Foreign Markings Alone Can’t Prove Smuggling: CESTAT Quashes Confiscation Of Gold & Cash

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the confiscation of 10 gold biscuits and Indian currency amounting to Rs. 33.56 lakh, holding that mere foreign markings on gold cannot by themselves establish smuggling in the absence of corroborative evidence. The bench of Angad Prasad (Judicial Member) and A.K. Jyotishi (Technical Member) ruled that Customs authorities cannot invoke stringent provisions under the Customs Act without first recording valid “reasons to believe” before seizure. The appeal was filed by jeweller Kishore Kumar Gilda against an Order-in-Original passed by the Commissioner of Customs, Vijayawada, which had ordered absolute confiscation of gold valued at ₹28.20 lakh under Section 111 of the Customs Act, confiscation of Indian currency under Section 121, and imposition of penalties under Sections 112 and 117 of the Act. According to the case records, Customs officers had conducted a search at the appellant’s premises on 5 February 2015 and seized 10 gold biscuits of 100 grams each bearing foreign markings along with ₹33.56 lakh in cash. The Department alleged that the gold had been smuggled into India and that the seized currency represented the sale proceeds of smuggled gold. The appellant, however, contended that he was engaged in lawful trading of gold and silver ornaments and that the gold had been purchased locally in the ordinary course of business. He further argued that the seizure itself was illegal as Customs officers had failed to separately record “reasons to believe” before effecting seizure under Section 110 of the Customs Act. The Tribunal examined the legality of the seizure and observed that except for a general statement in the panchnama, there was no independent material on record to indicate that Customs officers had recorded objective reasons before seizure. The Bench noted that the requirement of recording “reasons to believe” is mandatory and not merely procedural. Relying upon the Delhi High Court judgment in Worldline Tradex Pvt. Ltd., the Tribunal held that seizure powers under Section 110 are drastic in nature and can be exercised only after recording valid reasons based on objective material. Since no separate order recording such reasons existed in the present case, the seizure itself suffered from legal infirmity. The Bench further held that invocation of Section 123 of the Customs Act, which shifts the burden of proof onto the person from whom goods are seized, was unsustainable because such burden can arise only when the initial seizure itself is valid. On the allegation of smuggling, the Tribunal categorically ruled that foreign markings on gold biscuits cannot automatically lead to the conclusion that the goods are smuggled. It observed that gold is widely traded in the domestic market and may legally carry foreign inscriptions. The Tribunal stressed that suspicion, however strong, cannot replace proof. The Tribunal also found fault with the Department’s reliance on the appellant’s statement recorded under Section 108 of the Customs Act. It noted that the statement had subsequently been retracted and there was no independent corroborative evidence to support the alleged admissions. A retracted confession, the Bench held, cannot be relied upon without material corroboration. Another major defect identified by the Tribunal was that the confiscation order under Section 111 failed to specify the exact clause allegedly violated. Referring to the Supreme Court judgment in Amrit Foods, the Bench held that failure to specify the precise statutory clause vitiates confiscation proceedings because the affected person must be informed of the exact nature of the alleged contravention. The Tribunal further observed that gold is not a prohibited item but only a restricted item under customs law. Therefore, even where confiscation may otherwise be justified, authorities are ordinarily required to provide the option of redemption under Section 125 of the Customs Act rather than ordering absolute confiscation. On confiscation of the cash amount, the Tribunal ruled that Section 121 can be invoked only if Customs establishes a direct nexus between the seized currency and sale proceeds of smuggled goods. In the present case, no evidence was produced to prove any actual sale of smuggled gold or establish the identity of any buyer or seller. The Bench held that confiscation of currency merely on suspicion is impermissible and observed that there was “absolutely no evidence” linking the seized cash to alleged smuggled gold. Setting aside the confiscation and penalties, the Tribunal ultimately allowed the appeal with consequential relief to the appellant. Case Details Case Title: Shri Kishore Kumar Gilda Versus Commissioner of Customs Citation: JURISHOUR-1208-CES-2026(HYD) Case No.: Customs Appeal No. 30009 of 2015 Date: 08.05.2026 Counsel For Appellant: Y. Sreenivasa Reddy, Advocate Counsel For Respondent: K. Sreenivasa Reddy, Authorized Representative Click Here To Read Order

Foreign Markings Alone Can’t Prove Smuggling: CESTAT Quashes Confiscation Of Gold & Cash

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