Custom, Excise & Service Tax Tribunal
Abishek Mundhra vs Commissioner Of Customs-Cc Airport Ch - ... on 29 November, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Customs Appeal No.40004 of 2024
(Arising out of Order-in-Appeal AIR C.CUS. I. No.281, 282, 283 &
284/2020 dated 27.11.2020 (F.No.C4/I/139/O/2020-AIR) passed by
Commissioner of Customs (Appeals-I), 60, Rajaji Salai, Chennai 600 001.)
Mr. Abishek Mundhra .... Appellant
S/o Late Shri Bhikamchand Mundhra,
No.20, Thulasingam Street,
Sowcarpet,
Chennai 600 079.
VERSUS
The Commissioner of Customs ... Respondent
Chennai - I Commissionerate,
New Custom House, Air Cargo Complex,
Meenambakkam, Chennai 600 027.
APPEARANCE :
Shri N. Muralikumaran, Senior Advocate for the Appellant
Shri Anoop Singh, Authorized Representative for the Respondent
CORAM :
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
FINAL ORDER No.41549/2024
DATE OF HEARING : 26.09.2024
DATE OF DECISION :29.11.2024
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Customs Appeal No.40004 of 2024
Per: Shri P. Dinesha
The show cause notice in this case came to be issued on
13.04.2014 but, however, we deem it appropriate to refer to
the facts captured in the mahazar dated 14.10.2013 drawn at
the place of incident viz. Kamaraj Domestic airport,
Meenambakkam, Chennai. In the said mahazar it is
mentioned that the officers had informed the witnesses that
they had specific intelligence that the appellant of
M/s. Mundhra Bullion Pvt. Ltd., Chennai is carrying smuggled
non-duty paid gold bars from Kolkata to Chennai by Spice Jet
Flight SG 324 which would land at Chennai at
18.15 hours on same day. Upon his arrival, the appellant was
found carrying one small handbag and a trolley bag and upon
enquiry by the officers as to whether he was carrying any gold
bars, it appears that the appellant responded saying that he
has around 15 kgs. of gold bars in his small handbag. The
mahazar further reveals that the appellant was also carrying
an authorization letter dt. 13.10.2013 in the letterhead of
M/s. Mundhra Bullion Pvt. Ltd. authorizing the appellant to
carry 15193.00 gms. of gold bar to Kolkata for manufacturing
purpose. The said bag carried by the appellant was then
opened and it was found to contain 296 rectangular cut pieces
of gold bars of various seizes and weight. It also records that
the markings on the gold bars have been deliberately
attempted to be erased to avoid detection of foreign markings
in the said gold bars made to appear to be crude.
2. On enquiry, the mahazar records the appellant having
stated that 296 rectangular cut pieces of gold bars were
received by him from one Shri Gautam Chakraborty of Kolkata
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Customs Appeal No.40004 of 2024
outside the Kolkata Airport and that the said gold bars were
smuggled into India from Bangladesh which was received by
the appellant from one Shri Raju of Kolkata; the original
foreign origin markings on the gold bars have been removed
by the said Goutam Chakraborty and then given to him. The
original marking on the gold bars was reported to be
"AI ETHIHAD G DUBAI-UAS 10 TOLA 999.0".
3. One Shri B. Mohan Achary, said to be a Government of
India approved assayer, appears to be waiting along with the
mahazar witnesses for the arrival of the appellant at the
airport, on examination of the gold found with the appellant
certified the said 296 rectangular cut pieces of gold bars to be
of 24 carat purity and, on further examination, also certified
that the said pieces have been cut from regular gold bars and
the markings on the original bars have been erased and
made crude. But however, the traces of markings such as "10
TOLA", "999.0" "DUBAI-UAE", "G" were visible.
4. During investigation, the Revenue appears to have
recorded statements from various persons and thereafter
issued the show cause notice dt. 13.04.2014 proposing inter
alia to confiscate 15.16 kgs. of gold bars allegedly of foreign
origin u/Ss. 111 (d) and 111 (l), r/w S. 120 (1) of the
Customs Act, 1962. It appears that the appellant filed a
detailed reply challenging the very issuance of show cause
notice, seizure of gold bars from him on the pretext of reason
to believe that the same were smuggled into India, etc.
Not-satisfied with the reply, the adjudicating authority vide
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Customs Appeal No.40004 of 2024
Order-in-Original No.95 dated 17.02.2015 ordered absolute
confiscation of the goods in question, apart from imposing a
penalty of Rs.2.50 crores on the appellant. The said order
came to be challenged in writ before the Hon'ble High Court of
Judicature at Chennai in W.P.No.10816/2015 and vide order
dated 19.08.2019, the Hon'ble High Court set aside the said
OIO with a direction to pass a de-novo order after affording
reasonable opportunity to the appellant. Consequent thereto,
the appellant appears to have participated in the adjudicating
proceedings by seriously contending the legality of seizure.
The adjudicating authority vide De-novo Order-In-Original
No.87/2020-21 dt. 13.07.2020 appears to have accepted the
case of the appellant that the seizure was invalid and that the
gold bars in question were not of foreign origin but, however,
ordered confiscation of the same giving an option to the
appellant to redeem the same upon payment of redemption
fine of Rs.25 lakhs, apart from imposing a penalty of Rs.12
lakhs under Section 112 (a) ibid.
5. It appears that both the Revenue as well as the
appellant filed appeals before the first appellate authority: the
Revenue being aggrieved by the findings of the original
authority as to seizure of gold bars, while the appellant was
aggrieved by the order of confiscation and imposing penalty on
him. The first appellate authority after hearing both sides,
passed a common Order-in-Appeal dt. 27.11.2020 wherein,
the FAA has allowed the Revenue's appeal and dismissed the
Assessee's appeal; it is the assessee who has challenged the
above order of the FAA which is the subject matter of appeal
before this forum. It is ascertained that the Revenue has
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Customs Appeal No.40004 of 2024
accepted the order of FAA and hence, they have not filed any
appeal before this forum against the said OIA.
6. We have noted that there is a reference in the SCN to
the cut pieces having the markings or traces of markings such
as '10 TOLA', '999.0', 'DUBAI - UAE', 'G' alleged to be visible
on most of those 296 rectangular cut pieces from which it is
presumed by the Commissioner (Appeals) "as evident that the
original marking on the said gold bars would be "AI ETHIHAD
G DUBAI - UAE 10 TOLA 999.0"."
7. Further, there is also a reference to Foreign Trade Policy
2009-14, Chapter 2 - General Provisions regarding imports
and exports. A further reference has also been made to CBEC
Circular No. 34/2013 dated 04.09.2013 wherein, fresh
guidelines for import of gold and gold bars into India have
been clarified. Based on the above, at para 49, it has been
summarized that the FTP, Customs Act, 1962 and other
notifications issued therein clearly indicate that import of gold
including gold jewellary through baggage is restricted.
8. The appellant appears to have seriously refuted the
allegation of smuggling of gold bars or involving himself in the
alleged smuggling activity of gold bar in any manner. When
the appellant was admittedly apprehended on 14.10.2013 at
Kamaraj domestic airport, he was also found to be carrying an
authorization letter dated 13.10.2013, which is evident from
the Mahazar itself. He would also seriously contend that the
seizure of the above gold from him itself was bad in law as
there was no material at all to conclude that the bullion
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Customs Appeal No.40004 of 2024
possessed by him at the time of seizure was the smuggled
one. The words 'reason to believe' in S. 110 of the Customs
Act, 1962 mandates the subjective satisfaction to be arrived at
based on the materials available, which should be such that
any ordinary reasonable person on the facts and
circumstances would come to such a conclusion that the same
was smuggled. The same is to be tested considering the
connection between the information and the material/goods
that were available. It is his case that there may at the most
be a failure to maintain proper accounts at the time of his
apprehension, but that alone would not empower the
authorities to seize the goods in question.
9. Ld. Sr. Advocate appearing for the appellant would
seriously contend that this was a case of town seizure of gold
in question which was termed to be 'smuggled', for which, sole
reliance has been placed on the un-corroborated report of
Mohan Achary, claimed to be a gold assayer, who was brought
to the airport much before the arrival of the appellant. The
said person admittedly did not carry with him any equipment
of any kind or certificate or any other relevant tools or thing/s
to examine the goods in question and report that the gold
bullion in question was smuggled/ of foreign origin. Other than
this uncorroborated version which is not even in the form of
statement of Mohan Achary, there is no other evidence relied
upon by the revenue to establish, in the first place, that the
Gold bullion in question was carrying foreign markings and
secondly, that the same was smuggled into India by the
appellant; and in any case, the appellant was found to be
carrying only a domestic ticket from Kolkata to Chennai. There
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Customs Appeal No.40004 of 2024
was no piece of evidence at all to even indicate that the
appellant had landed from abroad. Insofar as the confessional
statements of the appellant are concerned, they have been
claimed to be obtained under coercion/threat when appellant
was in the custody of DRI. It was his case later on that he had
sent retraction statement by post from the judicial custody,
ensuring through proper channel, that is, through the jail
official. A copy of the same is furnished before us and the
same was also claimed to have been filed before the Hon'ble
High Court in the writ proceedings. He would take us through
the said Mahazar to contend that there is a specific reference
to the authorization letter issued in the letter head of M/s.
Mundhra Bullion Pvt. Ltd., which fact has duly been recorded
at page 2 of Mahazar, but the officers in spite of having
recorded that, still asked the appellant if he was '....in
possession of any documents for licit possession...'. This,
according to the ld. Counsel was a clear case of coercion on
the appellant.
10. Further, Seizure mahazar was drawn from 17.30 hours
to 22.30 hours on 14.10.2013, admittedly the appellant
landed at the airport only at 18.15 hours. In the affidavit filed
along with the writ petition much before the issuance of SCN,
it was stated by the applicant that he had carried the gold bars
with him from Chennai. The said facts are admittedly nowhere
disputed or refuted by the revenue.
11. Several statements came to be recorded, but those of
critical importance are the ones recorded on 14.10.2013,
15.10.2013 which have later-on been retracted vide statement
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Customs Appeal No.40004 of 2024
dated 20.10.2013. Strangely, statements of several persons
recorded but however, the appellant has raised serious doubts
insofar as the reliability is concerned since, according to him,
such statements appear to be contradicting with each other in
respect of certain crucial facts. In this regard, our attention
was drawn particularly to paragraph 62 of the OIO itself
wherein serious contradictions/inconsistencies have been
reproduced.
