Non-Mention of Serial Numbers in Pre-2015 Watch Imports Can’t Prove Smuggling: CESTAT Quashes Confiscation of 838 Luxury Watches

The New Delhi Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a major customs demand and confiscation order involving 838 high-end luxury watches, holding that the non-mention of serial numbers in pre-2015 watch imports cannot prove smuggling. The bench of Justice Dilip Gupta (President) and C.J. Mathew (Technical Member) has observed that the proceedings were barred by limitation and that the Department had wrongly invoked the burden of proof under Section 123 of the Customs Act, 1962. The appeals arose from an Order-in-Origina passed by the Principal Commissioner of Customs (Preventive), New Delhi. The order had directed confiscation of 837 watches from M/s Kapoor Watch Co. Pvt. Ltd. and one watch from its group concern, besides confirming a customs duty demand of over Rs. 4.66 crore with interest and imposing penalties on the company, its directors, partners, and an employee. The Directorate of Revenue Intelligence (DRI) initiated investigations in October 2012 after intercepting a foreign national at IGI Airport allegedly handing over two undeclared luxury watches to an employee of the company. Subsequent searches were conducted at multiple showrooms, service centres, and residences linked to the appellants, during which thousands of watches and other foreign-origin goods were examined Although over 4,400 watches were initially detained, the show cause notice issued on 6 October 2017 confined the case to 838 watches. According to the Department, these watches were smuggled because in 807 cases, import documents did not mention serial numbers; in 24 cases, there were alleged major mismatches between model or serial numbers in panchnamas and invoices; and in 7 cases, no import documents were produced. Relying on Section 123 of the Customs Act (which places the burden of proving licit import on the person in possession for notified goods such as watches), the Commissioner concluded that the appellants failed to establish lawful import and ordered confiscation with penalties The Tribunal accepted the appellants’ contention that, prior to the DRI Alert Circular dated 5 March 2015, there was no legal or procedural requirement to mention serial numbers of watches in Bills of Entry. It noted that customs officers had cleared the watches after examination based on model numbers alone. Therefore, absence of serial numbers in earlier import documents could not render the goods smuggled. For the 24 watches with alleged mismatches, the Tribunal held that minor discrepancies could not override the fact that the watches were imported, entered in stock registers, and cleared by customs years earlier. Similarly, the 7 watches without documents were found to be part of old stock reflected in closing inventories, a factor ignored by the adjudicating authority. A crucial blow to the Department’s case was limitation. The Tribunal held that all watches were imported prior to 2012, whereas the show cause notice was issued in October 2017—beyond even the extended five-year period under Section 28(4) of the Customs Act. The Tribunal rejected the Department’s attempt to treat the date of search as the “relevant date,” calling it legally unsustainable. While acknowledging that watches are notified goods under Section 123, the Tribunal clarified that once an importer produces reasonable evidence of licit import, the burden shifts back to the Department. In this case, the appellants had discharged their initial burden through import documents and stock records. The Department, however, failed to produce any independent evidence of smuggling. The Tribunal further held that statements recorded under Section 108 of the Customs Act could not be relied upon without following the mandatory procedure under Section 138B, including examination and opportunity for cross-examination. As this procedure was not followed, the statements could not legally sustain the findings of smuggling or penalties. The CESTAT set aside the confiscation of the 838 watches, quashed the customs duty demand, and annulled all penalties imposed on the company, its directors, partners, and the employee. The ruling underscores strict adherence to limitation provisions, cautions against retrospective procedural requirements, and reiterates that Section 123 cannot be used mechanically without substantive evidence of smuggling. Case Details Case Title: M/s. Kapoor Watch Co. Pvt. Ltd. Versus Principal Commissioner of Customs (Preventive) Case No.: CUSTOMS APPEAL NO. 50706 OF 2020 Date: 19.01.2026 Counsel For Appellant: Piyush Kumar, Shri Sharad Chandra Srivastava Counsel For Respondent: Devesh Tripathi Click Here To Read Order Read More: TN GST Seizes Rs. 1.5 Cr Illegal Adult Toy Consignment, Raises Questions on Port-Level Customs Clearance

Non-Mention of Serial Numbers in Pre-2015 Watch Imports Can’t Prove Smuggling: CESTAT Quashes Confiscation of 838 Luxury Watches

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