The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has held that while gold ornaments brought into India without declaration are liable to confiscation under the Customs Act, authorities should not mechanically order absolute confiscation in every case.

The bench of K. Anpazhakan (Technical Member) that where the facts indicate a bona fide lapse rather than organized smuggling, passengers should ordinarily be given an opportunity to redeem the confiscated jewellery by paying a redemption fine under Section 125 of the Customs Act. 

The dispute arose after the appellant arrived at Netaji Subhas Chandra Bose International Airport, Kolkata, from Bangkok on August 31, 2017. While attempting to exit through the Green Channel, he was intercepted by officers of the Air Intelligence Unit (AIU) after X-ray screening of his baggage and metal detector checks revealed concealed metallic objects. 

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During the search, Customs officers recovered two gold bangles from the appellant’s handbag and one gold chain that he was wearing beneath his shirt. A government-approved valuer certified the ornaments as 24-karat gold weighing 418 grams with a market value of ₹12.54 lakh, while the Customs Chemical Laboratory later confirmed a gold purity of 99.6%. Since the passenger had neither declared the jewellery nor produced documents evidencing lawful import, Customs seized the ornaments and initiated proceedings under the Customs Act. 

Following adjudication, the Additional Commissioner ordered absolute confiscation of the ornaments under Sections 111(d), 111(i), and 111(l) of the Customs Act and imposed a penalty of ₹6 lakh under Sections 112(a), 112(b), and 114AA. The Commissioner (Appeals) affirmed the order, prompting the appeal before CESTAT. 

Before the Tribunal, the appellant did not seriously dispute that the gold ornaments were liable to confiscation. Instead, the principal challenge was directed against the decision to order absolute confiscation rather than allowing redemption upon payment of a fine.

The appellant argued that he was a travel agent by profession, had purchased the ornaments for personal use during his foreign visit, and mistakenly believed they could be carried as bona fide baggage without declaration. It was further submitted that he was not a habitual offender and that there was no evidence of prior involvement in similar offences. The appellant relied upon earlier Tribunal decisions permitting redemption of confiscated gold in comparable circumstances. 

The Customs Department contended that the appellant was not an eligible passenger to import gold under the applicable baggage rules and had deliberately failed to declare the ornaments while crossing the Green Channel.

According to the Department, import of gold by an ineligible passenger without declaration rendered the goods prohibited for the purposes of the Customs Act, thereby justifying absolute confiscation. It also defended the ₹6 lakh penalty as proportionate to the gravity of the violations. 

The Tribunal first held that the confiscation itself was legally justified because the appellant had failed to declare the ornaments and could not produce satisfactory evidence regarding their lawful importation.

However, it emphasized that confiscability of goods and the manner of confiscation are two distinct issues under the Customs Act. While confiscation follows from statutory contravention, the decision whether confiscation should be absolute or whether redemption should be permitted requires consideration of the facts of each case. 

The Tribunal observed that adjudicating authorities must evaluate the nature of the offence, surrounding circumstances, and overall conduct of the passenger instead of routinely directing absolute confiscation.

A key factor influencing the Tribunal was its finding that the circumstances did not suggest an organized smuggling operation.

The Tribunal noted that throughout the investigation, the appellant consistently maintained that he had purchased the ornaments during his foreign travel and candidly admitted his mistake in passing through the Green Channel without making the required declaration. His statement did not indicate any attempt to deny possession of the ornaments or obstruct the investigation. 

It further observed that one of the ornaments—a gold chain—was openly worn around the appellant’s neck, while the remaining bangles were kept inside his handbag. According to the Tribunal, this mode of carriage did not reflect the carefully planned concealment or sophisticated modus operandi normally associated with organized gold smuggling. 

The Tribunal also distinguished the present case from cases involving commercial quantities of gold bars or bullion.

It noted that the goods consisted of finished gold ornaments weighing 418 grams, significantly below one kilogram, and not primary gold in the form of bars or biscuits. These factors, along with the personal nature of the jewellery and the absence of evidence indicating organized smuggling, justified a more balanced approach while exercising discretion under Section 125 of the Customs Act. 

The Tribunal relied on several earlier judicial precedents holding that gold is not a prohibited item in the strict sense and that redemption should ordinarily be allowed where the passenger is not a habitual offender and the circumstances do not indicate deliberate smuggling. 

The Bench rejected the Revenue’s reliance on Delhi High Court decisions involving commercial quantities of gold.

It observed that those cases concerned import of more than three kilograms of primary gold in the form of bars and bullion, whereas the present matter involved personal jewellery weighing only 418 grams. Consequently, those precedents could not be mechanically applied to justify absolute confiscation. 

Allowing the appeal in part, the Tribunal upheld the confiscation of the gold ornaments but modified the orders of the lower authorities.

It granted the appellant the statutory option to redeem the confiscated gold ornaments upon payment of a redemption fine of ₹1 lakh under Section 125 of the Customs Act. 

The Tribunal also reduced the penalty from ₹6 lakh to ₹50,000, observing that the original penalty was disproportionately severe in the absence of any material indicating involvement in organized smuggling or previous similar violations. The appellant was directed to exercise the option of redemption within one month from receipt of the order, failing which the benefit would lapse.

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