Our attention was particularly drawn to Para 77 of OIO which
reads as under :
"77. In any event the subject Show Cause Notice is liable to be set-aside
for the following reasons :-
a. The gold seized from him on 14.10.2013 was in the Domestic Airport
and not while crossing the customs frontier.
b. The onus is on the CZU-DRI officials to prove the source of the gold
seized from him. i.e., to prove the seized gold from him a smuggled one.
c. Gold is not a restricted commodity and if at all in the worst scenario
the authorities can only impose duty. In the present case, even the same
will not apply.
d. The 1st above referred Show Cause Notice suffers from the vice of lack
of jurisdiction.
e. The officials of the Directorate of Revenue Intelligence are not the
"proper officers' for the purpose of exercising the powers under section
124 of the Customs Act and therefore the issuance of the impugned Sow
Cause Notice under section 124 of the Customs Act for the purpose of
adjudication under section 122 of the Customs Act is wholly without
jurisdiction.
12. Regarding the alleged CCTV recordings relied upon by
the revenue [para 28.2 of the OIA], ld. Advocate would
contend that same was never shared with the appellant for
rebuttal and hence, the same cannot be taken as clinching
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Customs Appeal No.40004 of 2024
piece of evidence. He also contended that at the most the
same may indicate the presence of the appellant and nothing
beyond that. To rely on the same, the revenue should have
sought the opinion of a forensic expert, which has not been
done.
13. In the impugned order, the first appellate authority has
reproduced at para 33.2/31 of the impugned order a picture of
a gold bar of foreign origin by referring to website, but
however, we find that the same is very much an improvement
as urged by the Ld. Senior Advocate which is clearly travelling
beyond both the SCN as well as both the orders in original. By
doing so, the first appellate authority has violated the
principles of natural justice; to say the least, he could have
given an opportunity of rebuttal before drawing any conclusion
on such pictorial depiction. What was perhaps more relevant
was the photo of cut pieces as such, but certainly not the
picture of the whole biscuit. The website reference is also a
new thing introduced in the impugned order which cannot be
accepted at this stage. We find that the Commissioner
(Appeals) went overboard to reproduce the picture of gold bar
and as pointed out by Ld. Sr. Advocate, the same is in fact
misleading because, he has not seen the gold bar nor the DRI
officers who were involved from day one. Any authority could
therefore assume that the gold bar was like this before the
foreign marks were removed. Thus, clearly, the first appellate
authority has not spelt out the reasons in his OIA as to why he
has reproduced the same. Moreover, the original authority was
in complete control of the documents, analysed the same not
once, but twice, and still he did not feel it proper to reproduce
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Customs Appeal No.40004 of 2024
the picture of gold bar which was not seen by any of the
persons involved. Considering the statements of various
persons recorded, only three persons could have seen the bar
in full shape; Shri Tapas Chakraborty who is alleged to have
received the gold bars who also has claimed that he counted
the same before handing over to Goutam. It was then Goutam
who could have seen the gold biscuit upon receiving the same
and finally, it was Sri Debasish Das who is claimed to be
involved in erasing of the foreign marking.
14.1 It was his case that there were no such marking on any
of the gold; what was the methodology adopted to arrive at
such a conclusion and whether any known processes and
methodologies have been adopted to declare as foreign-origin
are not stated anywhere and a specific request to cross-
examine them was denied, thereby depriving the appellant to
prove that Mr. B. Mohan Achary was not only incompetent but
also had not carried out any test of any nature to determine
and conclude as to origin of gold. In this regard, reliance has
been placed on the following case-law:
i. Commissioner of Customs v. Mohammed Ali
Jinnah [Customs Appeal No. 40099 of 2020 - Final
Order No. 40289 of 2023 dtd. 20.04.2023 -
CESTAT, Chennai]
ii. Daleep Kumar Verma v. Commissioner of
Customs (Preventive), Shillong & ors. [Customs
Appeal No. 75315 of 2022 & ors. - Final Order
Nos. 75300- 75302 of 2023 dtd. 04.05.2023 -
CESTAT, Kolkata] (para. 20)
iii. Customs v. Dina Aruna Gupta [2011 SCC
Online Del 3024] (paras. 31 and 32)
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Customs Appeal No.40004 of 2024
iv. Central Excise Department, Bangalore v. P.
Somasundaram [1979 SCC OnlineKar 187]
(para.9)
The alleged statement said to have
been given under Section 108 of the
Customs Act and that too, when retracted,
cannot alone be the basis of confiscation. In
this regard he has relied on the decision in
the case of Union of India v. Imtiaz Iqbal
Pothiwala [2019 (365) E.L.T. 167 (Bom.)]
to contend that for confiscation, the
confession should be subsequent to the
Show Cause Notice. The following case-law
were also relied upon:
i. Di Gold Designer Jewellery v. Commr. of
Customs[2021 SCC Online CESTAT 4213]
ii. Ankit Agarwal v. Commr. of Customs
(Preventive) [2020 SCC OnLine CESTAT 210]
(paras. 13,16)
iii.Daleep Kumar Verma v. Commissioner of
Customs (Preventive), Shillong & ors.
[Customs Appeal No. 75315 of 2022 & ors. -
Final Order Nos. 75300- 75302 of 2023 dtd.
04.05.2023 - CESTAT, Kolkata] (para. 21.4)
to contend that once it is proved that the
gold is not a smuggled one, the burden
under Section 123 stood discharged.
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Customs Appeal No.40004 of 2024
Before exercising the power to seize
under Section 110 of the Customs Act, the
Revenue has to form reasonable belief that
the goods in question are liable for
confiscation; subjective satisfaction is
therefore a condition precedent for the
exercise of power under Section 110 ibid.
The formation of reasonable belief
should be prior to the seizure and cannot
be subsequent to the seizure and hence,
the very seizure is invalid. When the
seizure is invalid, all subsequent
proceedings and consequential actions are
also bad in law.
There was nothing at all to indicate
that any of the gold jewellery which were
seized by the Revenue were of foreign
origin, nor did they contain any marking to
that effect.
When the gold did not have the foreign
marking the burden of proof will not shift
to the appellants. In this regard, reliance
is placed on the order of CESTAT, Kolkata
in Daleep Kumar Verma (supra)
[paragraph 19.8]
When it is admitted that the seized
goods were purchased from indigenous
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Customs Appeal No.40004 of 2024
sources, the provisions of Section 123 of
the Customs Act will not apply, which stand
is supported by the order in Daleep Kumar
Verma (supra) [paragraphs 19.4, 19.5]
14.2 Ld. Senior Counsel concluded his arguments by placing
reliance on many decisions of various higher judicial fora and
also many orders of co-ordinate Benches of the CESTAT.
15. Per contra, Ld. Joint Commissioner relied on the findings
of the lower authorities. He would also contend that the
Revenue had entertained a reasonable belief that the gold in
question was smuggled into India based only on the voluntary
statement of the appellant herein.
15.1 He would take us through various portions of the
findings in the impugned order to highlight the modus
operandi of the appellant.
16. We have considered the rival contentions carefully and
also meticulously perused the documents placed on record. We
have also gone through the various decisions relied upon by
the Ld. counsel during the course of arguments.
17. The issue in the appeal on hand revolves around the
interpretation of Section 111(d) and (l) of the Customs Act,
1962, which authorizes confiscation. In this regard, the
following legal provisions are also required to be looked into,
namely, Sections 2(22), (33) and (39), Section 111(i) and (p),
Section 112, Section 120, Section 121 and Section 123: -
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Customs Appeal No.40004 of 2024
Relevant statutory provisions:
Section 2(22), (33) and (39): -
"Section 2. Definitions. -- In this Act, unless the
contextotherwise requires.
(22) "goods" includes -
(a) vessels, aircrafts and vehicles;
(b) stores;
(c) baggage;
(d) currency and negotiable instruments; and
(e) any other kind of movable property;
...
(33) "prohibited goods" means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with;
...
(39) "smuggling", in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113;"
Section 111 (d), (i), (l) and (p): -15
Customs Appeal No.40004 of 2024 "Section 111. Confiscation of improperly imported goods,etc. -
The following goods brought from a place outside India shallbe liable to confiscation : -
(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;
...
(i) any dutiable or prohibited goods found concealed in any manner in any package either before or after the unloading thereof;
...
(l) any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77;
...
(p) any notified goods in relation to which any provisions of Chapter IVA or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened."
Section 112: -
"Section 112.Penalty for improper importation of goods,etc. Any person, -16
Customs Appeal No.40004 of 2024
(a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or
(b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable, -
(i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty [not exceeding the value of the goods or five thousand rupees], whichever isthe greater;
(ii) in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding ten per cent. of the duty sought to be evaded or five thousand rupees, whichever is higher :
Provided that where such duty as determined under sub- section (8) of section 28 and the interest payable thereon under section 28AA is paid within thirty days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty- five per cent. of the penalty so determined;
(iii) in the case of goods in respect of which the value stated in the entry made under this Act 17 Customs Appeal No.40004 of 2024 or in the case of baggage, in the declaration made under section 77 (in either case hereafter in this section referred to as the declared value) is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or five thousand rupees], whichever is the greater;
(iv) in the case of goods falling both under clauses (i) and (iii), to a penalty [not exceeding the value of the goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest;
(v) in the case of goods falling both under clauses (ii) and (iii), to a penalty [not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or five thousand rupees], whichever is the highest."
Section 120: -
"Section 120. Confiscation of smuggled goods notwithstanding any change in form, etc.
--
(1) Smuggled goods may be confiscated notwithstanding any change in their form.
(2) Where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation :
Provided that where the owner of such goods proves thathe had no knowledge or reason to believe that they included any smuggled goods, only such part of 18 Customs Appeal No.40004 of 2024 the goods the value of which is equal to the value of the smuggled goods shall be liable to confiscation."
Section 121: -
"Section 121. Confiscation of sale-proceeds of smuggled goods. -- Where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled goods, the sale-proceeds thereof shall be liable to confiscation."
Section 123: -
"Section 123. Burden of proof in certain cases. --
(1) Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be -
(a) in a case where such seizure is made from the possession of any person, -
(i) on the person from whose possession the goods were seized; and
(ii) if any person, other than the person from whose possession the goods were seized, claims to be the owner thereof, also on such other person;
(b) in any other case, on the person, if 19 Customs Appeal No.40004 of 2024 any, who claims to be the owner of the goods so seized.
(2) This section shall apply to gold, [and manufactures thereof,] watches, and any other class of goods which the Central Government may by notification in the Official Gazette specify."
18.1 Section 111(d) ibid. authorizes confiscation of improperly imported goods contrary to any prohibition imposed by or under this Act or any other law for the time being in force.
18.2 Section 111(l) ibid. authorizes confiscation of any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage, in the declaration made under Section 77.
19. Two things that are most relevant are: 'import', which should be 'improper'. Sec.123 (1) requires reasonable belief that the gold is smuggled. This itself remains not satisfied since, when apprehended, an authorization letter was produced which is a documentary evidence. Revenue however, tried to give quietus to the same. Therefore, Section 123 (1)
(a) (i) if at all applies, stands satisfied.
