Prasanta Sarkar Vs Commissioner of Customs (Preventive) (CESTAT Kolkata)

Conclusion: Confiscation of gold and the imposition of penalties was quashed due to the absence of a recorded reasonable belief that the gold was smuggled as mere suspicion or the presence of foreign markings on gold did not establish illegal importation, especially when assessee had provided documents to support their claim of legitimate possession.

Held: Customs Preventive Branch had received specific information that smuggled gold of foreign origin was being transacted at M/s. Gouri Gold House. Acting on this tip, a team of Customs officers, accompanied by two independent witnesses, conducted a search of the premises. During the search, they recovered 12 pieces of yellow metal, believed to be gold of foreign origin, along with purchase bills, sales records, and a mobile phone. Assessee was unable to produce list of documents for the gold, leading to its seizure under Section 110 of the Customs Act, 1962. The gold was later inventoried and seized at the Customs House, and assessee recorded a voluntary statement. In his statement, assessee admitted that he had purchased some of the gold without proper documents, while other pieces were acquired through legitimate channels. He also claimed that the gold was purchased from local suppliers. Adjudicating Authority ordered the absolute confiscation of the gold and imposed penalties on both assessee and his brother who was also involved in the business. Assessee challenged the order before the Commissioner of Customs (Appeals), who dismissed the appeal as time-barred. Assessee contended that the seizure was invalid due to the absence of a recorded “reasonable belief” by the Customs officers that the gold was smuggled.  submitted that such a belief was a crucial safeguard against arbitrary seizures and must be explicitly documented, as per Circular No. 01/2017.Assessee further contended that they had produced documents to support their claim of legitimate possession of the gold, thereby discharging their burden of proof under Section 123 of the Customs Act. Revenue argued that the gold was notified goods under Section 123 of the Customs Act, and the burden of proving licit procurement lay with assessee. CESTAT observed that the seizure memo did not record any “reasonable belief” that the gold was smuggled, as required under Section 110 of the Customs Act. Tribunal noted that the absence of such a belief rendered the seizure proceedings invalid. It was held that assessee had produced documents to support their claim of legitimate possession, and there was no evidence to prove that the gold was smuggled. Tribunal also found that the provisions of Section 111(b) and 111(d) of the Customs Act, which deal with the confiscation of goods imported in violation of specified routes or prohibitions, were not applicable in this case. Penalty as well as the confiscation of gold and the imposition of penalty was quashed and the CESTAT held that the impugned order was unsustainable in law. Tribunal noted that mere suspicion or the presence of foreign markings on gold did not establish illegal importation, especially when assessee had provided documents to support their claim of legitimate possession.

FULL TEXT OF THE CESTAT KOLKATA ORDER

This is second round of litigation. In earlier round of litigation matter was remanded back to Ld. Commissioner (Appeal) to decide the issue on merits.

2. The facts of the case are as under:

“By way of these appeals, the appellants have challenged the confiscation of the impugned goods and imposition of penalty on them.

2. The facts of the case are that specific information was received by the officers of P & I Branch, CC(P), WB, Kolkata that smuggled gold of foreign origin, after being smuggled into India is transacted at M/s. Gouri Gold House, 11/A/1, K.B. Basu Road, Barasat, near Allahabad Bank. The information was brought to the knowledge of the Assistant Commissioner of Customs, P & I Branch, CC(P), WB, Kolkata who directed Customs officers to form a team headed by the Superintendent of Customs, p & I Branch. The team reached the spot i.e. M/s. Gouri Gold House at Barasat at about 16.00 hours on 24/10/2016. Meanwhile two independent witnesses were called by the Customs officers. The officers informed the witnesses in brief about the specific information received and requested them to witness the search operation based on the information and they agreed to the same. The officers on reaching the premises of M/s. Gouri Gold House asked for the owner of the said premises. A person named Shri Prasanta Sarkar came forward and claimed to be the owner of the said premises. The officers introduced themselves to the owner and also informed him about the purpose of visit, which was understood by him. The officers showed him Search Warrant issued by the proper authority. Owner, Shri Prasanta Sarkar allowed the officers to conduct the search by putting his signature over Search Warrant. The officers first offered the owner to search themselves, but the owner refused to do so.

