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IN THE HIGH COURT OF JUDICATURE AT CALCUTTA

SPECIAL JURISDICTION (CUSTOMS)

ORIGINAL SIDE

RESERVED ON: 10.05.2024

DELIVERED ON:15.05.2024

CORAM:

THE HON’BLE MR. CHIEF JUSTICE T.S. SIVAGNANAM

AND

THE HON’BLE MR. JUSTICE HIRANMAY BHATTACHARYYA

CUSTA NO. 16 OF 2023

(I.A G.A NO. 01 OF 2024)

COMMISSIONER OF CUSTOMS (PREVENTIVE)

VERSUS

SHRI RAJENDRA KUMAR DAMANI @ RAJU DAMANI

Appearance:-

Mr. Kaushik Dey, Learned Senior Standing Counsel.

Mrs. Aishwarya Rajashree, Adv.

.….For the Appellant.

Mr. Joydip Kar, Sr. Adv.

Mr. Shovendu Banerjee, Adv.

Mr. Soumyajit Mishra, Adv.

…..For the Respondent.

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JUDGMENT

(Judgment of the Court was delivered by T.S. Sivagnanam, CJ.)

1. The revenue is on an appeal questioning the correctness of the order

passed by the Customs Excise and Service Tax Appellate Tribunal, Kolkata

(Tribunal) in Customs Appeals dated 13.03.2023 by which the appeal filed

by the respondent along with other connected appeals were allowed holding

that the stand taken by the respondent and others that the gold in question

was made out of an old jewellery purchased in cash which fact has not been

denied by the revenue by cogent reasons and therefore the gold is not liable

for confiscation. Further the learned tribunal held that the revenue has

failed to establish the fact that the cash recovered from the respondent and

others are sale proceeds of the smuggled gold and therefore the cash seized

cannot be confiscated and no penalties are imposable.

2. The revenue has raised the following substantial questions of law for

consideration:-

(a) Whether the Learned Tribunal erred in law

in not holding that the statements of the

Respondent/Noticee No.1 i.e. Rajendra

Kumar Damani was voluntary, while giving

credence to the Noticee's submission that

they were retracted. The statements made

by Respondent/Noticee No. 1 on

07.08.2018, 08.08.2018, and 25.07.2019

were all in his own handwriting and in his

vernacular, which indicates that the

statements were all voluntary ?

(b) Whether the Learned Tribunal erred in law

in not holding that the that the third

statement, which is also in his own

handwriting and in his vernacular, is after

the gap of almost a year, in which he has 2025:CHC-OS:61-DB

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reiterated his original statements. The

attempted retraction was almost a year

after the initial statement and the noticee

had made no mention of any threat or

coercion in the initial bail hearing, and

hence has to be construed as an after

thought?

(c) Whether the Learned Tribunal was correct

in holding Noticees claim that the gold was

melted from old jewellery, since this claim

was never made at any stage of the

investigation, nor any shred of documentary

evidence was produced ?

(d) Whether the Learned Tribunal erred in law

in the holding the claim of the Noticee at

face value in the face of overwhelming

evidence against the same and not

considering Section 123 of the Customs Act,

1956 which places the burden of proof on

the Noticees?

(e) Whether the Learned Tribunal erred in law

in not holding that mere melting of old

jewellery will yield gold of purity of only 91-

92% and melting of old jewellery into pure

gold is a precise chemical process which

requires strong chemicals and skilled

professionals and cannot, in the normal

course, be done at home Noticee No. 1 has

produced no evidence or documentary proof

of any kind to substantiate engaging any

professional to carry out this refining

process ?

(f) Whether the Learned Tribunal failed to

appreciate that Hon'ble Supreme Court in

Judgement dated 03.04.1974 passed in

Collector of Customs, Madras and Ors. Vs.

D. Bhoormul has held that with regard to

these specified goods if seized under this

Act in the reasonable belief that they are

smuggled goods, the burden of proof that

they are not such goods shall be on the

person from whose possession, they are

seized. The prosecution or the Department 2025:CHC-OS:61-DB

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is not required to prove its case with

mathematical precision to a demonstrable

degree ?