20.1 Section 112 ibid. authorizes levy of penalty for improper importation of goods.
20Customs Appeal No.40004 of 2024 20.2 Section 123 ibid. talks of burden of proof in certain cases wherever goods are seized under the Customs Act in the reasonable belief that they are smuggled goods.
21.1 We have very carefully analysed the findings in the impugned order and also multiple copies of the mahazars placed on record. We have carefully considered the statements, most of which were retracted.
21.2 We do not find conclusive evidence, much less any iota of evidence at all, to indicate that the gold bits that were seized / confiscated were of foreign origin. Even the Assayer has not specifically identified the presence of any clear mark to the effect that the goods in question were of foreign origin and the basis thereof . Hence, the only source for the Revenue to allege that the gold bits were of foreign origin are the alleged inculpatory statements recorded under Section 108 of the Customs Act. Having obtained such statements, there could have been further investigation to find out the veracity of such statements or, at least, to prove such statements, but we do not see any such effort being placed on record, at least before us. But however, it is a fact borne on record that the statements of crucial persons have also been retracted.
21.3 There is also reference in the mahazar that the said assayer had examined the gold bars with reference to their origin, weight, value and purity, then certified that the cut pieces of gold bars were of 24 carat purity and that the markings on the original bars have been erased and made crude. When the said person was not shown to have carried 21 Customs Appeal No.40004 of 2024 any tools with him at all and his statement has not at all been recorded, how is it that he was able to check the origin, weight, value, and purity is the question which is not answered by the revenue. What is the method/s used by him to test the purity - whether touchstone method or some other method has not been spelt out. Neither there was any effort to send the Gold Bits to any Forensic Expert. The report is silent even as to the number of Gold Bits. Moreover, when the markings were erased, how could his naked eyes decipher what was scripted on it, is another mystery since there were 296 small bits of approximately 51 gms. each. There is no Assayer's report at all except the Mahazar dated 14.10.2013. This itself suggests that whole case is concocted. There is also reference to serial numbers but however, there is no mention about any of such serial numbers either in the Mahazar or anywhere else. It is also not explained as to why the investigation team ignored the authorization letter and arrived at the conclusion that the appellant did not possess any valid documents for licit possession of the cut pieces of gold bars. The revenue has never established that the impugned gold bars were of foreign origin but they suddenly claim that the same were 'admittedly smuggled ones' and that they were liable for confiscation. Whose admission was it in anyway which they are relying on, however, remains conspicuously absent.
21.4 From the facts of the case, admittedly, the gold was not seized during the course of import and nor has the Revenue proved beyond reasonable doubt that the goods in question were of foreign origin. Had the Assayer been 22 Customs Appeal No.40004 of 2024 subjected to cross-examination, perhaps they would have revealed as to the basis for his conclusion/assertion as to the source of the goods in question, but in any case, neither the mahazar nor even the Assayer's view give any proof that the gold involved had any clear mark as to their foreign origin and hence, the onus on Revenue stands undischarged. There is no Assayer's report except his participation in the Mahazar proceedings.
21.5 The original authority has, having applied his mind to the facts and circumstances of the case and after applying the ratio laid down by various courts, felt that the revenue has not discharged the primary burden of proof to establish that the gold were smuggled ones. Reference is also drawn to the assertion of the investigation team, as could be seen from para 146 of the OIO, that the appellant had carried gold from Chennai to Bombay, to Calcutta and back to Chennai and, if the subsequent version of the investigation team is to be accepted, then situation would be that the gold carried from Chennai was exchanged for the allegedly smuggled gold in Kolkata. In which event, the appellant may not be responsible for smuggling activity since he was not found crossing the international border with gold. The officer thus accepts that the appellant had discharged the onus, as could be seen from para 147 of the OIO. He thus holds that the revenue had only jumped the gun and seized the gold on suspicion, without there being any material evidence in support. It is a surprise that when the conclusion is so logically drawn, that too without any supporting evidence, the FAA accepts the case of Revenue.
23Customs Appeal No.40004 of 2024 21.6 In the impugned order, the Commissioner (Appeals) has referred to a decision of Hon'ble Kerala High Court in Om Prakash case wherein, the court has held that even in the case of seizure of gold without markings, the burden is upon the person who has the custody of gold, under section 123 of the Customs Act, to prove that the gold was legally acquired. The judgement is clearly in favour of the appellant and hence, the ratio applies squarely to the case in hand, rather against the department since, admittedly, when apprehended, the appellant did produce an authorization letter dated 13.10.2013 authorizing him to carry the goods seized. The same also stands fortified by the findings at para 146 of OIO. Thus, the burden of proof, both in terms of S. 123 ibid and the ratio of the above decision, stands discharged by the appellant. It has been explained even before the High Court in the proceedings, that the said gold that was carried by him was part of the stock-in-trade as evidenced by the appropriate documents. The fact that the FAA has relied on this judgment itself indicates that he was having no doubt that it was the case of town seizure of gold without markings, here, in the case on hand.
21.7 In the case of Union of India Vs Rajendra Prabhu [2001 (129) ELT 286 (SC)] relied upon by the FAA at para 35.2, the paragraph reproduced therein clearly indicates that the gold recovered are 30 gold biscuits 'with foreign markings'. Hence, that is a case where the foreign marking were clearly visible, in full, contrary to the case on hand. Similar is the case of Zaki Ish Rathi Vs Commissioner of Customs & Central Excise, Kanpur [2013 (291) ELT 161 (All.) 24 Customs Appeal No.40004 of 2024 referred to paragraph 35.3. Hence, these decisions are not applicable since facts are clearly different from the facts of the case in hand.
Reasonable belief:
22.1 In our opinion, therefore, mere inculpatory statement of persons allegedly involved which were later on retracted, cannot by themselves form the basis or become a clinching piece of evidence to hold that the goods in question were smuggled goods. Thus, the above discussion indicates that the officers of the DRI did not have any basis to assume/entertain reasonable belief, at the threshold, that the seized gold were smuggled goods, in order to shift the primary burden on to the appellants herein, under Section 123 ibid.
22.2 On going through the documents placed on record, the Order-in-Original and the Show Cause Notice, it appears to us that the Department has not pursued the investigation after issuing the Show Cause Notice and the only effort seems to be that since they did not consider the authorization letter as evidence in support, and that no valid import documents could be produced by the appellant-person carrying the gold, the same were 'deemed' to be smuggled into India. Going by the ratio of the decisions of various higher judicial fora, the requirement of law is that the Revenue needs to prove the smuggled nature of the goods. It was not the intention of the Government to bring back the Gold (Control) Act albeit by a backdoor entry, by notifying gold under Section 123 ibid. The Revenue, therefore, is 25 Customs Appeal No.40004 of 2024 required to prove that the gold were of smuggled nature, even when it is notified under Section 123. In the case of Union of India and anor. v. Imtiaz Iqbal Pothiwala & ors. [2019 (365) E.L.T. 167 (Bom.)], the Hon'ble High Court has observed as under: -
"2. This appeal was admitted on 28th June, 2007 on thefollowing substantial questions of law :-
"(a) Whether in the facts and circumstances of the case and in law, the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal) is justified in allowing the appeal of the respondents herein and setting aside the order of confiscation of the seized gold, by totally discarding the confessional statements given by the respondents under the provisions of Section 108 of the Customs Act, 1962, which are in the nature of admissible legal evidence, as clearly mandated by the Hon'ble Supreme Court in the cases of (i) K.I. Pavunny v. The Assistant Collector (HQ), (1997) 3 SCC 721, and
(ii) Naresh J. Sukhwani v. Union of India - (1996) SCC (Cri) 76 = 1996 (83) E.L.T. 258 (S.C.)?
(b) Whether in the facts and circumstances of the case and in law, the Tribunal is justified in holding that the respondents have discharged their burden/onus cast on them in terms of the provisions of Section 123 of the Customs Act, 1962 to prove and/or establish that the huge quantity of 575 gold bars seized from their custody is not the smuggled one, in spite of the fact that no legal evidence, such as maintenance of any basic books of account whatsoever, registration details under the provisions of sales tax, payment of purchase price of the gold, payment of Government levies, like income-tax, Sales Tax, etc., duly supported by the annual returns, etc., has been produced/brought on record by the respondents?"26
Customs Appeal No.40004 of 2024 .
.
.
7. Secondly, the questions which arise for our consideration in this case is in the context of the application of Section 123 of the Act in respect of the goods notified therein. Gold is an item which is notified under Section 123 of the Act and it provides that burden of proof in case of notified goods, would be upon the person from whose possession and/or the person who claims ownership of the goods to prove that the seized goods are not smuggled goods. However, before the aforesaid burden could be cast upon the person who claims to be the owner of the seized goods, the Revenue should be able to establish that the goods seized under Section 110 of the Act, was on a reasonable belief that the imported goods were smuggled goods. Therefore, where seizure is a subject of challenge on the ground of absence of reasonable belief then, the question of burden of proof on the person, claiming to be the owner of the goods, would arise only when the challenge to seizure is, negatived. In the facts of the present case, neither before us nor before the authorities under the Act, has the respondent No. 1 challenged the seizure for absence of reasonable belief that the seized gold was smuggled goods. Thus, the burden of proof in this case is upon the respondent to establish that the seized gold bars are notsmuggled.
(vi) Therefore, this substantial question of law is answered in the affirmative i.e. in favour of the respondent-assessee and against the appellant- Revenue.
(B) Reg. Question (b) :-
...27
Customs Appeal No.40004 of 2024
(iii) We are of the view that in the absence of evidence in the form of regular books of account, registration under the income-tax and Sales Tax, etc., cannot ispo facto lead to the conclusion that the seized gold bars, are smuggled gold bars. These may lead to proceedings for breaches of other Acts but it does not follow from it that the gold bars are smuggled goods. In fact, if a person in possession of the stolen gold is able to establish that it had come into India after a proper declaration and compliance of the Act, no confiscation under the Act, can arise.
Proceedings under the Indian Penal Code may be initiated by the police for theft, but it would not by reason of theft become smuggled goods. Moreover, smuggling as defined under Section 2(39) of the Act, is an act or omission which will render goods liable to confiscation under Section 111 of the Act for import and 113 of the Act for exports. On reading of Sections 111 and 113 of the Act, not keeping proper books of account or not being registered with the income-tax and/or Sales Tax Authorities, is not an omission which renders the goods liable for confiscation i.e. smuggled goods.
...
