Custom, Excise & Service Tax Tribunal
Commissioner Of Customs Preventive - ... vs P.R.Mohanlal on 23 January, 2026
C/20837/2024
C/20592, 20593, 20594/2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 20837 of 2024
(Arising out of Order-in-Appeal No. COC-CUSTM-PRV-APP-34 to 37-
2024-25 dated 13.05.2024 passed by the Commissioner of Central
Excise (Appeals), Kochi.)
Commissioner of Customs
(Preventive) Appellant(s)
Customs Preventive Commissionerate,
Catholic Centre, Broadway,
Cochin - 682 031.
VERSUS
Shri P.R. Mohanlal alias Shaji,
Proprietor of M/s. Vajra Jewels,
Perumbillisseri House,
P.O. Perinchery,
Respondent(s)
Thrissur - 680 306.
With
(i). Customs Appeal No. 20592 of 2025
(Commissioner of Customs Vs. Shri M R Ranjith)
(Arising out of Order-in-Appeal No. COC-CUSTM-PRV-APP-34
to 37-2024-25 dated 13.05.2024 passed by the
Commissioner of Central Excise (Appeals), Kochi.)
(ii). Customs Appeal No. 20593 of 2025
(Commissioner of Customs Vs. Shri Jaison Baby)
(Arising out of Order-in-Appeal No. COC-CUSTM-PRV-APP-34
to 37-2024-25 dated 13.05.2024 passed by the
Commissioner of Central Excise (Appeals), Kochi.)
(iii). Customs Appeal No. 20594 of 2025
(Commissioner of Customs Vs. Shri Dinesh
Kumar)
(Arising out of Order-in-Appeal No. COC-CUSTM-PRV-APP-34
to 37-2024-25 dated 13.05.2024 passed by the
Commissioner of Central Excise (Appeals), Kochi.)
APPEARANCE:
Mr. Maneesh Akhoury, Assistant Commissioner (AR) for the Appellant
Mr. Bindusaran, Consultant for the Respondent
CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL)
HON'BLE MR PULLELA NAGESWARA RAO,
MEMBER (TECHNICAL)
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Final Order No. 20132 - 20135 /2026
DATE OF HEARING: 25.07.2025
DATE OF DECISION: 23.01.2026
PER : DR. D.M. MISRA
These appeals are filed by the Revenue against the Order-
in-Appeal No.COC-CUSTM-PRV-APP-34 to 37-2024-25 dated
13.05.2024 passed by the Commissioner of Central Tax and
Central Excise (Appeals), Kochi.
2. Briefly stated the facts of the case are that on the basis of
intelligence, the Customs Preventive officers on 16.10.2019
intercepted eight passengers who arrived from Chennai by train
at Thrissur Railway Station. Later they were taken to the office
of the Assistant Commissioner of Customs (Preventive) and
subjected to physical search in presence of panchaas and the
proceedings were recorded by drawing a mahazar dated
16.10.2019. During the course of search all the passengers
huge quantity of gold and Jewellery was recovered from the
passengers including gold cut pieces weighing 4046.300 gms
from Shri Ranjith M.R., one of the passengers which was kept in
a dark blue colored cloth waist belt with pouch in front, tied
around his waist inside the underwear. On necessary
investigation it revealed that Shri Ranjtih M.R. was working with
one Shri P.R. Mohanlal, owner of M/s. Vajra Jewels, brought the
gold in cut pieces from M/s. Swarna Shilpi, Chennai. As Shri
Ranjith could not produce any document about licit procurement
of the cut pieces of the gold and after being examined by the
certified Gold Assayer Shri C.N. Pradeep Kumar, about the purity
the gold cut pieces weighing 4046.300 gms which was found to
be 24ct., international value of Rs.1,40,14,146/- were seized on
the reasonable belief that the same was smuggled. Later as a
part of further investigation, statements of various persons were
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recorded under Section 108 of the Customs Act, 1962 from time
to time, documentary evidence analysed and on completion of
investigation, a show-cause notice was issued on 10.12.2020
proposing confiscation of the smuggled gold weighing 4046.300
gms under Sections 111(d) / 111(i) / 111(m) of the Customs
Act, 1962; penalty was proposed on various noticees under
Section 112 of the Customs Act, 1962. On adjudication of the
notices, the gold cut pieces totally weighing 4046.300 gms
seized from Shri Ranjith M.R. was absolutely confiscated under
Sections 111(d) / 111(i) / 111(m) of the Customs Act, 1962 and
penalty of Rs.25,000/- on Shri M.R. Ranjith under Section
112(b); penalty of Rs.1,75,000/- Rs.10,000/- on Shri P.R.