3. The officers then searched the said premises in presence of the owner and two independent witnesses. During search 12 (twelve) pieces of yellow metal believed to be gold of foreign origin of total weight 1218.690 Grams of value Rs.38,13,783/-(Thirty Eight Lakh Thirteen thousand Seven Hundred Eighty Three) only (@ Rs.3,129.412 for 1 Gram) were recovered. The officers marked the recovered items with a marker serially from ‘1‘ to ‘12‘ for the purpose of identification. Details of the recovered goods are as follows:-

(1) 01 (one) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “DFI FINE GOLD 100 g 99.5” of weight 100.01 grams,

(2) 01 (One) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “DFI FINE GOLD 100g 99.5” of weight 100.03 grams,

(3) 01 (One) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “DFI FINE GOLD 100g 99.5” of weight 100.00 grams,

(4) 01 (one) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “Valcambi Suisse 100g gold 995.0 ESSAYEUR FOUNDER” OF WEIGHT 100.01 grams,

(5) 01 (one) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “Valcambi SUISSE 100g 995.0 ESSAYEUR FOUNDER” of weight 100.01 grams,

(6) 01(One) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “Valcambi SUISSE 100g 995.0 ESSAYEUR FOUNDER” with serial number AA419935 of weight 100.00 grams,

(7) 01 (One) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “SUISSE 100g 995.0 ESSAYEUR

4. FOUNDER” with serial number 236704 of weight 100.00 grams,

(8) 01 (One) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “HERAEUS.SA. Switzerland 100g MELTER ASSAYER 995.0” with serial number AF2905 OF WEIGHT 100.03 grams,

(9) 01 (One) piece of yellow metal biscuit believed to be gold of foreign origin having inscription as “UBS 100g GOLD 995.0 Switzerland MELTER ASSAYER” with serial number 012908 (serial number tried to Erase by beating it) of weight 100.01 grams,

(10) 01 (One) piece of yellow metal biscuit of medium size believed to be gold of foreign origin having inscription as “Valcambi SUISSE 100g 995.0

ESSAYEUR &nbsp FOUNDER” with serial number AA123297 of weight 50.02 grams,

(11) 01 (One piece of yellow metal biscuit of medium size believed to be gold of foreign origin having inscription as “Valcambi SUISSE 100g 995.0 ESSAYEUR FOUNDER” with serial number AA123294 of weight 50.02 grams,

(12) 01 (one) cut piece of yellow metal bar believed to be gold of foreign origin having inscription as “ARGOR.SA” of weight 218.54 grams, alongwith one file containing purchase bills (Pages 01 to 18), Exercise book containing sales record (pages 01 to 91, entry in pages 03 to 86 and rest is blank) 01 Nokia Mobile-Model 1110i, IMEI No.-357697/01/484808/1, With SIM card having Mob.No.7278638554 (AIRCEL) of NCV form the possession of the owner namely Mr. Prasanta Sarkar, the said Noticee No.1. The Customs Officers asked the owner to produce licit documents in connection with the said recovered yellow metal believed to be gold recovered from his premises, but he failed to produce the same. Thereafter, the Customs officers served one spot Summons under

5. Section 108 of the said Act to Mr.Prasanta Sarkar, and also requested two independent witnesses to accompany them to P&I Branch, CC(P), W.B., Kolkata, Custom House, at 15/1 Strand Raod, Kolkata alongwith recovered goods for other customs formalities as the same was not possible at the spot. The Customs offices along with Shri Prasanta Sarkar and two independent witnesses left the spot and reached Custom House, 15/1, Strand Road, Kolkata at about 19.00 hours on 24/10/2016.

4. At Custom House the officers inventories the recovered goods in presence of the owner and two independent witnesses and further seized the yellow metal believed to be gold of foreign origin, documents and one Mobile phone, considered to be relevant by the officers for further investigation of the case, under Section 110 of the said Act vide Seizure Case

No.05/IMP/CL/GOLD/P&I/CCP/WB/2016-17&nbspdated
24/10/2016 liable to confiscation under Section 111(b), 111(d) of the said Act. A copy of inventory was handed over to the said Noticee No.1.

