The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the confiscation of 7 out of 10 gold bars of foreign origin.
The bench of Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that there is sufficient corroboration to the appellant’s testimony about 3 out of 10 gold bars were not procured from outside the country but got melted out of old jewellery with the appellants being in business of sale and purchase of gold ornaments as well. Department could not produce any evidence to falsify the testimony on a record.
Background
The Zonal Unit Delhi of Directorate of Revenue Intelligence (DRI) got a specific intelligence about a passenger namely, Dharmender Kumar was likely to arrive at New Delhi from Kolkata by Indigo Flight.
Acting on the said intelligence, surveillance was mounted at the domestic terminal of Indira Gandhi International (IGI) Airport, Delhi by the Officers of DRI. The team identified and intercepted Dharmender Kumar at domestic terminal. There was already an intelligence that Dharmender Kumar is an employee of M/s. ND Diamonds has a branch office and Bank Street, Karol Bagh. During the initial enquiry Dharmender Kumar admitted that he was carrying 10 gold bars of 1kg each having foreign markings.
The notice of personal search under Section 102 of Customs Act, 1962 was served upon him. The search was conducted in the presence of two independent punchas.
Dharmender Kumar was found to have a checked-in baggage i.e. blue coloured samsonite make trolly which was found containing 10 bars of yellow coloured metal suspected to be gold bars being concealed as wrapped in the newspaper and then filled in socks. In addition Rs.50,000/-were also recovered along with two pillows supposedly meant to conceal the metal bars from the said bag.
The yellow metal was assessed by Anil Yadav, Jewellery Appraiser, IGI, New Delhi who affirmed the metal to gold of 995 purity. It was reported that out of 10 bars recovered from the appellant seven had engraved logo of VALCAMBI SUISSE and logo of PAMPESSAVUER FONDEUR however with tampered serial numbers.
Three of the remaining bars were without any marking and engravings and were plain on both the sides. The value of the recovered gold was assessed at Rs.2,72,57,350. On being enquired Dharmender Kumar had admitted that the gold bars had been brought illegally into India. His employers have instructed him to tamper the serial number or either heat up the face of gold bars to make them plain without any engravings to avoid the deduction of smuggled nature of the gold bars and to cover the illicit movement of the same under the issue voucher.
Rs.50,000/- was admitted to be received from Shankar Lal Soni as his remuneration for carrying the smuggled gold bars from Kolkata to Delhi. The admission was considered sufficient by DRI officers to have reasonable belief that the gold was smuggled. The gold is notified that they invoked Section 123 of the Customs Act, 1962.
As per Section 123 of the Customs Act, 1962 the burden to prove in such circumstance that the said gold bars were not smuggled nature lies on the person from whose possession the same is recovered or on the person who claims to be the owner.
Dharmender Kumar failed to produce any valid document evidencing legal acquisition/possession of the said gold bar except two stock transfer voucers. However, he admitted the gold to be smuggled and the vouchers to be the manipulated documents to cover the illegal activity of smuggling. Accordingly, all 10 gold bars were seized under Panchnama in terms of Section 110 on a reasonable belief that the gold bars have been smuggled into India in violation of provisions of Customs Act. Hence were liable for confiscation in terms of Section 119. The searches were conducted at the premises of M/s. ND Diamond, Karol Bagh as well as at their Kolkata office on 07.03.2014 itself. The Kolkata Office was again searched on 10.03.2014.
Arguments
The appellant contended that it is engaged in business of trading of gold and diamond bullion and jewellery on the strength of valid trade license duly issued by the competent authority. The appellant is looking after the business of the firm at the Kolkata office and his brother Shri Manoj Kulthia is looking after the business of the firm at Delhi office.
The appellant contended that the firm is also a holder of IEC certificate duly issued vide DGFT Authority on the strength of which the firm is a regular importer of gold ornaments into India. The old gold ornaments get melted through different job workers for being converted into gold bars for purpose of trades. These gold bars, whether purchased from the authorized dealers or obtained by melting jewellery are sold by the appellant in the normal course of business. Stock of bullion is regularly being transferred between Delhi and Kolkata office of the firm through their authorized employees under duly issued stock transfers/vouchers/challan.
The department contended that the appellant did not have any document of licit possession of the foreign origin gold bars to prove that the gold was not smuggled one. His employee Shri Dharmender Kumar (the carrier) admitted, in his voluntary statement recorded under section 108 of the Customs Act, that the gold bars were smuggled and that the same were not brought into India through any legal channel.
Relevant Provisions
Section 123 of the Customs Act 1962, enshrines the doctrine of Reverse Burden of Proof shifts the burden of proving that the goods like gold, watches and any other goods specified by the Central Government by notification on the person from whose possession the said goods were seized or on the person who claims to be the owner of such seized goods to prove the Customs Officers that the goods are not smuggled goods and were procured through illicit channels/means.
In order to attract the provisions of Section 123 of the Customs Act, 1962, it is essential that the intercepting/investigating officers got reasonable belief about goods to be the smuggled goods. The term smuggled goods means goods of foreign origin which have been brought to India through illicit channels/means without payment of applicable duties.
Most commonly Foreign Marked Gold in large quantities is being smuggled into India through land, sea and air routes through illicit channels/means, viz; by making payments through Hawala Channels by the smugglers. During the course of such gold smuggling, the smugglers will erase the Foreign Markspurity content marks and country of origin marks, embossed on the gold bars and will cut them into pieces of asymmetrical sizes so that its original form/shape is lost.
For invoking Section 123 of the Act, it would be necessary, therefore, before any person could be called upon to prove that the goods seized from him were not smuggled goods, that the customs officer making the seizure must proceed upon the foundation of a reasonable belief inspired in him by some definite material by way of some definite information or otherwise so that he could be said to have seized the goods in a reasonable belief that they were smuggled goods.
Conclusion
The CESTAT upheld confiscation of 7 gold bars of foreign origin but set aside confiscation of 3 gold bars and reduced the penalty imposed under Section 112 to Rs.7 Lakhs and penalty under Section 114AA to Rs.7 Lakhs.
The tribunal modified the order under challenge by setting aside confiscation of 3 gold bars which has no foreign markings. The penalty is also reduced under Section 112 to Rs.7 Lakhs and also under Section 114AA to Rs.7 Lakhs. Rest of the impugned order, was upheld.
The tribunal directed the department to release the 3 gold bars within 15 days.
Case Title: Kamal Kant Kulthia v/s Principal Commissioner of CustomsNew Delhi
Citation: Customs Appeal No. 50069 of 2020 [DB]
Counsel for the Petitioner: Navneet Panwar
Counsel for the Respondent: Rakesh Kumar
Decision Date: 27.09.2024