Therefore, the principle laid down in R.V.E. Venkatachala Gounder (supra) is applicable to adjudicating proceedings under the Act. By virtue of Section 123 of the Act, the burden to prove that the gold is not smuggled, is on the person found in possession of the gold. Thereafter, the onus keeps shifting. The impugned order holds the absence of the Revenue being able to discharge the onus on it after the respondent No. 1 has discharged the primary onus by showing the source of its purchase of gold. In fact, respondent No. 1 has also shown the 28 Customs Appeal No.40004 of 2024 source of its source. Thus, shifting the onus upon the Revenue. In the absence of the Revenue discharging its onus, it must follow that in the present facts, the respondent has discharged the burden of proof imposed upon him under Section 123 of the Act."
22.3 In Indian jurisprudence, the principle of 'presumption of innocence'--that, one is considered innocent until proven guilty--is a cornerstone of justice. This philosophy, rooted in the maxim that it is better for the guilty to be acquitted than for one innocent person to be wrongly convicted, underpins various safeguards for the accused enshrined in the Criminal Procedure Code, 1973 ('CrPC'), and the Constitution of India ('Constitution'). Notably, Article 20(3) of the Constitution asserts that no person accused of any offence shall be compelled to be a witness against themselves, a protection further reinforced by Ss. 161 and 162 of the CrPC. There may, however, be occasions when these safeguards face significant challenges when juxtaposed with provisions in special statutes like the Customs Act, 1962 since, it includes provisions that potentially encroach on fundamental protections, especially against self-incrimination thereby creating conflicts with established principles.
22.4 Section 108 of the Customs Act and Section 138B of the Customs Act are relevant in this regard. These provisions ensure that Customs officers can gather necessary information during inquiries, treat these proceedings as judicial in nature, and use statements as evidence under specific circumstances, even when direct testimony is not possible. This means that such statements can be used to verify the facts they assert, even if the person who made the statement is not available to 29 Customs Appeal No.40004 of 2024 prove its veracity. The key takeaway from these provisions is that statements recorded under S. 108 hold significant evidentiary value. They are treated as part of judicial proceedings, which means they are considered reliable and credible. S.138B further reinforces this by allowing these statements to be used as evidence in prosecution under specific circumstances. However, the admissibility and relevance of these statements are not straightforward; they are subject to specific safeguards within each act designed to protect the rights of the summoned individuals to some extent.
22.5 In one of the earliest judgments on this issue, the Bombay High Court in Mulchand Sampatraj Shah v. Dayashankar, Assistant [1988 (35) ELT 458 Bom] emphasised that since statements recorded under s. 108 of the Customs Act are considered part of judicial proceedings; the individual making them is legally bound to tell the truth, akin to giving testimony on oath in court. The High Court noted that such statements have a higher evidentiary value compared to statements given to the police because customs officers have specific statutory powers in this regard. The Supreme Court made similar observations in the 1995 case of GTC India [UOI & Anr. v. GTC India & Ors., SLP(C) No. 2183/1994 dated 03.01.1995].
22.6 In Hi-Tech Abrasives [M/s Hi-Tech Abrasives Ltd. v. CCE, High Court of Chhatisgarh, TAXC 54/2017 on 04.07.2018], the Chhattisgarh High Court held that for a statement to be treated as relevant and admissible, mere recording is not enough; there must be a fully conscious application of mind by the Adjudicating Authority (AA) that the 30 Customs Appeal No.40004 of 2024 statement is required to be admitted in the interest of justice. If such a statement is treated as relevant and admissible without verifying the contingencies under s. 138B or without examining the maker of the statement as a witness, the entire proceedings shall amount to circumventing the statutorily laid down procedure of law, vitiating the whole prosecution or adjudication process. This stance, reflecting a commitment to ensuring that evidence is gathered and used in a manner that respects legal norms and the rights of individuals involved in legal proceedings, has also been affirmed by the Punjab & Haryana and Allahabad High Courts [Jindal Drugs Pvt Ltd & Anr. v. UOI & Anr., 2016-TIOL-1230-HC-P&H-CX; CCE v. Parmarth Iron Pvt Ltd., 2010 (250) ELT 514 (All)], which stated that if the procedure prescribed by law is not followed, reliance on such statements must be regarded as misguided. They would not be relevant in proving the truth of the contents thereof.
22.7 In this light, it is interesting to examine certain sections of the Indian Evidence Act, 1872 ('Evidence Act') and their interplay with constitutional protections. Ss. 24, 25, and 26 of the Evidence Act set critical standards for the admissibility of confessions in criminal proceedings, which seem to contrast sharply with the provisions under discussion. Additionally, Article 20(3) of the Constitution fortifies these protections by granting an accused the right against self-incrimination. However, these protections are significantly challenged under the said provisions, which place individuals in a precarious position by considering statements as substantive evidence that are taken without providing the summoned individual with traditional legal safeguards.
31Customs Appeal No.40004 of 2024 22.8 Judicial precedents have established that if a confessional statement is retracted, it can only lead to a conviction if independently corroborated by other substantial evidence. This principle was evident in the case of Commr. Of C. Ex., Ahmedabad-III v. Deora Wires N. Machines Pvt. Ltd., [2016 (332) ELT 393 (Guj)], where the Court dismissed orders based solely on promptly retracted confessional statements lacking independent corroborative evidence. The Gujarat High Court, while highlighting the necessity for independent corroboration of retracted statements, also recognised that relying solely on retracted statements without corroboration violates the principles of natural justice and can lead to unjust outcomes.
22.9 The Hon'ble Delhi High Court in CCE, Delhi-I v. Vishnu & Co Pvt. Ltd. [ 2016 (332) ELT 793 (Del)] held that the reliability of a statement, rather than its mere admissibility, becomes questionable once it is retracted, even if the retraction occurs after a significant period. The Court observed that a retracted statement, in the absence of independent corroborative evidence, cannot safely be relied upon as substantive proof. This position emphasises that the burden shifts to the department to prove the validity of the statement post-retraction.
22.10 In the case of Union of India v. Kisan Ratan Singh [2020 (372) E.L.T. 714 (Bom.)], Hon'ble Bombay High Court offered a critical observation that underscores the necessity of corroborating evidence beyond the statements recorded under s. 108. The court poignantly questioned the very essence of a fair trial by stating:
32Customs Appeal No.40004 of 2024 "If I have to simply accept the statement recorded under s. 108 as gospel truth and without any corroboration, I ask myself another question, as to why should anyone then go through a trial. The moment the Customs authorities recorded the statement under s. 108, in which the accused has confessed about his involvement in carrying contraband gold, the accused could be straightaway sent to jail without the trial court having recorded any evidence or conducting a trial."
22.11 The above decision has been by the Hon'ble Allahabad High court in Peeyush Kumar Jain - Vs - Union of India, reported in 2022 (382) E.L.T. 184 (All).
23. The above view, in our opinion, clearly highlights the inherent risks in accepting uncorroborated statements as conclusive evidence.
24. Further, the observations of Apex Court in COMMISSIONER OF CUSTOMS (IMPORTS), MUMBAI .Vs. M/S GANPATI OVERSEAS THROUGH ITS PROPRIETOR SHRI YASHPAL SHARMA & ANR are as under :-
Section 108 of the Customs Act deals with the power to summon persons to give evidence and produce documents. Section 108 of the Customs Act as it stood at the relevant time is extracted as under:-
108. Power to summon persons to give evidence and produce documents-
(1) .....
(2) .....
(3) .....
(4) Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 33 Customs Appeal No.40004 of 2024 and section 228 of the Indian Penal Code, 1860 (45 of 1860).
20. From a reading of the provisions of Section 108 of the Customs Act, as it stood at the relevant point of time, we find that any gazetted officer of customs duly empowered by the Central Government had the authority to summon a person whose attendance be considered necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer was making with respect to the smuggling of any goods. A person so summoned was bound to make a statement as regards the subject which was being examined. Such an enquiry by the customs officer would be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code.
21. While we are on Section 108 of the Customs Act, we may also advert to Section 24 of the Evidence Act, 1882 which deals with admissibility of a confession. Section 24 of the Evidence Act reads as under:
24. Confession caused by inducement, threat or promise, when irrelevant in criminal proceeding--
22. From a reading of Section 24 of the Evidence Act what is clear is that a confession made by an accused due to any inducement, threat or promise having reference to the charge against the accused person would be irrelevant in a criminal proceeding.
This court held in State of Punjab Vs. Barkat Ram 1962 (3) SCR 338 that customs officers are not police officers for the purpose of Section 25 of the Evidence Act which says that no confession made before a police officer shall be proved as against a person accused of any offence. A constitution bench of this court in Ramesh Chandra Mehta Vs. State of West Bengal, AIR 1970 SC 940 held that customs officers are entrusted with the powers specifically relating to collection of customs duty and prevention of smuggling. For that purpose, they are invested with the power to search any person on reasonable suspicion, to summon a person to give evidence, to arrest such a person if there is a reasonable suspicion that such a person is guilty of an offence under the Customs Act etc.
23. For collecting evidence, the customs officer is entitled to serve summons upon a person to produce a document or 34 Customs Appeal No.40004 of 2024 other thing or to give evidence etc. However, he has no power to investigate a customs infringement as an offence nor has he the power to submit a report under the Code of Criminal Procedure. A customs officer is not a police officer. Dealing with Sections 167(8) and 178(A) of the Sea Customs Act, 1878, this court in Collector of Customs, Madras Vs. D. Bhoormall, (1974) 2 SCC 544 held that provisions of the Evidence Act and the Code of Criminal Procedure did not govern the onus of proof under Section 167(8) of the Sea Customs Act. In such proceedings, the customs officer was guided by the basic principles of criminal jurisprudence and natural justice. The burden of proving that the goods were smuggled goods was on the department. The cardinal principle having an important bearing on the incidence of burden of proof was that sufficiency and weight of the evidence was to be considered according to the proof which it was in the power of one side to prove and in the power of the other side to have contradicted.
24. In Ramesh Chandra Mehta (supra), the objections as to admissibility of a confessional statement under Section 25 of the Evidence Act were rejected, holding that such a statement was admissible in evidence in customs proceedings since customs officers are not police officers.
25. This court in Naresh J. Sukhawani Vs. Union of India, AIR 1996 SC 522 clarified that a statement made before the customs officer is not a statement recorded under Section 161 of the Criminal Procedure Code, 1973. It is material piece of evidence collected by the customs officer under Section 108 of the Customs Act.
26. A three-judge bench of this court in K.I. Pavunny Vs. Assistant Collector, (1997) 3 SCC 721 considered the question as to whether a retracted confessional statement would be inadmissible in evidence in the context of the Customs Act. After holding that a statement recorded under Section 108 of the Customs Act is admissible in evidence, this court considered the next question as to whether such a statement can form the sole basis for conviction. The further question was whether a retracted confessional statement requires corroboration from any other evidence. After referring to various judicial pronouncements this court observed that there is no prohibition under the Evidence Act to rely upon a retracted confession to prove the prosecution case or to make the same the basis for conviction of the accused. But practice 35 Customs Appeal No.40004 of 2024 and prudence would require that the court would seek assurance by getting corroboration from other evidence adduced by the prosecution.