5. Voluntary statement of Shri Prasanta Sarkar was recovered under Section 108 of the Customs Act, 1962 before the Superintendent of Customs, P & I Branch, CC(P), W.B., Kolkata on 24/10/2016.

6. In his voluntary statement dated 24/10/2016 Shri Prasanta Sarkar had admitted that he is the owner of the jewellery shop named M/s. Gouri Gold House located at K.B. Basu Road, Barasat since 08 years; that his family consists of his father aged 65 years, mother aged 61 years, wife aged 32 years, daughter aged one and half years and brother aged 33 years; his shop is in partnership with his younger brother Shri Simul Sarkar; he purchases gold with valid documents from M/.s VICKY JEWELLERY WORKS PVT.LTD. 12 Syakra Para Lane, Bowbazar & M/s. Paul Gold House and Sons, 12/1 Syakra Para Lane, Bowbazar; that he had also purchased the gold biscuits without any documents form them; that the exercise book recovered from his shop premises showing the same records is his own and written/maintained by his staff; that some of the gold sold by him is through valid documents and rest is without any papers; that three pieces among the recovered gold from his shop premises during search operation on 24/10/2016 had been purchased on valid documents; that the file recovered from his shop premises showing purchase bills is his purchase documents of gold and he had put his signature on each page; that he had a passport and had last visited Bangladesh one and half years ago to attend his cousin‟s marriage.

7. That, an offence has been committed in violation of Section 7 (C) read with Section 11 of the said Act and hence seized the above recovered goods under Section 110 of the said Act, on the reasonable belief that the same had been smuggled into India and are liable to confiscation under Section 111(b) & 111(d) of the said Act. The persons engaged in this case are liable to be prosecuted under Section 135 of the said Act.

8. Thereafter, statements of the appellants were recorded. A show cause notice was issued to the appellants for confiscation of the 12 pieces of gold recovered from the search and for imposition of penalty.

9. After affording two opportunities the adjudicating authority held absolute confiscation of the gold in question and held the gold in question liable for confiscation and imposed penalty on both the appellants.”

3. The said order was challenged before the Ld. Commissioner (Appeal) who dismissed the appeal as time barred. On appeal before this Tribunal, this Tribunal remanded the matter back to the Ld. Commissioner (Appeal) vide Final Order No. 77416-77417/2023 dated 3^rdNovember, 2023 to decide the issue on merits considering the submissions made by the Ld. Counsel for the appellant and the Ld. Commissioner (Appeal) passed the impugned order affirming the order passed by the Ld. Adjudicating Authority.

4. Aggrieved from the said order the appellant is before me.

5. The Ld. Counsel for the appellant submits as under:

“As far as the reasonable belief of the officer is concerned the same hasn‟t been formed while executing the seizure in terms of Section 110 of the Customs Act and the same is evident from the Seizure List itself. Reasonable belief is the only safeguard available against the indiscriminate seizure against any person and absence thereof makes the entire seizure proceedings bad in the eyes of law.

The absence of reasonable belief clearly makes the instant seizure proceedings vitiated in nature which in turn makes the entire SCN proceedings and its consequent adjudication thereto bad in the eyes of law. Therefore there arises no question for sustenance of the impugned Order directing penalty as well as confiscation of the seized goods. Hence, the Impugned Order is ipso facto illegal and liable to be quashed.

The case of Ajit Bhosle reported in 2020 (374) E.L.T. 814 (Tri. – Kolkata); “Seizure – Gold seized on suspicion that it was smuggled – Seizure of gold in cut pieces having no marking and of different purity from melting house – Submission of documentary evidence in support of lawful possession by claimant – Not controverted in investigation – Claimant duly discharging his burden of proof – No evidence documentary or otherwise adduced by Department to show that gold illegally imported – Gold freely imported in country and abundantly available in market – Seized gold cannot be held to be smuggled – Doubt and suspicion can invite investigation but not sufficient for penal action – Sections 111, 112 and 123 of Customs Act, 1962.”