3. We have heard Mr. Kaushik Dey, learned Senior Standing Counsel for

the appellant assisted by Mr. Aishwarya Rajashree, learned Standing

Counsel and Mr. Joydip Kar, learned Senior Advocate assisted by Mr.

Shovendu Banerjee and Mr. Soumyajit Mishra, learned advocates for the

respondents.

4. The DRI, Kolkata conducted search at two premises in Kolkata and

during the search operation huge amount of cash of Indian currency of 50 to

2000, nine pieces of yellow metallic coins believed to be gold of foreign origin

and a pouch of white colour metallic granules believed to be silver of foreign

origin were found. A search list cum inventory was prepared by the DRI of

the recovered Indian currency as well as the yellow metallic coins believed to

be gold of foreign origin and white metallic granules believed to be silver of

foreign origin and the search list was signed by the respondent herein.

When the respondent was questioned, he stated to have admitted that the

entire cash is the sale proceeds of smuggled gold and silver. The DRI officers

called upon the respondent to produce documents but they could not

produce any document to show that the ceased articles were not of foreign

origin.

5. In the simultaneous search conducted in the second premises, eleven

number of yellow colour metallic bars believed to be gold of foreign origin

concealed inside old and used newspapers and several bundles of huge

amount of cash of Indian currency secreted in metallic vault fitted on the 2025:CHC-OS:61-DB

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wall was found. The respondent is stated to have admitted that he is the

owner of the shop and the other two persons were his employees and that

the eleven yellow colour metallic bars believed to be gold of foreign origin

were smuggled in nature and that he used to store those smuggled goods in

the said metallic vaults at his shop for selling those to others and the

recovered amount of Indian currency are the sale proceeds of such smuggled

gold sworn by him on earlier occasions. Statement of the respondent was

recorded under Section 108 of the Customs Act, 1962 (the Act) on

06.08.2018 wherein it appears that he has admitted that he has been

dealing with smuggled gold and the Indian currency recovered is out of the

smuggled gold which was sold earlier.

6. Further he added that there is no document in support of his

procurement of the gold bars. Statements of the others were also recorded,

test report was obtained from the, Chemical Laboratory, Customs House,

Kolkata which certified that the seized items are gold and the percentage of

gold by weight was 99.5%. The call detail records of the mobile phones used

by the respondent were ascertained from which it was seen that the

respondent was in regular contact with two other persons and the other two

persons were also dealing in smuggled gold.

7. Based on the above facts and other details, show cause notice dated

28.07.2019 was issued under Section 124 of the Act to six noticees of which

the respondent is the first notice. Calling upon them to explain as to why

the seized eleven pieces of gold of foreign origin having total weight

10500.80 grams valued at Rs. 3,15,02,400/-, nine pieces of gold coins

valued at Rs. 2,07,000/- and 509.100 grams of silver granules valued at Rs. 2025:CHC-OS:61-DB

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19,448/- should not be confiscated under Section 111(b) and 111(d) of the

Act; why Indian currency notes amounting to Rs. 1,74,76,500/- seized

during the investigation, should not be confiscated under Section 121 of the

Act and among others things why penalty should not be imposed under

Section 112(a) and/or 112(b) and 117 of the Act.

8. In the show cause notice, it had been stated that import of gold in the

India is regulated under various provisions and subject to strict conditions.

In accordance to Notification No. 50/2017- as amended, gold, with

description as mentioned in the notification, is allowed to be imported by the

importers and/or eligible passengers upon payment of applicable rate of

duty subject to specific conditions being fulfilled. It was stated that as per

notification and circulars/instructions/rules, it can be seen that well

defined and exhaustive conditions and restrictions are imposed on the

import of various forms of gold by eligible passengers/nominated banks etc.

These conditions are restrictions imposed on the import of gold. It was

stated that in the case on hand that none of the condition was satisfied

rendering it a clear case of smuggling. Section 123 of the Act was referred to

and it was stated that the burden of proving that the gold is not smuggled

gold shall be on the person, who claims to be the owner of the goods so

seized or from whom whose possession the goods are seized. In paragraph

27.1 of the show cause notice the role of the respondent has been set out.