Mohanlal alias Shaji under Section 112(b) and Section 114(AA)
respectively; penalty of Rs.10,000/- on Shri Srambikkal Jaison
Baby under Section 114(AA) and penalty of Rs. 10,000/- on Shri
Dinseh Kumar under Section 114(AA); of the Customs Act, 1962
were imposed. Aggrieved by the said order of the adjudicating
authority, the above appellants preferred appeals before the
learned Commissioner(Appeals), who passed the following order:
i. I set aside the order-in-original No.167/2021-22 CUSTOMS
(PREV) dated 31.03.2022 passed by the Additional
Commissioner of Customs, Preventive Commissionerate.
ii. I order for the absolute release of 4046.30 gms of gold seized
under the Mahazar dated 16.10.2019 and confiscated under
Section 111(d), 111(i) and 111(m) of the Customs Act, 1962,
with immediate effect.
iii. I set aside the penalty imposed under Section 112(b) and
Section 114AA of the Customs Act, 1962, on the appellants.
iv. The appeals bearing Nos. 08/CUS/CHN/2022,
09/CUS/CHN/2022,10/CUS/CHN/2022 and 11/CUS/CHN /2022
are allowed with consequential relief.
Aggrieved by the said order, the Revenue is in appeal.
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3. During the course of hearing, the learned AR for the
Revenue has advanced the following submissions, summarized
as below:-
➢ The show-cause notice issued is not hit by limitation
prescribed under Section 110 read with Section 124 of
Customs Act, 1962 inasmuch as the period of limitation
prescribed under the Act has been extended under Section
6 of the Taxation and Other Laws (Relaxation and
Amendment of Certain Provisions) Act, 2020 till
31.12.2020 as circulated by the Board under
F.No.450/61/2020-Cus.IV (Part-1) dated 30.09.2020.
Reliance placed by the learned consultant for the
respondents on the Circular No.157/13/2021-GST dated
20.07.2021 relates to extension of period of limitation
under the CGST Act, 2017 deliberated by the GST Council
which is not relevant and not applicable to the facts of the
present case. The argument of the respondent that the
show-cause notice is barred by limitation cannot be
acceptable at this stage since the said point has not been
raised earlier.
➢ Even though the smuggled gold of foreign origin is always
in the form of bars bearing marking of the mint of the
country of origin, but in the present case, merely because
the gold was converted into cut pieces and do not contain
the foreign marking, it does not disprove that the gold is
not of foreign origin and smuggled one.
➢ Also, he has submitted that merely the goods were seized
far away from the international border itself, it will not hold
water as there is no dispute of the fact that gold was
brought from Chennai which has the airport as well as sea,
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international border. In support, he has referred to the
judgment of Hon'ble Kerala High Court in the case of Om
Prakash Khatri [2019(366) ELT 402 (Ker.)] and Hon'ble
Madras High Court in the case of CC, Chennai Vs.
Mohammed Ali Jinnah [2025(394) ELT 123 (Mad.)]
➢ The Department has discharged its burden under Section
123 of Customs Act, 1962 as when the gold was seized
from Shri Ranjith M.R., as he was not in possession of
documents to prove the legitimacy of gold since the goods
were of high value and in absence of documents, the
Department has, under the reasonable belief, effected
seizure of the gold thereby discharging burden cast on it.
The documents were later fabricated by issuing invoices by
M/s. Vajra Jewels, shop of Shri P.R. Mohanlal and by M/s.
Swarna Shilpi, Chennai to legalise the smuggled gold with
the help of Shri Jaison Baby a GST consultant, which is
evident from the statements recorded from him.
Statements of Shri Dinesh Kumar of M/s. Sayam Jewels
corroborates with the result of investigation that the goods
are not bona fidely sold or purchased indicating smuggled
nature of the goods.
➢ There are contradictions in the evidences produced by the
respondent as Shri Ranjith travelled to Chennai on
14.10.2019 whereas the invoice was issued by M/s. Vajra
Jewels was on 15.10.2019. The invoices issued reveals
that the transaction is about gold bullion and not cut
pieces. The invoices of 3240.090 gms issued by M/s.
Swarna Shilpi and 862.47 gms works out to 4102.56 gms
and the quantity of gold seized was 4046.300 gms. Also
the total quantity of 3240.090 gms and 793.47 gms works
out to 4033.56 gms against the quantity of 4046.300 gms.
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Thus, there is a difference in weight and identity of the
gold seized.
➢ The Assayer has certified the entire quantity of gold seized
4046.300 gms of 24ct gold whereas contrary to this, in the
invoices issued by M/s. Sayam Jewellers, it is indicated
that there is 69 gms of alloy / copper. All these
contradictions have not been considered by the learned
Commissioner(Appeals) in the impugned order.
➢ In his statement dated 26.02.2020, Shri Dilip Kumar,
partner of M/s. Swarna Shilpi, Chennai categorically stated
that he is not the owner of the gold seized from Shri
Ranjith M.R.; also Shri Ranjith in his statement dated
25.11.2020 stated that there is no connection between the
4046.300 gms of gold seized and the gold covered under
the voucher of M/s. Sayam Jewellers, Chennai. Therefore,
the gold in question has been illicitly procured by the
appellant and is not of Indian origin.
➢ In the case of M/s. Swarna Shilpi, Shri Dilip Kumar and
Shri Kamalesh Kumar, no appeal has been filed against the
Order-in-Original dated 24.02.2022. Thus, the impugned
order pertained to M/s. Swarna Shilpi, Shri Dilip Kumar
and Shri Kamalesh Kumar in so far as claims of gold to the
extent of not being of foreign original has attained finality.
