, after reviewing evidence and statements, found no basis for alleging the gold was smuggled. Thus, applying the law to facts, the Tribunal concluded that the authorities failed to establish reasonable belief required for confiscation under the Customs Act.

On the second issue concerning foreign and Indian currency, the appellant contended that the foreign currency belonged to his nephew, a permanent resident of the USA, and the Indian currency was his lawful possession, not proceeds of smuggled goods. The Tribunal relied on precedents such as Abu Zaid and Gurumukh Singh, which held that mere possession of foreign currency does not justify confiscation absent proof of smuggling or illegality. The Revenue failed to prove that the seized currencies were connected to smuggling or illicit proceeds. Consequently, the Court held that the seized currencies were not liable for confiscation.

The third issue related to the confiscation of the vehicle used by the appellant. The Revenue alleged the vehicle was used as a means of transporting smuggled goods. However, the Tribunal found no evidence that the vehicle was involved in smuggling activities. The ownership was traced to a jeweller's firm, and the appellant's admissions confirmed lawful possession. Without evidence of misuse, the vehicle was not liable for confiscation.

Regarding evidentiary issues, the appellant challenged the admissibility of electronic evidence (SMS and WhatsApp messages) relied upon by the Revenue, citing Section 65B of the Indian Evidence Act, which mandates certification for electronic records. The Tribunal noted this point but emphasized that even without such evidence, the Revenue failed to establish smuggling. The Court also observed that the statements recorded under alleged coercion were not sufficient to uphold confiscation.

In addressing competing arguments, the Tribunal carefully weighed the appellant's documentary evidence of lawful inheritance and the absence of foreign markings against the Revenue's reliance on purity tests and intercepted communications. The Court found the appellant's evidence more convincing, especially given the lack of independent corroborative proof of smuggling and the fact that the seizure occurred far from any border. The Tribunal also noted the procedural history, including the Magistrate's order granting bail and observing no basis for smuggling allegations, which undermined the Revenue's case.

The Tribunal concluded that the gold, foreign currency, Indian currency, and vehicle were not liable for confiscation and that penalties under Section 112(b) were not imposable. The impugned order of absolute confiscation and penalty imposition was set aside, and the seized items were ordered to be released to the appellant.

Significant holdings include the observation that "the appellant has been able to explain the source of procurement of the gold in question, which has been inherited from the appellant's mother through Wasiyatnama, and who, in turn, has given the said gold to the appellant after converting her jewellery into gold," which negates the presumption of smuggling. The Tribunal emphasized that "mere possession of foreign currency cannot lead the Department to allege that the said foreign currency was smuggled into India by the appellant," affirming the principle that possession alone is insufficient for confiscation without evidence linking currency to smuggling.

The Court also underscored that "the words 'reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that... the officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour," reaffirming the standard for lawful seizure under the Customs Act. It was further held that "the gold in question cannot be absolutely confiscated" where the Revenue fails to establish smuggling beyond reasonable doubt.

In sum, the Tribunal established that confiscation under the Customs Act requires a reasonable belief supported by credible evidence, not mere suspicion or uncorroborated assertions. The appellant's lawful inheritance and possession, absence of foreign markings, lack of licit importation documents notwithstanding, and failure of the Revenue to prove smuggling led to the reversal of confiscation and penalties. The decision reinforces the necessity of a sound evidentiary basis and adherence to procedural safeguards in customs enforcement actions.