27. Again, in Union of India Vs. Padam Narain Aggarwal, AIR 2009 SC 254, this court considered the provision of Section 108 of the Customs Act in great detail and thereafter observed that the said section obliges the person summoned to state the truth upon any subject in respect of which he is being examined. He is not absolved from speaking the truth on the ground that such a statement is admissible in evidence and could be used against him. The provision thus enables the custom officer to elicit the truth from the person examined. The underlying object of Section 108 is to ensure that the officer questioning the person gets all the truth concerning the incident. However, a person called upon to make a statement before the customs authorities is not an accused. The entire idea behind Section 108 is that the customs officer questioning the person must gather all the truth concerning the episode. If the statement so extracted is untrue, its utility for the officer gets lost. Therefore, statements recorded under Section 108 of the Customs Act are distinct and different from statements recorded by a police officer during the course of investigation under the Criminal Procedure Code.
28. Thus, what is deducible from an analysis of the relevant legal provisions and the corresponding judicial pronouncements is that a customs officer is not a police officer. Further, the person summoned and who makes a statement under Section 108 is not an accused. However, a statement made by a person under Section 108 of the Customs Act before the concerned customs officer is admissible in evidence and can be used against such a person. Object underlying Section 108 is to elicit the truth from the person who is being examined regarding the incident of customs infringement. Since the objective is to ascertain the truth, the customs officer must ensure the truthfulness of the statement so recorded. If the statement recorded is not correct, then, the very utility of recording such a statement would get lost. It is in this context that the customs officer who is empowered under Section 108 to record statement etc. has the onerous responsibility to see to it that the statement is recorded in a fair and judicious manner providing for procedural safeguards to the concerned person to ensure that the statement so recorded, which is admissible in 36 Customs Appeal No.40004 of 2024 evidence, can meet the standard of basic judicial principles and natural justice. It is axiomatic that when a statement is admissible as a piece of evidence, the same has to conform to minimum judicial standards. Certainly a statement recorded under duress or coercion cannot be used against the person making the statement. It is for the adjudicating authority to find out whether there was any duress or coercion in the recording of such a statement since the adjudicating authority exercises quasi-judicial powers.
[emphasis supplied by us]
25. From the above binding ruling, when we consider the disbelief expressed in so very clear terms in the findings by the AA in OIO, we have to see if the Revenue has demonstrated by means of any documentary evidence, that the findings of the AA cannot be sustained. We are afraid, we do not see any effort being made by the Revenue, much worse is, the FAA has only held that the statements were reliable, that too, without any reason/s, which were in fact not accepted by the AA giving acceptable reasons. The Revenue has therefore failed in the test laid down by the Apex court as recorded in the earlier paragraph.
26. In view of our above discussion, we are satisfied that the officers of the Department had no reasonable belief that the gold seized were smuggled and therefore, they have not discharged their primary responsibility of forming a prima facie / reasonable belief under Section 123 ibid., without which, the onus could not shift on to the appellant from whom the goods in question have been seized.
37Customs Appeal No.40004 of 2024 Judicial Precedents:
27.1 In the case of Pr. Commissioner of Customs (Prev.), Delhi v. Ahamed Mujjaba Khaleefa [2019 (366) E.L.T. 337 (Tri. - Del.)], the CESTAT had held as under: -
"10. It is seen that there is no foreign marking on the jewellery. Revenue has not placed any proof to substantiate that the jewellery was smuggled into India other than the statement of the passenger. In the facts and circumstances of the case, I find no reason to interfere with the findings of the impugned order which is sustained for the reason mentioned therein. In the result, Revenue appeal is rejected."
27.2 The importance of cross-examination has been explained by various High Courts as the one in the case of Basudev Gar Vs CC reported in 2013 (294) ELT 353 (Del.), the Hon'ble Delhi High Court has held as under :
"14. The Division Bench also observed that though it cannot be denied that the right of cross-examination in any quasi judicial proceeding is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-
examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who 38 Customs Appeal No.40004 of 2024 had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings.
(Emphasis supplied) 27.3 Further, the Hon'ble High Court of Delhi decision in the case of Flevel International v. Commissioner of Central Excise reported in 2016 (332) E.L.T. 416 (Del), held as under :
"42. It is settled law that the denial of opportunity of cross-examination of a witness whose statements have been relied upon in the adjudication order would vitiate the order of adjudication. In Basudev Garg v. Commissioner of Customs - 2013 (294) E.L.T. 353 (Del.), this Court referred to Section 9D of the CE Act and noted that even while upholding its constitutional validity in J & K Cigarettes Ltd v. Collector of Central Excise - 2011 (22) S.T.R. 225 (Del.) = 2009 (242) E.L.T. 189 (Del.), a Division Bench of this Court had observed that the circumstances under which the right of cross-examination can be taken away would have to be 'exceptional'. This would include circumstances where the person who had given the statement was dead or cannot be found are is incapable of giving evidence or is kept out the way by adverse party or whose presence 39 Customs Appeal No.40004 of 2024 cannot be obtained without an element of delay or expense which, under the circumstances the Court considers unreasonable. It was held by the Court in Basudev Garg (supra) that "it is clear that unless such circumstances exist the noticee would have right to cross-
examine the persons whose statements are being relied upon even in quasi- judicial proceedings."
27.4 Similarly, in one another case, the Ld. Principal Bench of the CESTAT in the case of Deepak Handa & anor. V Principal Commissioner of Customs (Preventive), New Delhi [Final Order Nos. 51520-51521 of 2021 dated 25.05.2021 in Custom Appeal Nos. 52922-52923 of 2019 - CESTAT, New Delhi], in a more or less similar situation, has held as under: -
"A.2. Gold jewellery weighing 4.687 kg and miscellaneous items of gold weighing 0.742 kg with a purity of 87.5% seized (part of S.No.(i) of the operative part of the Order in original)
33. These gold ornaments were confiscated in the order in original and upheld in the impugned order under sections 111(d), 111(i) and 111(p) read with section 120 of the Customs Act. Section 120 provides that smuggled goods may be confiscated notwithstanding any change in their form. Further, it also provides that where smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable to confiscation.40
Customs Appeal No.40004 of 2024
34. It is the case of the department that the seized jewellery was made out of smuggled gold and NOT that it itself was smuggled. There were also no foreign markings on them to show that the jewellery was smuggled. Deepak had no bills or invoices to show legitimate purchase of these ornaments.......
...
35. In his statement, Deepak, said that he got the jewellery made by supplying imported foreign marked, gold to the jewelers. Even if this statement is taken on face value, it does not say that smuggled gold was supplied to make the jewellery. It only says the jewellery was made from imported gold which could be
(a) legitimately imported gold sold by traders; or (b) smuggled gold. If it was established with some evidence (including statements) that the jewellery was manufactured out of smuggled gold, then such smuggled gold would have been covered under Section 123 and by virtue of section 120, would have been liable for confiscation notwithstanding the change in its form into jewellery.
However, there is no such evidence on record. In our considered view, therefore, the jewellery is not liable to confiscation in the absence of any evidence that it is smuggled or it has been made by converting smuggled gold. The mere fact that the jewellery was found along with the smuggled gold bars and gold coins makes no difference."
41Customs Appeal No.40004 of 2024
28. Insofar as burden of proof within the meaning of Section 123 ibid. is concerned, the following orders guide us to understand and arrive at a proper conclusion.
28.1 The case of Daleep Kumar Verma v. Commissioner of Customs (Preventive), Shillong & ors. [Customs Appeal No. 75315 of 2022 & ors. - Final Order Nos. 75300-75302 of 2023 dated 04.05.2023 - CESTAT, Kolkata].
28.2 The Bangalore Bench of the CESTAT in the case of Naveed Ahmed Khan v. Commissioner of Customs, Bangalore [2005 (182) E.L.T. 494 (Tri. - Bang.)], after considering the rival contentions, has concluded as under:-
"5. On a careful consideration of the submissions, we find from the facts of the case that the goods were seized in Bangalore by the Police. And the appellants had handed over the goods under seizure to the Customs Department for further investigation. In terms of the judgments relied by the Counsel which are noted supra, Section 123 of the Customs Act is inapplicable when the Police have seized the goods and handed over the same to the Customs Department as held in the case of Jitendra Pawar v. C.C.; Rajkamal Departmental Stores; State of Maharashtra v. P.P. Jain. Therefore, the burden of proving that the goods are smuggled ones is on the Revenue. The Commissionerhas taken a view that the department has discharged their burden of showing the goods having a foreign marking on the goods. On this point also we find that the Tribunal has held that mere marking of foreign origin does not by itself render the goods to be smuggled ones as noted in the citations extracted supra. The 42 Customs Appeal No.40004 of 2024 Statements of the appellants that they were not directly involved in the smuggle but they have purchased the goods from the shops located opposite to the Customs Office, Madras have not been contradicted by the Revenue and there is no finding in OIO that the appellants statements are incorrect and that they have directly smuggled the goods from abroad. Therefore, the fact of the appellants having purchased from open market has been established by the appellants. The fact that they did not carry the licit documents were not a ground to hold that the goods are smuggled ones. No doubt the goods carried the foreign marking but that by itself cannot be a ground to hold the goods to be smuggled ones as noted in the judgments cited supra......"
28.3 The relevant observations of this Bench in the case of Commissioner of Customs v. Mohammed Ali Jinnah [Customs Appeal No. 40099 of 2020 - Final Order No. 40289 of 2023 dated 20.04.2023 - CESTAT, Chennai] are as under: -
"8. In the absence of evidence on the part of respondent to prove that the gold was legally procured and in view of the fact that the crude gold bars had 999.9 purity, it appeared to be smuggled into India in violation of ForeignTrade Policy 2015 - 2020 read with RBI Regulations and having been found to be concealed in a bag, a Show Cause Notice dated 21.7.2017 was issued to the respondent by the Additional Director, DRI as to why the crude gold bars should not be confiscated and penalties should not be imposed under the Customs Act, 1962.43
Customs Appeal No.40004 of 2024 .
.
.
