Customs Dept. Can Seize Smuggled Gold Even Inside City, Not Just Near Borders: Calcutta HC

The Calcutta High Court has held that the customs department can seize the smuggled gold even inside the city and not just near borders. The bench of Justice Rajarshi Bharadwaj and Justice Uday Kumar has observed that "Reasonable Belief" is a behavioural and material construct, not a geographical one. The "Town Seizure" doctrine cannot serve as a legal sanctuary for the illicit transport of high- purity bullion. Once the modus operandi— clandestine concealment—is established, the jurisdictional trigger of Section 123 is complete. The bench reaffirmed that a statement recorded in a "deemed judicial proceeding" carries a presumption of truth. A non-contemporaneous retraction, appearing after a staggering 850-day interval, must be discarded as a "calculated afterthought" unless corroborated by independent medical or judicial evidence of duress. The bench held that in matters of bullion, Scientific Purity is the ultimate provenance. A "paper trail" of GST returns for scrap ornaments cannot bridge the identity mismatch between jewellery alloys and 99.6% pure international-standard bullion. The transition from scrap to 24-carat bullion requires industrial electrolytic refinement, not rudimentary local melting. The failure to produce "Melting Memos" or "Refinery Slips" is fatal to the discharge of the reverse burden of proof. The case originated from an intelligence-based interception on May 25, 2018, at Howrah Railway Station, where customs officials recovered two gold bars weighing 1,999.90 grams from an individual acting as a carrier. The gold was found concealed in a specially stitched waist belt worn beneath clothing—an aspect the Revenue emphasized as indicative of smuggling. Statements recorded under Section 108 of the Customs Act revealed that the carrier initially admitted the gold to be of foreign origin and linked it to a jewellery business based in Varanasi. Subsequently, the alleged owner claimed that the gold was domestically sourced, having been produced by melting scrap jewellery and supported this claim through GST invoices and purchase records. The issue raised was whether “reasonable belief” under Section 123 can be formed in a “town seizure” without foreign markings; whether delayed retraction of a confession diminishes its evidentiary value; and whether GST documentation alone suffices to discharge the reverse burden of proof. The department argued that the Tribunal committed a serious error by ignoring a “tripod of evidence”: Clandestine concealment of gold in a waist belt; Confessional statements recorded under Section 108; Scientific purity of gold (99.5%–99.6%) indicating international bullion standards. It was contended that such high purity cannot result from local melting of scrap jewellery without industrial refining, and the absence of refinery documentation created a critical “identity mismatch.” The assessee countered that the seizure occurred inland (“town seizure”), far from borders; the gold lacked foreign markings; documentary evidence (GST returns and invoices) established lawful origin; the confession was obtained under duress and later retracted. They also raised objections regarding maintainability based on monetary thresholds and departmental circulars. The High Court rejected the preliminary objections and upheld the maintainability of the appeals, noting that confiscation proceedings are enforcement actions, not valuation disputes. Interpretation of Section 123 constitutes a recurring legal issue. The value of the gold and penalties exceeded the prescribed threshold. The Court found that the Tribunal had erred by evaluating evidence in isolation rather than cumulatively. It held that Clandestine transport through concealment is a strong indicator of illicit intent and satisfies the “prudent man” test for forming reasonable belief. High purity (99.6%) strongly contradicts the claim of indigenous origin, especially in the absence of refinery records. Delayed retraction (850 days) of confession undermines its credibility and suggests an afterthought. The Court emphasized that Section 123 of the Customs Act creates a reverse burden of proof, which does not depend on the geographical location of seizure. Once reasonable belief is established, the onus shifts to the claimant to prove lawful origin—a burden the respondents failed to discharge. The Bench strongly criticized the Tribunal’s reliance on the “town seizure” doctrine, observing that it misapplied the law by treating the absence of foreign markings as decisive. The Court held that such an approach undermines the statutory framework and ignores the realities of smuggling operations. The court noted that the Tribunal overlooked the “identity mismatch” between the claimed source (scrap jewellery) and the seized product (high-purity bullion), by rendering its findings legally perverse. The court directed the registry to forward a copy of this judgment to the Jurisdictional Commissioner of GST and the Income Tax Authorities for an inquiry into the potential "Kachcha" accounts. Case Details Case Title: Commissioner Of Customs Preventive Kolkata Vs Shri Anil Kumar Soni Citation: JURISHOUR-604-HC-2026(CAL) Case No.: CUSTA 30 OF 2025 Date: 30/03/2026 Counsel For Appellant: Bhaskar Prasad Banerjee Counsel For Respondent: Arijit Chakraborti Click Here To Read Order Read More: NDPS Bail: Telangana High Court Holds Section 37 Inapplicable to Intermediate Quantity, Grants Bail in 9.1 Kg Ganja Seizure Case

Customs Dept. Can Seize Smuggled Gold Even Inside City, Not Just Near Borders: Calcutta HC

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