➢ The learned Commissioner(Appeals) has not taken into
account the contradictions and submissions of persons of
M/s. Swarna Shilpi, M/s. Sayam Jewellers, Shri Ranjith
M.R., Shri Jaison Baby and Shri P.R. Mohanlal. There is
failure on the part of the respondents to provide licit
receipt of the impugned goods and the documents
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fabricated to substantiate its legitimacy is an attempt to
cover the entire transaction.
➢ None of the persons whose statements were recorded had
retracted at any point of time on the incident that has
taken place on 16.10.2019 and till the date of issue of the
show-cause notice dated 10.12.2020.
➢ The Ld. AR for the revenue discussing the facts and
circumstances of each of the below mentioned cases and
comparing the same to the facts in hand submitted that
the said judgments are not applicable to the present case.
i. Manisha Devi Jain [2019(370) ELT 401 (Tri. Kol.)]
ii. Nand Kishore Sumani [2016(333) ELT 448 (Tri. Kol.)]
iii. S.K. Chains [2001(127) ELT 415 (Tri. Mum.)]
iv. Ashok Kumar Agarwal [2017(348) ELT 555 (Tri.
Kol.)]
v. Kapildeo Prasad [2002(142) ELT 668 (Tri. Ko.)]
vi. Pragnesh R. Choksi [2015(330) ELT 542 (Tri.
Ahmd.)]
4. Per contra, the learned consultant for the respondents has
submitted that the basis of investigation on the so-called
intelligence gathered is of suspicious nature and has been
misleadingly projected as the reasonable belief for sustaining the
interception of suspects, search proceedings, seizures and
subsequent proceedings. The intelligence gathered is mere
hearsay and it is neither cohesive nor specific nor realistic
considering the fact that the meaning of the term 'intelligence
gathered' refers to validated data collected from known valid
sources and is neither gossip or general unvalidated information.
The requirements prescribed under the Preventive Manual in
Volume-II have not been adhered to.
5. The argument of the learned consultant are summarized as
below:
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➢ The DRI-1 containing the intelligence gathered which are
required to be filed has not been filed till date. The term
"Moosha" is the unverified colloquial term (used only by
very few goldsmiths / small jewellery manufacturers, in
certain pockets of Thrissur District) is to indicate that the
said goods is crude melted gold of Indian origin, derived
from the indigenous refining process by the local gold
refiners. Therefore, it is impossible to physically ascertain
if the said Moosha or cut bits of gold are of imported origin
or of 24 ct / 22ct / 18ct etc. The Moosha gold is said to be
cheaper than imported refined gold bullion. Moosha gold is
also said to be used as a means of payment to small job-
workers / manufacturers of gold ornaments in these areas.
This payment is also termed as 'Touch' payment i.e.
payment is made in Moosha gold / locally available gold,
instead of using cash or the expensive high quality
imported gold bars. Moosha gold is also said to be used as
a means to provide as raw materials in further
manufacture of gold jewellery by some local goldsmiths /
jewellers by some local goldsmiths / jewellers.
➢ The impugned show-cause notice also made an attempt to
tread into specific areas of the GST Act that are statutorily
not within the ambit of the Kochi Customs Preventive
Commissionerate jurisdiction. Prior to 12.09.2022, E-Way
bill was not required to inter-state or intra state movement
of gold as per Rule 138(14) of the CGST Rules, 2017,
goods under Chapter 71 are exempt from mandatory e-
way bill. However, from 12.09.2022, e-way bill generation
for transporting gold and other precious stone under
Chapter 71 has been made mandatory. In respect of e-
way bill, Rule 138 states that it is to be used by the person
causing such movement of goods or by the transporter.
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Hence, mis-use of the e-way bill during 2019 by the
Department is not correct.
➢ The interpretation on job work provisions / violations
under GST as alleged in the show-cause notice and
confirmed in the impugned order are solely within the
jurisdiction of the GST Department, even if taxable under
the GST on the supply of services by goldsmith / job work.
➢ The circumstances as reflected in the show-cause notice,
the seizures, mahazars, the Assayers Certificates and
statements are exaggerated and the quantification of the
demand are thoughtfully suspicious.
➢ Rebutting the assertion in the notice that the documents
such as stock register, ledger accounts, purchase bills,
cash books, balance sheets, sales register, job book
register etc. submitted by the respondents at a later date
along with other their statements were not considered by
the adjudicating authority on the ground that there are
contradictions in the statements and attempts to
manipulate through fabricated invoice etc. at a later date
to legalise the smuggled gold as proper and legal, he has
submitted that all these documents placed before the
authorities are real and authentic. These documents
statutorily pertain to GST compliance procedures and the
allegations by the Customs Department are baseless.