27. We therefore proceed to examine the merits of the case. The allegation in the Show Cause Notice is that the gold seized from the respondent is gold smuggled into India without declaring it to Customs for avoiding payment of customs duties. The first issue that requires to be analyzed is whether the gold is of foreign origin. Admittedly, the gold does not have any foreign markings. It is the case of department that the gold assayer Sh. G.K. Shankar has issued certificate that the purity of the gold is 24 karat and of 999.9%. It is contended by department that only foreign gold would have such high purity. It is seen mentioned in the mahazar dated 23.1.2017 that the gold was assayed by the assayer on the same day. However, the said document is not made part of relied upon documents for the purpose of issuing Show Cause Notice. The learned counsel for respondent has submitted that the respondent was not served with copy of this document. The said contention was raised before the Commissioner (Appeals) also. On the date of hearing of this appeal by us, the learned AR has produced a copy of this document purported to be issued by assayer. We do not understand what prevented the department from placing this document as part of relied upon documents. Usually, only copies of the Relied Upon Documents are given to the noticee. It can therefore be inferred that the appellant was not given copy of this document. Although it is seen mentioned in the mahazar that the assayer certified the purity of gold on the same day of the incident (23.1.2017), the date mentioned in the certificate produced by the learned AR is 24.1.2017. Further, it says 24 karat gold and does not say 999.9%. This document is produced only now, at the second appeal stage. This 44 Customs Appeal No.40004 of 2024 document which is not made part of RUD and of which a copy has not been served to the respondent, when produced at the fag end of proceedings cannot be viewed without suspicion.
...
29. The purity of the gold as certified by the assayer is the main reason for the department to allege that the gold is of foreign origin and is smuggled into India. Apart from challenging the certificate issued by assayer, the learned counsel has also challenged the method adopted for ascertaining the purity of the gold. It is not stated in the certificate as to what is the method adopted by the assayer to ascertain the purity. The learned counsel submitted that the touchstone method is not an acceptable method to prove the purity of the gold. The Customs officers ought to have obtained a report from a competent agency like the Government Mint. The decision in the case of Customs Vs. Dina Aruna Gupta reported in 2011 (274) ELT 323 (Del.) is relied by the respondent to assail the certificate of assayer. The relevant para reads as under:-
"31. The prosecution has examined PW-3 Shri Ramesh Chand Aggarwal, the goldsmith and the valuer who had tested the gold bars allegedly recovered from the possession of the accused. Whether PW-3 Shri Ramesh Chand Aggarwal was possessed of any qualification in the matter of testing gold was liable to be proved by the prosecution. The certificate issued by the PW-3 Shri Ramesh Chand Aggarwal i.e. Ex.PW-1/F does not disclose the method on the basis of which he had tested the gold and had reached 45 Customs Appeal No.40004 of 2024 to the conclusion that it was gold of 24^ purity.
32. Normally, the test applied for testing gold is furnace test but the same was not applied or resorted to in the present case. There is no evidence on record that PW-3 Sh. Ramesh Chand Aggarwal was possessing any proficiency in the matter of testing gold. The certificate/report Ex.PW-1/F does not contain any data. Whereas the certificate must contain actual data and not mere opinion. Further, the gold of foreign origin has to be proved by the authentic manner. Law is well settled that mere marking cannot be taken as a proof of the gold for origin of the gold as markings and labels. In such a situation, the statement of the accused under Section 108 of the said Act has no consequences." (Emphasis supplied) ...
31. We have to say that in the case on hand, the certificate does not mention 999.9% as contended by department. It merely says 24 carat. It does not mention the method adopted to test the purity. Further, the certificate is not made part of RUD. The copy of certificate is not given to the respondent. Again, the request to cross- examine the assayer was denied. It is produced belatedly and there is no petition filed by learned AR stating reasons to accept the document at the appellate stage. On the totality of these facts, we have to hold that the certificate of the assayer produced by the learned AR cannot be accepted in evidence.
32. Apart from the certificate, the department relies on the statements given by the respondent 46 Customs Appeal No.40004 of 2024 on 23/24.1.2017. These statements have been retracted later by the respondent. In such circumstances, the department has to place reliable evidence to prove that the gold is smuggled from Sri Lanka. There is no evidence to prove that the gold is smuggled from Sri Lanka or any connection of the gold with Murugan or Batcha.
...
34. In the absence of foreign markings, there should be cogent evidence to establish that the gold is of foreign origin. The contention of the learned AR that if gold jewellery when converted into bullion will not have 999.9% purity is without any substance. The statement of respondent which has been retracted cannot be the basis for holding that the gold is smuggled unless corroborated by other evidences.
...
36. The respondent has put forward the contention that the seized gold belongs to him and that he had procured it using his earning andthe gold jewellery of other members of the family. His family members such as father, mother, wife and daughter have written letters to the department stating that the gold was procured by their jewellery and earnings. The department has not been able to adduce any evidence to disprove these contentions......
...
37. The learned AR has adverted to various decisions Surjeet Singh Chabra Vs. Union of India - 1997 (89) ELT 646 (SC), Kanungo & Co. Vs. Collector of Customs, Calcutta - 1983 (13) ELT 1486 (SC), Union of India Vs. GTC Industries
- 2003 (153) ELT 244 (SC) and Sanjay Shah Vs. 47 Customs Appeal No.40004 of 2024 Commissioner - 2011 (268) ELT A109 (SC) to argue that not allowing cross-examination will not be violation of principles of natural justice. These cases are distinguishable on facts. When the evidence relied by the department to prove that the gold is of foreign origin is the certificate issued by assayer, the rejection of request to crossexamine him without giving cogent reasons vitiates the proceedings."
[emphasis added]
29. In terms of sub-section (8) of Section 129C of the Customs Act, 1962, any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of section 196 of the Indian Penal Code, and the Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973. Thus, the Indian Evidence Act is no stranger to proceedings under the Customs Act. The OIO was passed in the year 2014 and hence, the Indian Evidence Act, 1872 as it existed then would apply.
30. Order 6 Rule 2 of the Civil Procedure Code, 1908 states that the pleading shall only contain important facts that must be shown in a concise form. Evidence is a relative term that refers to a connection between two facts: the fact in dispute (factum probandum), or statement to be proven, and the evidential fact (factum probans), or material corroborating the proposition.
48Customs Appeal No.40004 of 2024
31. Therefore, we need to consider the facts, evidence and the documents placed on record by the Revenue in support, in the context of whether the same are sufficient to lead us near 'facts proved' or 'facts disproved' or 'facts not proved', as defined under the Indian Evidence Act. We must bear in mind essential blocks in the pillars of the fundamentals that proof is the effect of evidence and Evidence is the means of proof. The above needs to be examined in the context of the definition of facts-in-issue. It is undisputed that evidence can be demonstrated and experienced, but the proof can only be felt by the adjudicating authority or the judge. In view of our above discussion, the first fact-in-issue that crops up is, whether there was 'import'; and the second fact-in-issue is, whether the above import was 'improper'. The same becomes essential when we read S. 111 ibid in juxtaposition with S. 123 ibid. When we examine the requirements of import as defined in the earlier paragraphs herein, under the relevant statute, we find that the same is not satisfied and hence, the fact of import which is the first fact-in-issue is not at all proved. When the import itself is not proved, whether the same was improper or not is clearly out of question. Be that as it may, most importantly, we find that the authorities have not bothered to at least exhibit before us the impugned gold pieces alleged to be smuggled by the Appellant. This is therefore a case of corpus delicti, we are therefore required to imagine and then give a finding! Thus, to imagine deciphering what exactly was written on a small/tiny bit of a gold piece of about 50-odd grams is impractical, more so, with naked eyes. Hence, the case is clearly concocted 'Res Ipsa Loquitor', it speaks for itself.
49Customs Appeal No.40004 of 2024
32. It is claimed to be seized, but the same is not produced for the best reasons known to the revenue and no explanation is forthcoming anywhere from the documents placed on record or even from the impugned order. The view expressed by Sri Mohan Achary through Mahazar [his statement is not placed on record, not even a part of RUD], could at best be another source, which is required to be weighed with utmost caution before venturing into accepting his views.
33. We shall now consider the claim of the revenue as to the CCTV footage relied upon by the DRI and FAA admittedly from the Factory place of Gautam. From the Mahazar drawn there, Sri Arjit Mitra, Senior Technical Support Executive of M/s.Prama Hikvision India Pvt. Ltd. was present, who is admittedly not an expert in the field but only a technician and hence, such Mahazar should also be looked into very carefully before accepting the same. In any case what is recorded in the Mahazar is that so & so are seen to be entering the premises, but none of the Mahazar witnesses is speaking about the alleged activity of erasing the markings on gold bars and cutting the same into small pieces. In this regard, we find it relevant to consider the above in the context of the guidelines laid by the Hon'ble Supreme Court in the case of Anwar PV versus PK Bashir. - (2014) 10 SCC 473 :
"The evidence consisted of three parts - (i) electronic records, (ii) documentary evidence other than electronic records, and (iii) oral evidence. As the major thrust in the arguments was on electronic records, we shall first deal with the same.
Electronic record produced for the inspection of the court is documentary evidence under Section 3 of The Indian 50 Customs Appeal No.40004 of 2024 Evidence Act, 1872 (hereinafter referred to as 'Evidence Act'). The Evidence Act underwent a major amendment by Act 21 of 2000 [The Information Technology Act, 2000 (hereinafter referred to as 'IT Act')]. Corresponding amendments were also introduced in The Indian Penal Code (45 of 1860), The Bankers Books Evidence Act, 1891, etc. Section 22A of the Evidence Act reads as follows:
"22A. When oral admission as to contents of electronic records are relevant.- Oral admissions as to the contents of electronic records are not relevant, unless the genuineness of the electronic record produced is in question." Section 45A of the Evidence Act reads as follows: "45A. Opinion of Examiner of Electronic Evidence.-When in a proceeding, the court has to form an opinion on any matter relating to any information transmitted or stored in any computer resource or any other electronic or digital form, the opinion of the Examiner of Electronic Evidence referred to in section 79A of the Information Technology Act, 2000(21 of 2000)., is a relevant fact. Explanation.--For the purposes of this section, an Examiner of Electronic Evidence shall be an expert." Section 59 under Part II of the Evidence Act dealing with proof, reads as follows:
"59. Proof of facts by oral evidence.--All facts, except the contents of documents or electronic records, may be proved by oral evidence." Section 65A reads as follows: "65A. Special provisions as to evidence relating to electronic record: The contents of electronic records may be proved in accordance with the provisions of section 65B."
Section 65B reads as follows:
"65B. Admissibility of electronic records:
(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.51
Customs Appeal No.40004 of 2024 (2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely: -
(a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and
(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether -
(a) by a combination of computers operating over that period; or
(b) by different computers operating in succession over that period; or
(c) by different combinations of computers operating in succession over that period; or
(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly.52
Customs Appeal No.40004 of 2024 (4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, -
(a) identifying the electronic record containing the statement and describing the manner in which it was produced;
(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it. (5) For the purposes of this section, -
(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;
(b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;
(c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.
Explanation: For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process." These are the provisions under the Evidence Act relevant to the issue under discussion.
