The Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has ordered the release of 3.651 kilograms of seized gold and set aside penalties imposed on three individuals, holding that documentary evidence such as GST invoices, purchase registers, GST returns, and job-work challans were sufficient to establish the lawful origin of the gold.
The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) allowed three connected appeals and directed customs authorities to release the gold after concluding that the appellants had successfully discharged the burden cast upon them under Section 123 of the Customs Act, 1962.
The dispute originated from an operation conducted by the Directorate of Revenue Intelligence (DRI), Kolkata, on August 9, 2020. Acting on specific intelligence, DRI officers intercepted an individual at Howrah Railway Station while he was preparing to board a train bound for New Delhi.
During a personal search, officers recovered four rectangular gold bars and twelve cut pieces of gold concealed in a cloth belt tied around his waist. The total quantity recovered was 3,651.3 grams, valued at approximately ₹2.07 crore. As no documents were immediately produced to establish lawful possession, the gold was seized on the belief that it was smuggled foreign-origin gold. Mobile phones recovered during the operation were also seized.
According to statements recorded by DRI, the carrier allegedly stated that he had travelled to Kolkata on the instructions of another individual and had received the gold from a person identified as “Goldy” before attempting to transport it to Meerut.
Subsequently, ownership of the seized gold was claimed through a letter submitted to customs authorities. The claim was supported by job-work challans issued by a jewellery business operating from Meerut. Records produced before authorities showed that the jewellery firm was engaged in the purchase and sale of gold and that the gold had allegedly been procured through legitimate commercial transactions.
The appellants maintained that the gold was not of foreign origin but had been purchased domestically under valid tax invoices. They submitted extensive documentary evidence, including GST invoices, GST returns, stock registers, purchase registers, banking records, and job-work challans. According to their explanation, the gold had been purchased legally, melted into bar form, and dispatched for jewellery manufacturing work through job workers in West Bengal.
Despite the documents produced, the adjudicating authority ordered absolute confiscation of the gold under Sections 111(b) and 111(d) of the Customs Act, 1962. Penalties of ₹20 lakh each were also imposed on the three noticees. The order was subsequently upheld by the Commissioner (Appeals), leading to the appeals before CESTAT.
Before the Tribunal, the appellants argued that the minor difference between the purity reflected in the invoices (99.5%) and the purity found in the laboratory report (99.6%) could not justify rejection of the entire documentary record. They contended that the evidentiary burden under Section 123 had been fully discharged through tax invoices, purchase records, GST compliance documents, and job-work challans.
The Tribunal carefully examined the purchase registers, invoices, GST returns and job-work challans placed on record. It noted that the records demonstrated that the gold was reflected in the books of account and that the appellants had furnished documentary evidence showing procurement of the gold through commercial channels.
A key aspect of the ruling was the Tribunal’s interpretation of Section 123 of the Customs Act, which places the burden of proving lawful possession of certain notified goods, including gold, on the person from whose possession the goods are seized.
The Bench observed that the adjudicating authority had discarded the documentary evidence without adequate consideration. It held that once purchase registers, GST returns, invoices and related records were produced, the appellants had discharged their statutory burden.
The Tribunal further noted that the seized gold did not bear any foreign-origin markings and that the case involved a “town seizure” rather than interception at an international border or airport. The absence of foreign markings, coupled with the documentary evidence establishing domestic procurement and GST-paid transactions, weakened the department’s allegation that the gold was smuggled.
According to the Tribunal, the existence of purchase documents, GST compliance records and accounting entries made it impossible to conclude that the gold was of foreign origin or had been smuggled into India. The Bench held that lawful acquisition had been sufficiently demonstrated and that the confiscation order could not be sustained.
Consequently, the Tribunal ruled that the gold was not liable to confiscation and that the penalties imposed on the appellants were also unsustainable.
Allowing all three appeals, CESTAT set aside the orders of the lower authorities and directed customs officials to release the seized gold to the appellants. The Tribunal specifically held that the appellants had successfully discharged their burden under Section 123 of the Customs Act and were therefore entitled to the return of the seized gold along with consequential relief.
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