➢ The Department has failed to note that the supplies were
of indigenous gold cut pieces being evident from the tax
invoice-cum-delivery challan of M/s.Swarna Shilpi,
Chennai, which has suffered GST and reflected in the GST
returns during the same month. The documents do not
disclose that the cut pieces were of foreign origin nor the
said gold bore any foreign origin markings; also Assayer
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certificate had not certified the cut gold pieces to be of
foreign origin. The Assayer has only certified on
16.10.2019 that entire gold cut bits of 4046.300 gms is of
24 ct and only on that basis the illegally seized gold cannot
be considered as being of foreign origin or being smuggled.
➢ The gold bullions supplied by M/s. Sayam Jewellers,
Chennai under voucher declared the gold cut pieces as
22ct i.e. if and when it includes any of the 69 grams of
copper / alloy added into the said 793.470 gms of 24ct
gold cut bits. So, even if it is assumed that there is an
allegation of smuggling relating to seizure of 793.470 gms
gold cut pieces, it can only be against the suppliers of
4046.300 gms and not against the noticee, also is merely
an employee of the job worker or only a job worker.
➢ Overall, the transaction between M/s. Swarna Shilpi and
the manufacturer M/s. Vajra Jewels, if considered, the
validity of the said documents, invoices, bills etc. cannot
be questioned. M/s. Vajra Jewels supplies gold ornaments
of 22ct to M/s. Swarna Shilpi Jewellers under a GST invoice
under payment of GST. M/s. Swarna Shilpi had sourced
24ct gold bullions / gold cut bits from GST registered
dealers on payment of GST and supplied the same to M/s.
Vajra Jewels, then it is a job-work transaction with M/s.
Vajra Jewels. All these facts have been ignored and blown
out of proportion by the Customs Department.
6. He has explained the transaction involving the gold as
follows:-
➢ On 14.10.2019, Shri Ranjith M.R. carried 3481 gms
of their manufactured 22ct Indian origin gold
ornaments to M/s. Swarna Shilpi of Chennai, for
outright sale, based on the earlier oral orders placed
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on them by M/s. Swarna Shilpi. He was also carrying
the digital Tax invoice bearing the No.VJ/001/2019-
20 dated 15.10.2019, for 3481.250 gms of 22 ct
Indian origin gold ornaments valued at
Rs.1,29,01,590/- (including 3% GST of
Rs.3,75,774/-).
➢ While returning from Chennai, Shri Ranjith M.R. was
given 3240.090 gms of Indian origin 24 ct gold cut
bits by M/s. Swarna Shilpi along with the digital tax
invoice No.SA2410/2019-20 dated 15.10.2019 in
order to manufacture gold jewellery by M/s. Vajra
Jewels. So, until the said 24ct gold bits remain in
the possession of M/s. Vajra Jewels, the Indian origin
24ct gold cut bits are owned by M/s. Vajra Jewels.
All the 24ct gold cut bits of Indian origin, supplied to
Shri Ranjith M.R. of M/s. Vajra Jewels, were
purchased by M/s. Swarna Shilpi, from GST
registered dealers and on payment of GST. The
Order-in-Original dated 22.04.2024 also evidences
the fact that M/s. Swarna Shilpi have purchased the
said gold of Indian origin (supplied by them to M/s.
Vajra Jewels) from GST registered dealers like M/s.
Gajananda Jewellery Mart India (P) Ltd., M/s. Shiv
Sahai & Sons (India) Pvt. Ltd., M/s. Malabar Gold (P)
Ltd. as had originally been also stated by Shri Dilip
Kumar in his statement dated 19.02.2020.
➢ The ITC on this was availed by M/s. Swarna Shilpi
Jewellers. These facts are documented in the GST
records of the said registered dealers. The supply of
these 24ct gold cut bits are also recorded in the GST
records of M/s. Swarna Shilpi Jewellers and M/s.
Vajra Jewels too. Shri Ranjith M.R. also collected
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793.470 gms of 24ct cut gold bits and 69 gms of
copper / alloy from M/s. Sayam Jewellers of Chennai
on 15.10.2019, for further manufacturing of 22 ct
gold ornaments by M/s. Vajra Jewels, in future. The
Manufacturing Issue Challan of M/s. Sayam Jewellers
bearing No. MI049 dated 15.10.2019 was also given
to him and was in his possession, at the time of
interception by the Thrissur Customs Preventive
officers on 16.10.2019.
➢ Supporting the findings of the learned
Commissioner(Appeals), he has submitted that
multiple statements have been recorded from
various persons and the last two statements from
Shri Mohanlal and Shri Ranjith were obtained after a
huge gap; hence, rightly not relied upon by the
learned Commissioner(Appeals).
➢ The statement of Shri Dinesh Kumar, Shri Mohan Lal,
Shri Ranjith and Shri Jaison Baby were recorded
under threat and coercion and hence, cannot be
relied upon. All these persons have retracted their
statements soon after receiving the show-cause
notice.
➢ The Customs Department has not adhered to the
mandate procedure of using CCTV coverage or
videography investigating a sensationalized issue,
commencing from the raids and ending with forcibly
obtaining of tutored statements; hence, the
statements are not reliable piece of evidence.
