No Evidence of Smuggling: CESTAT Dismisses Customs Appeals, Upholds Relief in Rs. 25 Lakh Penalty Case

The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has dismissed appeals filed by the Department against three individuals, holding that the Revenue failed to establish any “reasonable belief” that the seized gold and silver were smuggled goods. The bench of P. K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) upheld the order of the Commissioner (Appeals), which had earlier set aside confiscation and penalties imposed by the adjudicating authority. The case arose from an intelligence-based interception carried out by the Directorate of Revenue Intelligence (DRI) on 23 November 2023. Officials intercepted a vehicle near a toll plaza and recovered approximately 4.25 kg of gold and 12.7 kg of silver concealed within a cavity. The goods were seized on suspicion of being smuggled, and statements were recorded from the driver, who allegedly admitted to transporting the metals on behalf of local traders. Subsequently, a show cause notice was issued proposing confiscation of the seized goods and imposition of penalties. The adjudicating authority ordered absolute confiscation of the gold, silver, and the vehicle, and imposed penalties of ₹25 lakh each on the individuals involved. However, this order was overturned by the Commissioner (Appeals), prompting the Department to file appeals before the Tribunal. Before the Tribunal, the respondents argued that the seizure was made in a town area and not at any notified customs zone such as an airport, port, or border, thereby weakening the presumption of smuggling. They also contended that the seized gold did not bear any foreign markings, was not of standard international purity, and that no laboratory testing had been conducted to establish foreign origin. Further, they produced purchase invoices and claimed that the gold had been acquired through legitimate means, including family savings and sale of ancestral property. The Tribunal noted that the Department’s case was primarily based on the initial statement of one of the respondents, which was later retracted. Importantly, follow-up searches conducted at the residences and business premises of the respondents did not yield any incriminating evidence. The Tribunal emphasized that no effort was made by the Department to verify the authenticity of the purchase invoices or to investigate the alleged suppliers, which could have either substantiated or disproved the respondents’ claims. A key observation of the Tribunal was that the concept of “reasonable belief” under the Customs Act must be based on credible material available at the time of seizure. The absence of foreign markings, lack of corroborative evidence, and failure to trace the alleged smuggling route or source significantly weakened the Department’s case. The Tribunal held that suspicion, however strong, cannot substitute legal proof. The Bench also underscored that statements recorded during investigation cannot be relied upon unless tested in accordance with statutory safeguards. In this regard, it observed that the Department did not follow the procedure prescribed under Section 138B of the Customs Act, which requires examination of witnesses during adjudication if their statements are to be relied upon. The Tribunal reiterated settled legal principles laid down by the Supreme Court and various High Courts that “reasonable belief” must be based on objective material and not on mere conjecture. It held that in the absence of such belief, the burden of proof cannot be shifted onto the person from whom the goods were seized under Section 123 of the Customs Act. The Tribunal also took note of the fact that the Department had ample time—over a year—to conduct further investigation but failed to gather any substantive evidence linking the seized goods to smuggling. The lack of corroboration, coupled with contradictions in statements and absence of any independent verification, rendered the Department’s case unsustainable. The Tribunal found no infirmity in the order of the Commissioner (Appeals) and held that the Department had failed to establish that the seized goods were smuggled or liable for confiscation. Accordingly, all three appeals filed by the Revenue were dismissed. Case Details Case Title: Commissioner of Customs (Preventive), Lucknow Versus Mr. Gaurav Tiwari Citation: JURISHOUR-794-CES-2026(ALL) Case No.: Customs Appeal No.70074 of 2026 Date: 15.04.2026 Counsel For Petitioner: A.K. Choudhary, Authorised Representative Counsel For Respondent: Kapil Vaish, Chartered Accountant Click Here To Read Order Read More: Sale of Rural Agricultural Land Not Taxable: Rajasthan High Court

No Evidence of Smuggling: CESTAT Dismisses Customs Appeals, Upholds Relief in Rs. 25 Lakh Penalty Case

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