53Customs Appeal No.40004 of 2024 In the Statement of Objects and Reasons to the IT Act, it is stated thus:
"New communication systems and digital technology have made drastic changes in the way we live. A revolution is occurring in the way people transact business." In fact, there is a revolution in the way the evidence is produced before the court. Properly guided, it makes the systems function faster and more effective. The guidance relevant to the issue before us is reflected in the statutory provisions extracted above.
Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub- Section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act:
(i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer;
(ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity;
(iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks 54 Customs Appeal No.40004 of 2024 had not affected either the record or the accuracy of its contents; and
(iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.
Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied:
(a) There must be a certificate which identifies the electronic record containing the statement;
(b) The certificate must describe the manner in which the electronic record was produced;
(c) The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.
Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence.
The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements 55 Customs Appeal No.40004 of 2024 under Section 65B of the Evidence Act are not complied with, as the law now stands in India.
Proof of electronic record is a special provision introduced by the IT Act amending various provisions under the Evidence Act. The very caption of Section 65A of the Evidence Act, read with Sections 59 and 65B is sufficient to hold that the special provisions on evidence relating to electronic record shall be governed by the procedure prescribed under Section 65B of the Evidence Act. That is a complete code in itself. Being a special law, the general law under Sections 63 and 65 has to yield.
The evidence relating to electronic record, as noted herein before, being a special provision, the general law on secondary evidence under Section 63 read with Section 65 of the Evidence Act shall yield to the same. Generalia specialibus non derogant, special law will always prevail over the general law. It appears, the court omitted to take note of Sections 59 and 65A dealing with the admissibility of electronic record. Sections 63 and 65 have no application in the case of secondary evidence by way of electronic record; the same is wholly governed by Sections 65A and 65B. To that extent, the statement of law on admissibility of secondary evidence pertaining to electronic record, as stated by this court in Navjot Sandhu case (supra), does not lay down the correct legal position. It requires to be overruled and we do so. An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65B are satisfied. Thus, in the case of CD, VCD, chip, etc., the same shall be accompanied by the certificate in terms of Section 65B obtained at the time of taking the document, without which, the secondary evidence pertaining to that electronic record, is inadmissible.
The situation would have been different had the appellant adduced primary evidence, by making available in evidence, the CDs used for announcement and songs. Had those CDs used for objectionable songs or announcements been duly got seized through the police or Election Commission and had the same been used as primary evidence, the High Court could have played the same in court to see whether the allegations were true. That is not the situation in this case. The speeches, songs and 56 Customs Appeal No.40004 of 2024 announcements were recorded using other instruments and by feeding them into a computer, CDs were made therefrom which were produced in court, without due certification. Those CDs cannot be admitted in evidence since the mandatory requirements of Section 65B of the Evidence Act are not satisfied. It is clarified that notwithstanding what we have stated herein in the preceding paragraphs on the secondary evidence on electronic record with reference to Section 59, 65A and 65B of the Evidence Act, if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act, the same is admissible in evidence, without compliance of the conditions in Section 65B of the Evidence Act."
34. The Supreme Court thus holds that the CDs cannot be admitted in evidence since the mandatory requirements of section 65B of the IEA are not satisfied. In the case of Tomaso Bruno & Anr Vs State of UP - 2015 (7) SCC 178, air 2015 (SC (SUPP) 412 it is held as under :
"There is no doubt that conviction can be based solely on the circumstantial evidence. But it should be tested on the touchstone of the law relating to circumstantial evidence. This Court in C. Chenga Reddy & Ors. vs. State of A.P., (1996) 10 SCC 193, para (21) held as under :-
"21. In a case based on circumstantial evidence, the settled law is that the circumstances from which the conclusion of guilt is drawn should be fully proved and such circumstances must be conclusive in nature. Moreover, all the circumstances should be complete and there should be no gap left in the chain of [pic]evidence. Further, the proved circumstances must be consistent only with the hypothesis of the guilt of the accused and totally inconsistent with his innocence. In the present case the courts below have overlooked these settled principles and allowed suspicion to take the place of proof besides relying upon some inadmissible evidence."
After referring to a catena of cases based on circumstantial evidence in Shivu and Anr. vs. Registrar General, High 57 Customs Appeal No.40004 of 2024 Court of Karnataka & Anr., (2007) 4 SCC 713, this Court held as under:-
"12. It has been consistently laid down by this Court that where a case rests squarely on circumstantial evidence, the inference of guilt can be justified only when all the incriminating facts and circumstances are found to be incompatible with the innocence of the accused or the guilt of any other person. {See Hukam Singh v. State of Rajasthan, (1977) 2 SCC 99; Eradu v. State of Hyderabad (AIR 1956 SC 316), Earabhadrappa v. State of Karnataka (1983) 2 SCC 330, State of U.P. v. Sukhbasi (1985 (Supp.) SCC 79), Balwinder Singh v. State of Punjab (1987) 1 SCC 16 and Ashok Kumar Chatterjee [pic]v. State of M.P (1989 Supp. (1) SCC 560) The circumstances from which an inference as to the guilt of the accused is drawn have to be proved beyond reasonable doubt and have to be shown to be closely connected with the principal fact sought to be inferred from those circumstances. In Bhagat Ram v. State of Punjab, AIR 1954 SC 621, it was laid down that where the case depends upon the conclusion drawn from circumstances, the cumulative effect of the circumstances must be such as to negative the innocence of the accused and bring home the offences beyond any reasonable doubt."
22. To invoke Section 106 of the Evidence Act, the main point to be established by the prosecution is that the accused persons were present in the hotel room at the relevant time. PW-1 Ram Singh-Hotel Manager stated that CCTV cameras are installed in the boundaries, near the reception, in the kitchen, in the restaurant and all three floors. Since CCTV cameras were installed in the prominent places, CCTV footage would have been best evidence to prove whether the accused remained inside the room and whether or not they have gone out. CCTV footage is a strong piece of evidence which would have indicated whether the accused remained inside the hotel and whether they were responsible for the commission of a crime. It would have also shown whether or not the accused had gone out of the hotel. CCTV footage being a crucial piece of evidence, it is for the prosecution to have produced the best evidence which is missing. Omission to produce CCTV footage, in our view, which is the best evidence, raises serious doubts about the prosecution case.
58Customs Appeal No.40004 of 2024
25. With the advancement of information technology, scientific temper in the individual and at the institutional level is to pervade the methods of investigation. With the increasing impact of technology in everyday life and as a result, the production of electronic evidence in cases has become relevant to establish the guilt of the accused or the liability of the defendant. Electronic documents strictu sensu are admitted as material evidence. With the amendment to the Indian Evidence Act in 2000, Sections 65A and 65B were introduced into Chapter V relating to documentary evidence. Section 65A provides that contents of electronic records may be admitted as evidence if the criteria provided in Section 65B is complied with. The computer generated electronic records in evidence are admissible at a trial if proved in the manner specified by Section 65B of the Evidence Act. Sub-section (1) of Section 65B makes admissible as a document, paper print out of electronic records stored in optical or magnetic media produced by a computer, subject to the fulfilment of the conditions specified in sub-section (2) of Section 65B. Production of scientific and electronic evidence in court as contemplated under Section 65B of the Evidence Act is of great help to the investigating agency and also to the prosecution."
35. In the light of the above binding decisions, we have to hold that the CCTV footings relied upon by the revenue cannot lead us anywhere, the same is not conclusive evidence as to the act of smuggling, erasing, etc., and hence, the same is not of any assistance in so far as the facts-in-issue in this case are concerned.
Gist of Statements recorded by D.R.I.
1. The revenue has referred to the CCTV footage and, in this regard, Panchanama dated 27.11.2013 came to be drawn. The said Panchanama is drawn in the office of the DRI for analysing to CPU/DVR recorder of CCTV seized from the premises of Gautam, as per Panchanama dated 15.10.2013. Two Panchas have identified themselves and also identified one Arijit Mitra, claimed to be Senior technical support executive of a private Limited company. The other persons 59 Customs Appeal No.40004 of 2024 present when the said Panchanama was drawn were the two department officials, namely Rajiv Banerjee and K Panniraselvam. In this said Panchanama, none of the private persons is shown to be an expert to vouch about the contents. The expertise is relevant since what is claimed to be witnessed by them is what was already recorded in the CCTV and none of them was a witness to the live recording. Further, in the said document, it is mentioned that they saw three persons who entered into the office cum factory premises of Gautam, who was requested by the officers to identify, to which said Gautam appears to have identified the said three persons as Abhishek, Ashish and Mahaveer from Chennai. It is also revealed in the said document that they had enquired whether the work of erasing the foreign marks from 130 Nos. of 10 Thola foreign origin gold bars given by Abhishek through his person on 11.10.2013 and cutting the said 10 foreign origin gold bars into smaller pieces, had been completed. It was replied that the said work has been completed and cut pieces of gold bars would be delivered on 14.10.2013 to Abhishek at Kolkata Airport.
2.1 Said Gautam also appears to have revealed that the foreign markings were erased/removed by pressing the gold bars through a machine available in his factory, which was done by Debasish Das, one of his Office workers and that the said area was not under CCTV coverage. Further, Gautam also reveals that the work of cutting 130 numbers of 10 tola foreign origin was done by Mintu by hand cutter in one of the Office rooms which was covered by CCTV recordings.
2.2 However, the said work of cutting by the said Mintu, which was claimed to be under CCTV camera, is not part of the relied upon documents.
3. In the statement of appellant recorded on 15.10.2013, he says that he left for Mumbai from Chennai by GoAir flight on 12.10.2013 to attend a family function and during that time, he did not take any gold bars/gold cut pieces with him from Chennai. From Mumbai, he is said to have travelled to Kolkata on the same day by SpiceJet flight and here also, he did not take any gold bars/gold cut pieces. He further says that upon reaching Kolkata, he called Raju @ Mukesh and enquired about the smuggled foreign origin gold bars, to which the reply that the same would be ready by tomorrow. On 13.10.2013 in the late afternoon, it is revealed that Raju called him and asked him to collect smuggled bars from him at Chinti Road, Kolkata which was 60 Customs Appeal No.40004 of 2024 done by him. On the same day evening, he says that the said foreign origin gold bars were handed over to Gautam, a local Goldsmith, to cut the gold bar into pieces and to remove foreign marking. He further says that on the next day morning i.e 14.10.2013, he went to airport around 11 AM to receive his 6-year old son and at around that time, he received the cut pieces of the said 130 gold bars from Gautam and thereafter he boarded the flight to Chennai with his son. Raju's statement is not recorded.
4. Further, when asked as to who packed the cut pieces of gold bar in the white plastic containers, Abhishek has replied that the cut pieces of smuggled gold bars were handed over to him in white plastic covers by Gautham at airport. In his further statement recorded on 20.11.2013, the appellant changes the statement to the effect that on 14.10.2013, he received the smuggled gold bars at Kolkata airport from Tapas Chakraborty, who is a relative of Gautam and not from Gautam as stated by him earlier.