➢ The Department has issued Circular F.No.04/149/65-
Cus-III dated 14.12.1965 guidelines concerning town
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seizures under the Customs Act, 1962. Since the
guidelines prescribed thereunder have not been
followed in the present case, the Department never
discharged the burden of proof with evidences in
establishing the fact that the seized gold has been
smuggled.
➢ The ownership of 3240.090 gms of 24ct gold cut
pieces given by M/s. Swarna Shilpi Jewellers to Shri
Ranjith on 15.10.2019 legally rests with M/s. Vajra
Jewels until the proportionate jewellery is
manufactured from it and returned to M/s. Swarna
Shilpi. The value of the said 3240.090 gms of 24 ct
gold cut pieces represents the value of a major
potion of payment previously received by M/s. Vajra
Jewels (in kind) for the gold ornaments that had
been sold by them to M/s. Swarna Shilpi Jewellers
vide Invoice No.VJ/001/2019-20 dated 15.10.2019
but was directly ploughed into the 3240.090 gms of
gold cut pieces. This fact has been endorsed by the
statements of Shri Dilip Kumar dt. 19.02.2020 who
said that the 999 purity gold was given to Shri
Ranjith on 15.10.2019 in the form of many pieces
and also in his statement dated 09.02.2020 stated
that 3240.090 gms of gold has been supplied to Shri
Ranjith on 15.10.2019.
➢ The show-cause notice is barred by limitation since
the date of the seizure was 16.10.2019 and as per
Section 110(2) read with Section 124 of the Customs
Act, 1962, the notice to be issued within 6 (six)
months from the date of seizure i.e. due date was
15.04.2020 which was extended to 14.11.2020 by
the order of the Commissioner dated 11.03.2020;
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however, the show-cause notice was issued on
10.12.2020 after a delay of one month and 25 days
from the date of expiry of actual date.
➢ The Taxation and Other Laws (Relaxation and
Amendment of Certain Provisions) Act, 2020 is not
applicable to the facts of the present case in view of
Circular No.157/13/2021-GST dated 20.07.2021.
Also the Department has not followed the guidelines
issued by CBIC vide Circular No.37/2019 dated
05.11.2019 effective from 08.11.2019. It is
deliberately violated by not following the procedure
of providing 'Document Identification Number (DIN)'.
7. Heard both sides and perused the records.
8. The issue involved in the present appeals filed by the
Revenue for consideration is: whether 4046.300 gms of gold cut
pieces seized under Mahazar dated 16.10.2019 from the
possession of appellant Shri M.R. Ranjith is liable for confiscation
and consequent actions on other appellants as held by the
adjudicating authority or absolute release of the gold as held by
the learned Commissioner(Appeals) is in accordance with law.
9. Undisputed facts of the case are that the appellant Shri
Ranjith along with 7 other passengers were intercepted at 07.30
hrs on 16.10.2019 who arrived by Train No.22639, Chennai-
Alleppey Superfast Express at the exit gate of Platform No.1 of
Thrissur Railway Station, on the basis of specific information that
they were carrying contraband goods which are liable for seizure
and confiscation under the provisions of Customs Act, 1962.
Thereafter the appellant Shri Ranjith along with other
passengers were subjected to physical search / examination in
presence of panchas and there was recovery of cut pieces of gold
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weighing 4046.300 gms from the possession of Shri Ranjith
which was found and kept in a dark blue colored cloth waist belt
with pouch in front, tied around his waist inside the underwear.
Gold was recovered from other accompanied passengers is not
subject matter of the present appeals. The said gold was later
subjected to examination by certified Gold Assayer who certified
the same to be of 24ct purity. Since the appellant Shri Ranjith
could not produce any document relating to the huge quantity of
gold cut pieces weighing 4046.300 gms valued at
Rs.1,40,13,146/- (international value) and at Rs.1,59,62,654/-
(market value), carried by him, the same was placed under
seizure. Later investigation was conducted recording statements
of various persons including statement of Shri P.R. Mohanlal,
Proprietor of M/s. Vajra Jewels for whom it is claimed that Shri
Ranjith used to bring gold from M/s. Swarna Shilpi, Chennai and
statements of partners of M/s. Swarna Shilpi, Shri Dilipkumar
and statement of Shri Kamaleshkumar, Shri Dinesh Kumar of
M/s. Sayam Jewels, Shri Jaison Baby, GST Practitioner recorded
under Section 108 of the Customs Act, 1962.