The case of Om Sai Trading reported in 2020 (372) E.L.T. 542 (Pat.)

“Reason to believe – Meaning and scope – “Reason to believe” not the subjective satisfaction of the officer concerned but to be exercised in accordance with restraints imposed by law and such belief must be that of an honest and reasonable person based upon reasonable grounds – Reasons should either appear on the face of the notice or must be available on the materials which had been placed before him – Section 110 of Customs Act, 1962”

Circular No. 01/2017 minutely stipulates the process for recording of reasonable belief of the seizing officer both in seizure List as well as Panchnama separately but as is the case of the appellant it is seen that the seizing officers have certainly failed to comply with such circular thereby rendering the seizure and the subsequent SCN proceedings thereto bad in the eyes of law. Thus the Impugned Order arising out of such conjectures & surmises is beyond the purview of law

The key element U/s. 123 of CA,’62 is ‘reasonable belief, the officer exercising its reasons of believe must be acquainted of the reasons to belief that the same is illegally imported into the country whereof mere possession cannot be a factor to determine the same and even the same must be factor to be exercised over and above reasons to suspect, if the proper officer exercising jurisdiction U/s. 110 of CA,’62 acts on preliminary suspect of being illegal importation must come up with cogent reasoning and/or evidences thereof to substantiate such. In the present case, there is no such finding being adhered to whereof it can at times, thus, until or unless, it is on record to prove credible evidence to show the origin of the so-seized goods, the point of purity can only create an assumption and presumption, in corollary whereof, confiscation is not at all warranted.

Moreover, the appellant in his best of capacity had explained the purports of the subject gold and had also produced certain documents in his claim‘s support thereby discharging his onus in terms of Section 123 of the CA, ‘62 which makes the goods subject to release. Moreso, there is nothing on record to prove the smuggled character of the goods so seized. The Hon‘ble Bench may be pleased enough to consider the following case laws.

Madhukar Sonaba Bhagat reported in 2019(368) E.L.T. 990 (Tri.- Kolkata) whereof it has been held that “Gold of foreign origin- Burden of proof-Reasonable belief, absence of-Gold seized at accused‘s shop in the city and not while being smuggled either at Port or at Airport-Seizure based on information received and for non-availability of documents pertaining to gold, in shop at time of investigation-Nothing on record to suggest that pieces seized having any foreign markings-Also, documents produced to show how accused came in possession of gold and documents, on investigation, found to be genuine-Further, Commissioner refrained from imposing any penalty under Section 114AA of Customs Act, 1962- No reasonable belief for seizure of gold and Currency hence confiscation thereof and imposition of penalty under Section 112 , Customs Act,

11. 1962, not sustainable-Impugned order set aside-Section 111 and 123 of Customs Act,1962”. Reliance is also placed upon the case law Raj Kumar Jaiswal reported in 2006(204)E.L.T.561(Cal)

The Hon’ble Bench may be pleased enough to consider that though some gold carries foreign inscriptions however, the same does not specifically mean that the same has been illegally imported specially when the case is made in the vicinity of the city. Reliance is placed upon the case of S. K. Chains wherein the Hon’ble Tribunal had held the following-:

“Admission of purchase of foreign marked gold biscuits from open market without receipt not indicates that gold under seizure is illegally imported, there being no Central Act in existence requiring maintenance of documents indicating such receipts-Section 110 of the Customs act, 1962.”

In the present case it has been alleged that authenticate bills were produced with respect to three gold bars of 100 grams only to misguide the officials and hide the fact that the appellants were involved in illegal trade of smuggled gold. Now such baseless allegation arises from the fact that the investigating authority has simply failed to negate the document so produced and no contrary evidence could be brought

12. forth against your appellant to establish their role in forging the same. Despite the said fact, penalty in terms of Section 114AA of the CA, 62 has been imposed upon the appellants.

