The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, has upheld the absolute confiscation of six kilograms of gold valued at over ₹2 crore that was seized by the Directorate of Revenue Intelligence (DRI) in Kolkata in 2019. However, the Tribunal granted partial relief by reducing the penalty imposed on the alleged mastermind from ₹2.25 lakh to ₹1 lakh.

The bench of  Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical  Member) has observed that the alleged owner of the gold did not claim ownership during the investigation stage and only asserted ownership while replying to the show cause notice. The Tribunal viewed this conduct with suspicion and concluded that the claim of ownership was an afterthought. It consequently refused to accept the documents produced subsequently as evidence establishing lawful ownership of the seized gold.

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The dispute arose from a DRI operation conducted on June 12, 2019, at Hotel Samrat in Kolkata. Following intelligence inputs, DRI officers intercepted four individuals and recovered six gold bars weighing approximately one kilogram each. The seized gold was later certified to be of 24-carat purity, weighing 6,000 grams and valued at ₹2.016 crore at the prevailing market rate. Along with the gold, cash amounting to ₹25,900 and certain other materials were also seized.

According to the investigation, the carriers allegedly stated that they were transporting the gold on behalf of a jeweller from Pratapgarh, Uttar Pradesh. The DRI alleged that the gold had been procured from a person identified as “Johnny” in Kolkata and was of smuggled origin.

Laboratory examination conducted by Customs authorities found the purity of the gold samples to be between 99.5% and 99.7%.

The Customs Department maintained that the carriers were unable to produce any documents supporting lawful possession or transportation of the gold at the time of seizure. 

The department relied heavily on statements recorded under Section 108 of the Customs Act and on call detail records allegedly linking the carriers with the jeweller accused of orchestrating the transaction.
The department further argued that documents subsequently produced by the appellants—including delivery challans, customer affidavits, stock registers, and gold assay records—were generated after the seizure and failed to establish a credible nexus with the seized gold.

The appellants contended that the gold was not smuggled but had been derived from old jewellery received from customers in the ordinary course of business. They produced stock registers, income tax records, assay certificates, affidavits from customers, and documents relating to melting and conversion of old jewellery into gold bars. According to the defence, these records established a complete chain tracing the gold from customer deposits to the seized bars.
The appellants also challenged the admissibility of statements relied upon by the department, arguing that the mandatory procedure prescribed under Section 138B of the Customs Act had not been followed. They further contended that the department failed to establish any evidence of actual smuggling or illegal importation.

The Tribunal noted that the four carriers were found in possession of the gold and admittedly did not possess any documents establishing lawful procurement or transportation at the time of interception. Since gold is a notified commodity under Section 123 of the Customs Act, the burden of proving lawful possession rested on the persons from whom it was recovered.

Holding that the appellants had failed to discharge the statutory burden under Section 123, the Tribunal affirmed the absolute confiscation of the six gold bars.

The Tribunal took a different view regarding the penalty imposed on the jeweller alleged to be behind the transaction. It noted that although the department had accused him of misleading investigators and his ownership claim had not been accepted, the penalty of ₹2.25 lakh was excessive under the circumstances. Accordingly, CESTAT reduced the penalty to ₹1 lakh.

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