10. The adjudicating authority after a detailed analysis of the
documentary evidences and oral statements vis-à-vis the claim
of the appellant Shri P.R. Mohanlal, owner of M/s. Vajra Jewels,
Shri Ranjith and others, concluded that the appellant could not
discharge the burden of proof to establish that the gold is licitly
procured by them, following the principle of law laid down by the
Hon'ble Kerala High Court in the case of Om Prakash Khatri
(supra), later upheld by the Hon'ble Supreme Court on the
applicability of Section 123 of Customs Act, 1962. Consequently,
he has held that the gold cut pieces of 24 ct purity weighing
4046.300 gms was smuggled into India and the appellants were
engaged in the illegal act of smuggling gold from various persons
like jewellers / brokers in Chennai to M/s. Vajra Jewels and
taking back gold ornaments manufactured out of such smuggled
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gold for illegal sales / exchange with the same source of supply
without any documents. In appeal against the said order, the
learned Commissioner(Appeals) did not support the order of the
adjudicating authority holding that the principle of law laid in the
case of Om Prakash Khatri (supra) is not applicable / relevant to
the facts of the present case. He has observed that there are
contradictions in the Mahazar about the quantity of gold;
besides, he has inferred that even though the appellant had
furnished ledger accounts, proof of purchase of gold bullion,
purchase bills, cash books, extract of purchase registers, extract
of stock of gold bullion, balance sheets, sales register, job work
register to the Customs Department for investigation and found
that even in the case of 4046.300 gms of gold seized by
Customs, both supplier and receiver had accounted the receipt of
the same in the books of accounts and relevant GST had been
paid by them; these facts have not been considered by the
adjudicating authority and hence, the order directing confiscation
of gold cannot be sustained. Further, he has placed a doubt in
the veracity of the statements recorded observing that in the
event the statements recorded under Section 108 of the
Customs Act are considered to be voluntary, then there is no
requirement to record number of statements from the same
individual over a period of time which, in his opinion, caused
doubt on the authenticity and voluntary nature of the statements
and accordingly concluded that the statements were recorded
under pressure and coercion.
11. We find that both the adjudicating authority as well as the
learned Commissioner(Appeals) tried to sustain their findings
referring to the judgment of the Hon'ble Kerala High Court in the
case of Om Prakash Khatri (supra). Therefore, it is necessary to
appreciate the facts and the principle of law laid down in the said
case.
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C/20837/2024
C/20592, 20593, 20594/2025
12.1. To appreciate the ratio of the case facts of the case needs
to be visited. Brief facts of said are that on 04.02.2014, two
persons viz. Shri Surendra Singh and Shri Dhiraj Kumar Devasi,
both employees of M/s. Panna Gold Impex Ltd., Mumbai were
intercepted by the DRI at Vyttila in Ernakularm from whom gold
bars and pieces weighing 4430.730 gms, valued at
Rs.1,54,28,372/- along with gold ornaments weighing 5536.200
gms. valued at Rs.1,32,78,898/- were seized. Also, Rs.40,000/-
in cash alleged to be the sale proceeds of contraband gold were
recovered. The confessional statements of the apprehended
persons revealed involvement of one Shri Om Praksh Khatri,
Director of M/s. Panna Gold Impex Ltd. The adjudicating
authority in the said case directed absolute confiscation of the
gold bars and jewellery under Section 111(a), (d) and (m) read
with Section 120(1) of the Customs Act, 1962 and imposed
penalty of Rs.20.00 lakhs on Shri Om Prakash Khatri and
Rs.10.00 lakhs on M/s. Panna Gold Impex Ltd. under Section
114AA of the Customs Act, 1962. Appeals filed before the
Commissioner(Appeals) resulted in modification of the order of
the adjudicating authority by quashing the confiscation of the
gold bars and ornaments, which was later upheld by the
Tribunal. Revenue approached the Hon'ble High Court.
12.2. The Hon'ble High Court, analysing Section 123 of
Customs Act, 1962, observed as :-
12. Coming to the finding of the Tribunal regarding the
burden of proof, it would be necessary to examine the
scope of Section 123 of the Act, which deals with
burden of proof in certain cases. Section 123(2) in
particular, is pertinent, which reads thus :
"123. Burden of proof in certain cases. - (1) When
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 the seizure is from the possession
of any person,.-
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C/20837/2024
C/20592, 20593, 20594/2025
(i) on the person from possession the goods were
seized, and
(ii) ...........
(b) .................
(2) This section shall apply to gold and manufactures
thereof, watches and any other class or good which the
Central Government may by notification in the Official
Gazette, specify."
From a reading of the section, it is explicit that, when
any goods to which the Section applies are seized under
the Act under the reasonable belief that they were
smuggled goods, the burden of proof as to they were not
smuggled goods, shall be on the person from whose
possession the goods were seized. As far as gold and
watches are concerned, the Section applies directly, and
regarding other goods, the Central Government may by
notification in the official gazette specify. Hence, the
finding of the Tribunal that the burden is on the
Department to prove that the gold was smuggled,
cannot be accepted. The Tribunal has relied on the
decision on D. Bhoormall (supra) to justify that the
burden is on the Department. A reading of paragraph 34
of the judgment would be pertinent, where, it is stated
that it would be enough, if the Department furnishes
prima facie proof of the goods being smuggled stock. A
reading of Section 123 also require only a reasonable
belief as far as gold is concerned, that it was smuggled.