It is astonishing as to how the documentary evidence so produced for purchase of gold in the instant case were investigated and cross verified with other persons as well. Despite finding the same to be legitimate and correct the investigating authority has concocted a story wherein the appellant is alleged to have produced legitimate documents with regard to 3 gold bars just to misguide the investigating officers. No cogent reasoning has been put forth by the adjudicating authority as well so as to prove the alleged role of the appellants that makes them liable for penalization in terms of Section 114AA of the CA, ‟62. As regards for the rest gold (9 pcs) Shri Prasanta Sarkar had duly deposed the facts pertaining to procurement of the same which remains undisputed by any contradictory statement or finding.

The appellants state that mere presence of foreign marking in gold does not ipso facto establishes that the said gold bar is of foreign origin and has been illegally imported. It has been held in the case of SANJEEB KUMAR @ PAPPU KUMAR reported in 2018 (369) E.L.T. 1177 (Tri.-All.) that:- “Merely on the basis that recovered gold bearing foreign markings, it cannot be

13. presumed that the same are of third country origin and restricted”.

For that it is ought to be considered that the appellants cannot be brought under the domain of Section 114AA of Customs Act,‘62 which deals with situation of intentionally making or using declaration statement or documents which is false or incorrect in the transaction of any business for the purpose of Customs Act. The said Section is intended to penalize situation where there are paper transaction without any actual import or export of goods. In the present case, the department has no case that the transaction was paper transaction only and no goods were imported in the instant case and therefore, penalty imposed under Section 114AA of the Customs Act, ^„62 upon the appellants is not at all warranted

It is essential to be stated that the present appellants are in no way engaged illegal importation of any contraband goods. Moreover, there is no evidence in the present case so as to suggest that they have omitted or committed any act which renders them liable to be penalized in terms of Section 114AA of the CA,‘62.

It is ought to be appreciated that there is practically no ingredients available with the investigating authorities so as to penalize the appellants under Section 114 AA of the CA,‘62. There is no case

14. that the present appellants have done any act which is specified under Section 114AA of the C.A.‘62 in other words there are no ingredients to invoke Section 114AA of the CA, ‘62 against the appellants. The appellant‘s case gains force from the ratio of the judgments/decisions of the case laws- i) Jai Balaji Industries –Vs- Commissioner of Customs, Visakhapatnam reported in 2018 (361) ELT 429 (AP) and ii) Sameer Santosh Kr. Jaiswal –Vs-Commissioner of Customs (Import-II), Mumbai reported in 2018 (362) ELT 348 (Tri.-Mum.).

It is ought to be appreciated that the functioning of the section 111(b) of CA,’62, carries its key element as ‘any goods imported’ in violation of specified route and in the present case, the enquiry officer, is unable to furnish any evidence whereof, it can be stipulated the so-seized goods when seized was under proper reasonable belief that the same has been illegally imported.

Section 111(d) of CA,’62, carries its key element as ‘prohibition being imposed by any act or any other law for the time being in force’ of any goods which is imported or attempted to be imported. In the present case, gold being the article of seizure, it is ipso facto clear from the statute that such item is importable subject to conditions as is imposed and the appellant

15. has already deposed the mode and method of procurement of the subject gold.

Further, it is apt to be mentioned that no confessional statements has been made by the appellants herein or by any other persons in course of investigation which might in any way show that the appellants were involved in illegal importation of foreign origin. Though the gold bars bore inscriptions however, the same does not in any way prove that the appellants have smuggled it or illegally procured it. No evidence has also been adduced to the effect to prove the mens rea of the appellant in the alleged act of smuggling. Hence, the Order upholding the confiscation of goods as well as imposition of penalty is absolutely bad and perverse and the same is liable to be quashed. In terms of the said provision, ^„knowledge‟ of the confiscable nature of the goods is key element for invocation thereof. From the Statements of the appellants, nowhere it appears that the appellants dealt in smuggled goods. Hence, there is no ingredients present in the statement which might in any way show that they engaged in illegal import of goods.

The Ld. Commissioner (Appeals) has failed to appreciate the direction provided in Final Order dated 03.11.2023 in its true spirit and thus, has passed Order dated 15.12.2023 beyond the scope of the direction

16. provided in Order dated 03.11.2023 and accordingly, the same is liable to be set aside and quashed.”