5. Statement of Gautam was recorded on 15.10.2013. In response to the questions about the visit of appellant, he replies that appellant came on 13.10.2013 with some gold biscuits made into bars and then cut into smaller pieces by him. Appellant sent 130 PCS gold biscuits with foreign markings on 11.10.2013 through his men and asked to cut into smaller pieces which was done. On 13.10.2013, he reveals that appellant came to him along with his elder brother Ashish and Mahaveer and checked the gold pieces and they also asked him to deliver the gold pieces at airport on 14.10.2013. Thereafter, 'husband of his sister' took the gold pieces to airport and delivered the same to appellant. When asked about the name of the person who delivered the gold pieces with foreign markings on behalf of appellant, he has answered that he cannot remember the name of that person.
6. Further, one more statement was recorded from Gautham on 28.11.2013. His answer to one of the questions was that the incident recorded in 2 CCTVs related to his office/factory. Question No. 2 is about the identity of a man seen entering his office on 11.10.13 at about 10 AM, he says that it was his brother-in-law Tapash Chakraborty. He further admits that his brother-in-law, as per his instruction, had brought 130 pieces of 10 Tola foreign origin gold bar, received from a person sent by Abhishek of Chennai. In the said statement, he admits that the 61 Customs Appeal No.40004 of 2024 staircase near his factory was not under CCTV coverage. To one of the questions as to who was doing the work of erasing the foreign mark, his reply was that his employee Debasish Das had erased the foreign mark and Mintu and Kripasindhu cut into pieces. When asked about where the pressing machine was installed and was it under CCTV coverage, his reply was that pressing machine was behind the factory and the said area was not under CCTV coverage. He was also asked about where the cutting work was done and whether the same was under CCTV coverage. His reply was that cutting work was done in his office where Sujith Dhara sits and incident of cutting was covered under CCTV coverage. When asked about the visit of three persons as captured in the CCTV footage, his reply was that the said three persons came to his office at about 4 o'clock in the evening on 13.10.2013 and asked whether the gold bar given to him were ready or not. In response to question No. 22 as to after the work was done by him, how the gold was returned back, he has replied that Abhishek Mundhra came to his factory and received the foreign gold from him after the work was completed.
7. The revenue has also recorded the statement of Tapas Chakraborty. He reveals that on 14.10.2013 at about 1.00 PM, Gautham telephoned him and asked to go to his factory, where Gautam handed over a bag containing gold to him and told to deliver the same to Abhishek Mundra at Kolkata airport, and accordingly he went to Kolkata airport and handed over the pack to Abhishek Mundra near parking lot. He further admits that he received 130 pieces of gold biscuits of foreign origin on 11.10.2013 and handed over the same to Gautham, he received the same in front of staircase of the office of the factory, where no CCTV camera was installed and that he did not know the person from whom he received. He says that on receiving gold biscuits, he counted the same and handed over to Gautam.
8. Statement of Sujith Kumar Dhara, employee of Gautham is recorded on 1.5.2013. He admits that on 13.10.2013, his boss Gautham handed over to him 130 pieces of gold (pressed from bars/biscuits) for the purpose of cutting into pieces, he engaged to goldsmiths of his company namely Kripasindhu Roy and Mintu, and out of those pieces, they made 296 smaller pieces and handed over the same to Gautham. He also declares that the pieces of pressed 62 Customs Appeal No.40004 of 2024 bars/biscuits which were handed over to him were not bearing any inscription or marking.
9. The Revenue has also recorded the statement of Surendra Kumar on 18.10.2013. In his statement in response to a question, he admits that Abhishek Mundra left from Chennai on 12th to Mumbai and from there he went to Kolkata, Ashish and Mahaveer left for Kolkata from Chennai on 13. He also says that all the three of them went to receive the smuggled gold bars at Kolkata and that nobody carried any gold bars from Chennai when they left to Kolkata. In his further statement recorded on 06.02.2014, he clarifies that Abhishek Mundra had carried around 15 kgs gold bars when he left Chennai to Kolkata on 12.10.2013. He also admits and explains the source of 15.193 Kg of gold bars carried by Abhishek on 12.10.2013.
36. We shall now examine a hypothetical situation; going by the version of the Commissioner (Appeals) that the retraction is invalid and that statements are very much valid. But we find that those statements also are not sufficient enough to lead anywhere near gold 'smuggling'. The statements when considered, we find that the inconsistency is galore, inasmuch as there is no identity of the person who handed over the gold bars to Tapas Chakraborty. Further, the claim as to "not under CCTV coverage" does not inspire confidence, since it should also be a cooked one. When some of them are made to reveal identity of persons entering on a particular day, there was no difficulty even to make one to identify the said person who is reported to have delivered the gold bar at the factory premises of Gautam. Hence, the very fact of the gold bars reaching the factory premises of Gautam itself remains a mystery. Further, the seizure itself is also not beyond suspicion since, at the very first instance itself, the appellant produced a documentary evidence in support of having carried the gold. Statements are so recorded to ensure that at no place do we 63 Customs Appeal No.40004 of 2024 find any whisper about this documentary / material piece of evidence; but in any case we do not have to labour much on this as the original authority himself has disbelieved the statements based on which, the appellant was exonerated at least from the allegation of smuggling.
37.1 The requirements under the burden of proof are covered in Chapter VII of the Indian Evidence Act. Under the Indian Evidence Act, 1872, Sections 101 to 103 deal with the burden of proof in general, whereas Sections 104 to 106 deal with the situation where the burden of proof is placed on a specific individual.
37.2 The burden of proof is defined under Section 101 of the Indian Evidence Act: -
"Anyone who wants a court to rule on a legal right or responsibility based on facts he claims must first show that such facts exist. The second Section of the statute specifies that when a person is required to show the existence of a fact, that person shall also bear the burdenof proof.
As a result, a person seeking a favourable decision from the court must provide evidence in support of his case, according to this clause. The usual rule is that the party that asserts a truth bears the burden of proof, not the side that denies it."64
Customs Appeal No.40004 of 2024 37.3 Section 102 of the Indian Evidence Act reads as under: -
"Who bears the burden of proof -- In a suit or procedure, the person who would fail if no evidence was presented on either side has the burden of proof."
37.4 Section 103 of the Indian Evidence Act states:
"The burden of proof as to any specific fact is with the person who asks the court to believe in its existence unless any law provides that the burden of proof rests with any particular individual."
37.5 Section 104 of the Indian Evidence Act states that the burden of proof is on the person giving the evidence to prove the facts that must be shown in order for the evidence to be admissible.
38. From the foregoing, the initial burden of proof which was on the Revenue, stands undischarged. There is no primary evidence nor even any circumstantial evidence to assert that the appellant was found in possession of smuggled gold or that he was the responsible person for effecting the smuggling of gold in question into India. What could be gathered from many statements that were recorded and various Mahazar proceedings are that one Mr. Raju was alleged to have smuggled the gold bars from Bangladesh who was also alleged to have sold or handed the same to the appellant's representative, to be carried to Chennai after getting the foreign marks erased and cut into pieces at Gautam 65 Customs Appeal No.40004 of 2024 Chakraborty's factory. The identity of Mr. Raju has never been brought on record, neither the person who was alleged to have handed over these gold bars to Gautam Chakraborty's factory is forthcoming from the records before us and as such, the Revenue's allegation at the maximum against the Appellant could be that he had knowingly dealt with smuggled Gold which are liable for confiscation. But, the appellant could not be charged with smuggling activity as he was not intercepted while crossing the Customs Frontiers, and so, he cannot be charged for contravening the provisions of Section 111(d), (i),
(l) and (p) of the Customs Act, 1962.
Conclusion:
39. This is a case where the appellant has been penalized for an alleged activity which, according to the Revenue, has resulted in confiscation of the allegedly imported bits of gold. When, therefore, when a Show Cause Notice is issued by the DRI, a reasonable belief is required to be established before alleging any activity in the nature of smuggling. In the case of town seizure, the initial burden is always on the Revenue to prove as to what prompted it to reasonably believe that the gold in question were smuggled / of foreign origin.
40. Considering all the facts and attending circumstances, and by applying the standard proof of preponderance of probabilities, we are of the view that the Revenue has not proved that the gold bits seized from the appellant were of foreign origin. The seizure of the same is, therefore, not in accordance with the law.
66Customs Appeal No.40004 of 2024
41. Once the seizure is found to be invalid, all subsequent proceedings and consequent actions are bad in law, as held in the case of Dimondstar Exports Ltd. & ors. v. Director General of Income Tax (Investigation) [(2005) 278 I.T.R. 36].
42. Further, it has to be observed that Section 123, even assuming, is applicable, comes into play only if the ingredients for exercise of power under Section 110 are satisfied, as held in the case of Di Gold Designer Jewellery v. Commissioner of Customs [2021 SCC Online CESTAT 4213]. Hence, seizure of the gold as the case on hand is clearly abuse of the process of law.
43. In view of the peculiar facts of the case as discussed by us and in the light of the guidance set out by various judicial fora, we hold that confiscation of the gold bits from the appellant is bad in law, the Revenue has also failed to establish / prove that any of the gold bits confiscated from the appellants had any clear and conclusive marking as to its foreign origin and hence, the Revenue acted in a haste and without reasonable belief that the impugned goods were smuggled.
44. The appellants have questioned the leviability of penalty under Section 112 of the Customs Act on them. Section 112 authorizes imposition of penalty, obviously, for 'improper importation' which renders such goods liable for confiscation. However, the appellant could not be charged with smuggling or importation of the Gold Bits as that was not the allegation against him. Neither he was intercepted while crossing Customs frontiers. Rather he was intercepted in Kamaraj 67 Customs Appeal No.40004 of 2024 Domestic Airport while coming from Kolkata. From the analysis, as above, we are satisfied that the Revenue has not established that the goods in question were liable for confiscation in any manner known under the law. Nor has the Revenue placed any piece of evidence on record to even suggest that the gold bits that were seized had any marking as to their foreign origin and hence, there was no 'import' at all. We say so because, the assayer admits that the markings were erased which also stands supported by the employee of Goutham Chakraborty and hence, how the alleged markings could be deciphered by the revenue has not at all been explained. Consequently, when there was no import, then, there is nothing to allege as improper import. Hence, we are of the clear opinion that penalty under Section 112 not being automatic, cannot be imposed in the facts of this case, on the appellants.
45. In view of the above discussions, we are of the clear view that the impugned order in so far as the appellant before us is concerned, cannot sustain and hence, we set aside the same and allow the appeal with all consequential benefits, if any.
(Order pronounced in the open court on 29.11.2024) sd/- sd/-
(VASA SESHAGIRI RAO) (P. DINESHA) Member (Technical) Member (Judicial) gs