The gold was recovered from the possession of the two
individuals intercepted by the DRI, who were not able to
give a satisfactory explanation to upset the reasonable
belief entertained by the DRI officials who recovered
huge quantity of unmarked gold from the persons
intercepted. In fact the statements made by the
intercepted individuals further fortified the belief
entertained by the officials. The statement of the
carriers of the gold under Section 108 of the Act, can be
safely relied upon by the Department to proceed against
them. The decision in Shri Ganesh Enterprises (supra)
relied on by the Tribunal is not applicable to the case,
because the said decision deals with confiscation of
non-notified goods and not gold or other notified goods.
.........
.........
18. We have considered the decisions relied on by both sides and are of the opinion that in case of seizure of gold, even without markings, the burden is upon the person, who has custody of the gold, under Section 123 of the Act, to prove that the gold was legally acquired. The statement recorded under Section 108 of the Act could be safely relied upon in the proceedings against respondents. In K.I. Pavunny v. Assistant Collector, Page 18 of 24 C/20837/2024 C/20592, 20593, 20594/2025 (1997) 3 SCC 721 = 1997 (90) E.L.T. 241 (S.C.) the Hon'ble Supreme Court has held that a person summoned under Section 108 of the Act is "not the person accused of an offence" for the purpose of Section 24 of the Evidence Act. The primary question for consideration in that case was whether the retracted confession statement of the appellant is inadmissible in evidence under Section 24 of the Evidence Act. It is observed that even though the Customs officers have been invested with many of the powers, which an officer-in-charge of a police station exercises, while investigating a congnizable offence, they do not, thereby become police officers within the meaning of Section 25 of the Evidence Act and so the confessional statement by the admissible in evidence against them and it was ultimately held by the Hon'ble Supreme Court that the prosecution has proved the case based on the confession of the appellant given in Ext.P4 under Section 108 of the Evidence Act.
19. The unmarked gold recovered from the possession of two persons and their statements as to the source of the gold was sufficient to have a reasonable belief that the gold is smuggled. The two persons who were carrying the gold had nothing in their possession to prove the legitimacy of the gold they carried. The fact that the gold bars and pieces did not have any marking on them is suspicious and it points to a concerted effort to erase the markings on them. The burden under Section 123 which is only of a reasonable belief; is effectively discharged by the Department who initiated action on the basis of the seizure and the recorded statements of the detained persons. The mere fact that the interception and seizure was not affected in an international border or near an airport or seaport is irrelevant, since the statements of the intercepted persons clearly indicate that they were asked to avoid such means of transport and stick to the normal modes of public transport. There can also be no presumption drawn that the carriers of smuggled gold after the gold reaches the country would only resort to commutation by air or sea. The persons from whom the gold was seized disowned the same and said that they were mere carriers of Om Prakash Khatri, who accepted that the gold seized belonged to his Company. Then the onus to prove that the gold was not smuggled, so as to upset the reasonable belief entertained by the Department shifted and squarely rested on his shoulders. The gold bars and pieces were subjected to chemical examination which revealed that they were of 99.8% purity. The Tribunal ignored this aspect and referred to the purity of the ornaments; which was not an issue before it.
Page 19 of 24C/20837/2024 C/20592, 20593, 20594/2025 .........
.........
21. The assertion was that the gold found on the two employees were that purchased by the Company at Mumbai; which details are available in the registers maintained by the Company. The stock of refined gold and gold ornaments as seen from the stock register produced at the time of investigation substantially varied from the abstracts of the stock registers produced before this Court, where Om Prakash Khatri approached for anticipatory bail. The explanation offered for the anomalies was that some gold possessed by sales men were not accounted for. This clearly belies the veracity of the registers produced in the course of investigation. Further the specific statement in the reply was that the gold seized were purchased from 12 authorised bullion dealers in Mumbai. On examination of the records produced, the adjudicating authority found that the gold purchased from these parties were accounted in the stock register for standard gold, while the gold seized was seen to have been released from the stock register for refined gold. However there was no transfer of gold from the stock register for standard gold to that of refined gold. There was also no gold sourced from outside as entered in the stock register for refined gold. This totally demolish the contention of the appellants that the gold seized was that purchased at Mumbai. The registers produced and the transactions alleged did not tally nor did the quantity seized and that seen from the alleged Travel Authorisation Vouchers. The records maintained were vague, incomplete and incorrect justifying the allegation of the Department that they were fabricated. The transactions were shrouded in mystery and were not transparent and exact, especially considering the business of precious metal. The appellants hence clearly failed to discharge the onus of proof cast on them by Section 123.
13. On a plain reading of the aforesaid judgment, it is clear that burden of proof under Section 123 of the Customs Act, 1962 in case of smuggled gold is always on the Department to establish that the gold was smuggled has not been accepted. It is observed that when the gold was recovered from the possession of two persons intercepted by DRI, who could not able to furnish satisfactory explanation to offset the reasonable belief entertained by the officials who recovered huge quantity of Page 20 of 24 C/20837/2024 C/20592, 20593, 20594/2025 unmarked gold from the persons intercepted, the burden rest on the Department is discharged. Further, it is ruled that merely because of the fact that the seizure is not effected near the international border or near the airport or sea port, cannot lead to any presumption that the gold was not smuggled one. Further their Lordships, analysing the claim of the persons from whom the goods were seized that the goods were licitly procured by purchasing the same from a company at Mumbai, and adduced evidence in the nature of details of the transaction recorded in the register maintained by the company, the stock registers produced before the court, observed that there is lot of discrepancies in the claim of the appellant and vis-à-vis stock registers of refine gold maintained by the company, hence the burden was not discharge.
