The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has set aside a common Order-in-Original that had confiscated gold jewellery and bullion, ordered recovery of over ₹61.90 lakh in duty drawback, imposed customs duty demands exceeding ₹4.53 crore, and levied heavy penalties against multiple appellants.
The bench of P.K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) held that the Department’s case rested primarily on retracted statements and an unsubstantiated panchnama, while the adjudicating authority had also violated the principles of natural justice by denying cross-examination and adequate opportunity of hearing.
The appeals arose from an ex parte Order-in-Original dated December 24, 2020, passed by the Principal Commissioner of Customs, Noida. The order had confiscated gold jewellery and gold bullion allegedly involved in diversion of duty-free imports under the Special Economic Zone (SEZ) scheme, directed recovery of duty drawback amounting to ₹61,90,422, demanded customs duty with interest, and imposed penalties running into several crores of rupees on the appellants.
Buy Now: GST Judgements E-Compilation – June 2026
According to the Directorate of Revenue Intelligence (DRI), intelligence inputs suggested that a Noida SEZ unit had imported duty-free gold bullion for manufacture and export of jewellery but instead diverted export consignments into the domestic market. The investigation alleged that after obtaining customs clearance for export at Delhi’s IGI Airport, the exporter exchanged baggage with another passenger travelling on a domestic flight, thereby retaining the jewellery within India while completing export formalities on paper. Acting on this information, DRI officers intercepted the passengers, seized approximately 13.324 kilograms of gold jewellery at the airport, and subsequently recovered additional gold bullion and jewellery from the SEZ unit and business premises connected with the appellants.
The Department further alleged that jewellery diverted from the SEZ unit was subsequently routed through another jewellery exporter, which exported the goods under claim of duty drawback using allegedly fictitious purchase invoices. Based on these allegations, show cause notices proposed confiscation of seized goods, denial of drawback benefits, customs duty demands and penalties under multiple provisions of the Customs Act.
The appellants strongly disputed the allegations, contending that the entire case rested upon statements recorded under coercion which were retracted at the earliest opportunity while they were in judicial custody. They argued that the Department never rebutted the retractions nor recorded any further voluntary statements.
The appellants also questioned the reliability of the airport panchnama, arguing that the independent panch witnesses had not witnessed the actual interception or alleged exchange of baggage but were called only after the passengers had already been brought to the Customs Preventive Room. They further submitted that the allegation of baggage exchange itself was inherently improbable because domestic and international passengers are segregated after security screening, making such an exchange practically impossible.
A significant grievance raised by the appellants was that despite repeated written requests, the adjudicating authority neither granted cross-examination of the witnesses whose statements formed the basis of the allegations nor passed any reasoned order rejecting that request. The adjudication eventually culminated in an ex parte order without considering detailed replies filed by the appellants, including those submitted during the COVID-19 period.
After examining the record, the CESTAT observed that the Revenue’s case was founded almost entirely on statements that had been retracted and were unsupported by independent corroborative evidence. The Tribunal noted that the Department neither examined the makers of those statements during adjudication nor produced additional evidence to establish the allegations independently.
The Bench further held that the panchnama could not be treated as a reliable piece of evidence because the Department failed to examine the panch witnesses despite specific requests by the appellants. This omission, according to the Tribunal, went to the root of the proceedings since the panchnama formed the very foundation of the Department’s case.
The Tribunal also found serious procedural irregularities in the adjudication process. It noted that the appellants were denied cross-examination without any reasoned order, their requests for adjournment during the COVID-19 pandemic were ignored, and their detailed written replies were not properly considered before passing the ex parte order.
The Bench further observed that the adjudicating authority failed to follow the Central Board of Indirect Taxes and Customs (CBIC) Master Circular relating to cross-examination and also overlooked the Board’s instructions permitting personal hearings through video conferencing during the pandemic. Such procedural lapses amounted to a denial of reasonable opportunity to defend the case.
The Tribunal also found the allegation that jewellery exported by the SEZ unit had been diverted and rerouted through another exporter to be unsupported by cogent evidence. It noted that the exporter had been carrying on export business even before the SEZ unit commenced operations and had received export proceeds through banking channels. The Tribunal further observed that duty drawback had originally been sanctioned only after departmental verification of supporting documents and tax-paid inputs. Revenue had also found that the supplier of the jewellery was registered under VAT laws and that banking transactions corroborated the commercial transactions.
Additionally, the Tribunal found no evidence of alleged hawala payments or other material that could substantiate the claim that duty-free gold had been diverted into the domestic market.
Concluding that the department’s allegations remained vague, unsubstantiated and unsupported by reliable evidence, the CESTAT set aside the impugned Order-in-Original in its entirety.
The Tribunal allowed all four appeals and directed that the appellants be granted consequential reliefs, including return of the seized gold bullion and gold jewellery.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
