Clandestine Gold Transport, 99.6% Purity Override GST Invoices: Calcutta HC Restores Confiscation

The Calcutta High Court has reinforced the strict enforcement of customs laws by restoring the absolute confiscation of nearly 2 kilograms of gold and setting aside the order of the Customs, Excise and Service Tax Appellate Tribunal. The bench of Justice Rajarshi Bharadwaj and Justice Uday Kumar has observed that the Tribunal’s decision suffered from perversity and misapplication of legal principles, particularly in relation to the reverse burden of proof under the Customs Act, 1962. The bench noted that a paper trail relating to scrap ornaments cannot explain the existence of high-purity bullion without evidence of the transformation process. This “identity mismatch,” as described by the Court, was fatal to the respondents’ defence. The case originated from the seizure of 1,999.90 grams of gold at Howrah Railway Station in May 2018. The gold was recovered from a carrier who had concealed it in a specially stitched waist belt worn beneath his clothes. The Revenue alleged that the gold was smuggled and of foreign origin, relying on the manner of concealment, statements recorded under Section 108 of the Customs Act, and scientific analysis of the gold’s purity. The adjudicating authority had ordered absolute confiscation along with penalties, but the Tribunal later set aside this order, accepting the respondents’ claim that the gold was derived from melted scrap jewellery supported by GST records. Upon appeal, the High Court examined whether the Tribunal was justified in discarding the Revenue’s evidence and relying on what it termed a “town seizure” theory. The Court categorically rejected the notion that seizures made inland require a different or higher standard for forming “reasonable belief.” It held that the concept of reasonable belief under Section 123 is not dependent on geography but on the totality of circumstances, including conduct and material evidence. The clandestine manner in which the gold was transported was found to be a strong indicator of illicit intent. The Court placed significant reliance on the conduct of the carrier, noting that legitimate gold transactions are not conducted through secretive methods such as concealing bullion in a waist belt. It held that such behaviour satisfies the “prudent man test” and provides sufficient basis for customs अधिकारियों to form a reasonable belief of smuggling, thereby triggering the reverse burden of proof on the person claiming lawful ownership. Another crucial aspect of the judgment was the evidentiary value of statements recorded under Section 108 of the Customs Act. The carrier had initially admitted that the gold was of foreign origin, and this statement was reaffirmed at a later stage. The Court observed that such statements are recorded in deemed judicial proceedings and carry substantial evidentiary weight. The subsequent retraction made after a delay of 850 days was held to be a calculated afterthought, especially in the absence of any evidence of coercion or duress. The scientific analysis of the gold played a decisive role in the Court’s reasoning. The laboratory report indicated a purity level of 99.5% to 99.6%, which corresponds to international bullion standards. The Court found this inconsistent with the respondents’ claim that the gold was produced by melting scrap jewellery, which typically yields significantly lower purity levels. It held that achieving such high purity requires advanced industrial refining processes, and the respondents failed to produce any refinery records, melting memos, or conversion certificates to substantiate their claim. While the respondents relied on GST invoices and returns to establish a legitimate source, the Court held that such documentation alone was insufficient to discharge the burden under Section 123. The Court also rejected the preliminary objection regarding maintainability based on monetary limits and classification as a valuation dispute. It clarified that confiscation proceedings relate to enforcement of statutory provisions and not merely valuation, and therefore fall within the jurisdiction of the High Court. The Court noted that the total value involved exceeded the prescribed threshold and that issues concerning interpretation of Section 123 are exempt from monetary limits. In its final order, the High Court allowed the Revenue’s appeals, set aside the Tribunal’s decision, and restored the original order of confiscation along with penalties. It upheld the confiscation of the gold and directed the respondents to deposit the penalties within four weeks, failing which recovery proceedings may be initiated. The Court also directed that the matter be forwarded to GST and Income Tax authorities for further investigation into the financial records of the concerned entity. Case Details Case Title: Commissioner Of Customs Preventive Kolkata Vs Shri Anil Kumar Gaur Citation: JURISHOUR-568-HC-2026(CAL) Case No.: CUSTA 31 OF 2025 Date: 31.03.2026 Counsel For Petitioner: Bhaskar Prasad Banerjee Counsel For Respondent: Arijit Chakraborti Click Here To Read Order Read More: SGST Officers Can’t Detain Inter-State Goods Without Jurisdiction Under IGST: AP High Court

Clandestine Gold Transport, 99.6% Purity Override GST Invoices: Calcutta HC Restores Confiscation

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