14. While observing that the aforesaid judgment of Kerala High Court is not relevant to the case, the learned Commissioner(Appeals) observed that the in the instant case, the appellant had provided relevant documentary evidences to prove that the goods were not smuggled and the source of supply of seized goods is also known through the chain of events. In other words, the learned Commissioner(Appeals) referring to the various registers, extracts, stock register of gold bullion, balance sheet, job work register etc. produced by the appellant, without discussing/analyzing the relevant entries by which the gold cut pieces weighing 4046.300 gms recovered from the possession of Mr. Ranjith is duly accounted for and the invoices that were raised before and after the transaction of gold seized as pointed out by the adjudicating authority. He has observed that the said records produced disproves the fact that the gold seized was locally procured and not smuggled. We are of the view that without analysing the documentary evidences by the learned Commissioner(Appeals) and merely making a sweeping statement that the cut pieces of gold seized from the Page 21 of 24 C/20837/2024 C/20592, 20593, 20594/2025 possession of Shri Ranjith has been duly accounted in the books of accounts of the supplier M/s. Swarna Shilpi, Chennai and M/s. Sayam Jewellers cannot be sustained particularly when the GST practitioner has categorically stated and admitted to have fabricated the documents. The statement of Shri Jaison Baby dated 04.02.2020 cast a doubt on the records which reads as below:-
.........
However, the said invoices that means Invoice No. SA2410/2019-20 dated 15-10-2019 is prepared for effecting a mutual transaction with tax invoice No. VJ/001/2019-20 dated 15-10-2019. As per the tax invoice No. VJ/001/2019-20 dated 15-10- 2019, it is seen that Vajra Jewels sells gold ornaments to Swarnashilpi. To your query whether there were any such types of sale of gold ornaments from Vajra Jewels, I submit that no such sales directly since Vajra Jewels is working on Job work basis. As required by you, I explain in this regard that, the above mentioned Invoice No. VJ/001/2019-20 dated 15-10-2019 of My Vajra Jewels and Invoice No. SA2410/2019-20 dated 15-10-2019 of Swarnashilpi were fabricated documents prepared to escape from the Customs Act, and to legalize the seizure of 4046.300 grams of gold. To your query that whether i am aware that such fabrication of documents are illegal, I submit that, I have only prepared an invoice or Bill as directed by Sri Mohanlal and accordingly the Tax Invoices pertains to the seized gold by the Customs was fabricated by Swarnashilpi, sowcarpet, Chennai, but I do not have any direct role in it. The stock register submitted by Sri Mohanlal along with his statement on 02-12-2019 was prepared my me.
Therefore the finding of the learned Commissioner(Appeals) that the relevant documents such as ledger accounts, proof of purchase of gold bullion, purchase bills, cash books, extract of purchase registers, extract of stock of gold bullion, balance sheets, sales register, job work register produced by the appellant before the Department justifies the licit nature of the gold, without analysing and co-relating the Page 22 of 24 C/20837/2024 C/20592, 20593, 20594/2025 entries as held by the adjudicating authority, in our opinion, cannot be sustained. Consequently, the matter needs to be remanded to the learned Commissioner(Appeals) to examine the said evidences. viz. relevant ledger accounts, proof of purchase of gold bullion, purchase bills, cash books, extract of purchase registers, extract of stock of gold bullion, etc.
15. Learned consultant for the respondents raised various other issues which were not raised before the authorities below including the issue of time bar in issuing the show-cause notice to the respondents. The learned AR for the Revenue has vehemently opposed to such contention of the learned consultant, submitting that since such a ground was not raised earlier before the authorities below, and the present appeals are filed against the Order of the Commissioner(Appeals) by the Revenue and no cross objection has been filed by the Revenue, it should not be entertained. However, responding to the said argument, he has submitted that the show-cause notice was issued on 10.12.2020 and covered by Section 6 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, where the time limit, due to Covid, has been extended till 31.12.2020 and the circular cited by the learned consultant for the respondents relates to GST issues and not relevant to the present case. We find merit in the contention of the learned AR for the Revenue. Consequently, the time bar issue raised by the respondent is rejected and other issues not raised earlier have also not been considered.
16. In the result, the impugned order is set aside and the matter is remanded to the learned Commissioner(Appeals) to analyse / decide the issue afresh taking note of the above finding and the grounds of appeal raised by the Revenue. Needless to mention that a fair opportunity be given to the respondents to present their case. As far as practicable the de Page 23 of 24 C/20837/2024 C/20592, 20593, 20594/2025 novo proceeding be completed within a period of three months from the date of receipt of this Order. Revenue's appeals are disposed of by way of remand.
(Order pronounced in Open Court on 23.01.2026) (D.M. MISRA) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) Raja.......
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