6. On the other hand Ld. Authorized Representative supported the impugned order and submits that as goods in question are notified goods under Section 123 of the Customs Act, 1962 and owners of procurement of the said goods through elicit manner cast upon the appellants failing which goods shall become the restricted goods and same is liable to be absolute confiscation as held by the Hon’ble Delhi High Court in the case of Commissioner of Customs (Export) Vs. Ashwini Kumar Alias Amanullah in Custom Appeal No. CUSAA 37/2021 & CM APPL. 34847/2023.

7. He also relied on the decision of Sunny Kakkar Vs. Principal Commissioner of Customs vide Final Order No. 50-108/2023 dated 06.02.2023 and Kashi Kumar Aggarwal Vs. Commissioner of Customs (Preventive) vide Final Order No. 50387/2023 dated 23.03.2023. Rameshbhai Lakhabhai Patel vide Final Order No. A/10925-10926/2022 dated 05.08.2022 and Commissioner of Customs, Patna Vs. Amar Kishore Prasad, 2013 (298) ELT, 711 (Pat).

8. Heard the parties. Considered the submissions.

9. I find that in this case the goods have been seized as per the seizure memo. For better appreciation of the records, the seizure memo is enclosed herewith.

10. As per the seizure memo to confiscate the goods under Section 110 of the Customs Act, 1962 there should be reasonable belief that the goods in question are smuggled one which is absent from the seizure memo itself.

11. As per the circular no. 1/2017 Stipulates that there should be reasonable belief by/seizing officer both in seizure list as well as Panchnama separately.

12. But in the instant case, it is seen that seizing officer has certainly failed to comply with such circular thereby rendering the seizure and subsequent, the proceedings thereto bad in the eyes of law. The key element under Section 123 of the Customs Act, 1962 is reasonable belief. The officer exercising its reason of belief must be acquainted to the reason of belief that same is illegally imported into a country whereof mere possession cannot be a factor to determine the same and even the same must be a factor to exercise over and above the reason of suspect if proper officer exercising jurisdiction under Section 110 of the Customs Act, 1962.

13. Acts on reasonable belief, suspect of being illegal importation must come up with cogent reasons and or evidences thereof. In this case, there is no such findings being adhered to whether of it can be terms thus until and unless it is on record to prove credible evidence to show the origin to Show Seized goods. The point of purity can only be create and assumption and presumption whereof confiscation is not at all warranted.

14. Moreover, the appellant has produced certain documents in support of his claim to discharge its onus in Section 123 of the Customs Act, 1962 which made the goods subject to release.

15. I further find the in this case, the gold in question sought to be confiscated under Section 111(B) of the Customs Act, 1962. The said provision is applicable if any goods imported in violation of specified goods and in this case the enquiry officer has unable to furnish any evidence in support of that so the seized goods when seized was under proper reasonable belief the same has been illegally imported in violation of specified Rule thereof. Further, the provision of under Section 111(d) of the Act was also involved for confiscation of the goods, the said provisions are also applicable as provisions being imposed by any Act or any other law for the time being in force of any goods which is imported or attempted to be imported.

16. In this case the gold being importable subject to conditions as imposed and appellant has already produced the mode of procurement of the said goods. Therefore, the goods are not liable for confiscation under Section 111(d) of the Act. Further, the statements made by the appellant during the course of investigation has not been examined. In terms of Section 138 (B) of the Customs Act, 1962, no evidence have been adduced to effect to prove that goods in question recovered from the appellant is the alleged act of smuggling.

17. Further the Ld. Authorized Representative relied on the various case law cited herein above which does not through light on the issue of reasonable belief for confiscation of the goods in question. Therefore, the said decisions are of no help.

18. Further, in this case the Revenue has failed to give the findings in the seizure memo of reasonable belief for confiscation of the goods in question and moreover the provision of Section 111(b) & (d) of the Act are not applicable to the facts of the case.

19. In that circumstances, the impugned order qua absolute confiscation of gold in question is not sustainable in the eyes of law. Accordingly the same is set aside.

21. In result appeals are allowed with consequential relief, if any.

(Pronounced in the open court on _11.12.2024)