CESTAT Kolkata Sets Aside Confiscation of Gold, Citing Lack of Evidence for Smuggling

Tribunal rules foreign markings and absence of documents insufficient to establish smuggled nature; orders refund if gold was disposed of.

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Eastern Zonal Bench in Kolkata has overturned a previous decision to confiscate 2,333.02 grams of gold from M/s. Narru Guru Shantha Siva Kamal, valued at approximately INR 1.21 crore. The Tribunal found that the customs authorities failed to establish the foreign origin and smuggled nature of the gold, as required under Section 110 of the Customs Act, 1962.

The case arose when Shri Kamal was apprehended by the Directorate of Revenue Intelligence (DRI) officers at Santragachi Railway Station, allegedly carrying smuggled gold from Bangladesh. The officers seized the gold based on foreign markings and the appellant's inability to produce acquisition documents. However, the Tribunal found these grounds insufficient for establishing the gold as smuggled.

In their ruling, the Tribunal emphasized the necessity of "reasonable belief" for seizure under Section 110(1) of the Customs Act, which was not substantiated in this case. The Tribunal criticized the reliance on foreign markings alone, noting that the purity of the gold ranged from 99.7 to 99.8, not the usual 999.9 associated with foreign gold. Furthermore, only a portion of the gold was tested, leaving the purity of the majority of the gold biscuits unverified.

The Tribunal also ruled that the burden of proof under Section 123 does not shift to the appellant unless smuggling is established. It found that the seizure did not happen in a customs area or near an international border, further weakening the case for smuggling.

Consequently, the Tribunal set aside the confiscation and penalty imposed on Shri Kamal, ruling that the gold cannot be considered smuggled. Furthermore, if the gold has been sold, the Tribunal directed that the appellant is entitled to a refund of the average market value on the date of disposal, along with applicable interest, as per CBIC instructions.

This decision underscores the importance of substantial evidence when alleging smuggling, particularly in town seizures far removed from international borders or customs areas.

Bottom Line:

Customs Act, 1962 - Confiscation of gold bars - The Tribunal held that mere foreign markings and absence of documents do not establish the smuggled nature of gold - 'Reasonable belief' under Section 110(1) for seizure was not substantiated - Burden of proof under Section 123 does not shift to the appellant unless smuggled character is established.

Statutory provision(s): Customs Act, 1962 Sections 110(1), 111(b), 111(d), 112(b), 123

M/s. Narru Guru Shantha Siva Kamal v. Commissioner of Customs(Appeals), (CESTAT)(Eastern Zonal Bench Kolkata) : Law Finder Doc Id # 2813320