2026-VIL-1449-CESTAT-ALH-CU
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CUSTOMS CESTAT Cases

Customs - Confiscation of smuggled gold and imposition of penalties - Reasonable belief and burden of proof under Section 123 of Customs Act, 1962 - Admissibility of statements recorded during investigation - Appellant revenue seized gold bars and Indian currency from respondents during town interception at railway station alleging smuggled origin and proposed confiscation under Sections 111 and 113 of Customs Act, 1962, and penalties under Sections 112 and 114AA - Whether the evidence submitted by the Respondents regarding domestic purchase of the gold is sufficient to conclude that the gold in question are not smuggled in nature – HELD - Reasonable belief required to invoke Section 123 statutory presumption must be founded on objective circumstances existing at time of seizure, not conjectures or assumptions. Absence of foreign markings on seized gold, fact that seizure was effected in town area and not at notified customs zone or international border, and absence of scientific or technical material connecting seized gold with foreign source collectively create substantial doubt whether foundational requirement of reasonable belief was satisfied. Mere purity of gold without corroborative scientific evidence connecting it with foreign source cannot furnish reasonable belief contemplated under Section 123. Burden of proof does not shift to claimants where initial seizure was effected without reasonable belief. Once respondents produced contemporaneous commercial records showing GST-compliant purchases and complete accounting, burden necessarily shifted back to revenue to affirmatively establish documents were fabricated or forged through independent and legally admissible evidence - Revenue's case predominantly resting on untested statements not supported by independent documentary or scientific evidence cannot sustain allegations of smuggling. Regarding Indian currency seized, no cogent material establishing nexus between seized currency and alleged act of smuggling; department failed to place evidence of any investigation establishing source of currency – Further, the currency seized during investigation cannot be retained indefinitely in absence of legally admissible evidence establishing connection with alleged offence. Confiscation of gold under Sections 111 and 113 set aside; all penalties under Sections 112 and 114AA set aside as foundational basis for penalties ceases to exist once confiscation order fails; Indian currency to be released with applicable interest – The Revenue appeals are dismissed - Revenue’s reliance on the statements recorded during the course of investigation – HELD - Revenue relied only on uncorroborated statements instead of leading independent evidence and has not produced forensic examination or expert opinion questioning genuineness of documents. Statements recorded under Section 108 were not handwritten and admittedly typed by investigating officers with signatures appended thereafter; respondents who are illiterate persons contended they were unable to comprehend proceedings and were in state of fear and apprehension. Mandatory statutory safeguards prescribed under Section 138B of Customs Act, 1962 require adjudicating authority to examine maker of statement as witness, record satisfaction regarding admissibility, and afford affected noticee opportunity to test evidence through cross-examination. Statements relied upon without adherence to these mandatory safeguards cannot be admitted as substantive evidence against noticee. Once voluntariness of statements stood seriously disputed, prudence demanded Department substantiate same by leading independent corroborative evidence before placing exclusive reliance thereon. No such corroboration forthcoming.
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