9. The adjudicating authority namely The Additional Commissioner of

Customs (Preventive) afforded an opportunity of personal hearing to all the

noticees on 11.11.2019 including the respondent who has represented by

the learned advocate in the hearing fixed on 24.01.2020. The reply given by 2025:CHC-OS:61-DB

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the respondent was considered and by order dated 16.09.2020, the gold and

silver were ordered to be absolutely confiscated as well as the order for

absolute confiscation of the Indian currency which was seized, a sum of Rs.

70,00,000/- was imposed as penalty on the respondent. Aggrieved by such

order, the respondent and the other noticees filed appeal before the

Commissioner of Customs (Appeals) and by order dated 31.12.2021, the

appeal filed by the respondent was dismissed. Challenging the said order,

the respondent and others preferred appeal before the tribunal which was

allowed and challenging the correctness of the same, the revenue has

preferred this appeal.

10. The first aspect to be considered in the case on hand is with regard

to on whom the burden of proof lies. Section 123 of the Customs Act deals

with the burden of proof in certain cases. Sub Section (1) states that where

any goods to which the said section applies are seized under the Act in the

reasonable believe 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 persons; (b) in any other case, on the

person, if any, who claims to be the owner of the goods so seized. Sub

Section (2) states that Section 123 shall apply to gold and manufacturers

thereof, watches and any other class of goods which the Central

Government may by notification in the official Gazette specifies. 2025:CHC-OS:61-DB

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11. What is important to note is that Section 123 enacts that where any

goods to which the Section applies, are seized under the Act in the

reasonable believe that they are smuggled goods, the burden of proving that

they are not smuggled goods shall be on the person from whose possession

the goods were seized, the burden thus shifts under the conditions specified

in the Section and the conditions being the seizure of goods to which the

section applies, seizure under the Act (Customs Act) and seizure in the

reasonable believe that they are smuggled goods. When these three elements

are proved, the burden would shift to the accused to show that they are not

smuggled goods.

12. It has been held that the section does not compel the officers to give

reasons and the non-mention of reasons does not vitiate the authorization,

even though it was always proper for the officers to give reasons (Assistant

Collector of Customs Versus Pratap Rao Sait and Others

1). Thus when

Section 123(1) of the Act casts on the person concerned, the burden of

proving that the goods are not smuggled goods, it is up to him to show

whether that goods are not of foreign origin and hence not smuggled or that

the goods are of foreign origin, but not smuggled goods, having been lawfully

acquired.

13. Reasonable belief that goods are smuggled goods is to be judged from

the Customs Officers experience and that sufficiency of material leading to

formation of belief is not generally open to judicial review. However, the

opinion of the customs officers cannot be wholly objective and the courts

can examine the correctness and the circumstances leading to such belief.

1

1972 CrLJ 1135 2025:CHC-OS:61-DB

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Therefore, it would be sufficient if the circumstances on the material before

the officer, prima facie gives sufficient grounds to entertain the belief, one

such factor being prior information.

14. Having noted the above legal position, we are required to examine as

to what was the stand taken by the respondent and the two others co

noticees. As could be seen from the averments set out in the show cause

notice, and the adjudication order, a slight inconsistency is noticed in what

the respondent and other noticees have stated. In the statement recorded

under Section 108 of the Act on 06.08.2018, from the respondent herein

who was the first notice, he had stated as herein:-

9. Statement of Shri Rajendra Kumar Damani alias

Raju Damani was recorded under Section 108 of

the Customs Act, 1962 on 06.08.2018, wherein, he

inter-alia stated that;

I. He has a jewelry trading Co. at 72

Monohar Das Street Ground floor in his

name (Rajendra Kumar Maheshwari)

whose license was acquired by him 5-6

years back.

II. After working at the said shop for

some days he indulged himself into

illegal business of gold bullion and he

was in that illegal business of gold

bullion for the last 2 years and earned

at about Rs. 50,000/- to 60,000/- per

month.

III. He makes profit of about Rs. 2000/-

to Rs. 3000/- on trading, per kg of the

gold. He operates from his office at 72

Monohor Das Street and 2nd floor of 17,

Paggaypatty office, Kolkata

IV. Whatever gold he sold and

purchased had illegally been smuggled 2025:CHC-OS:61-DB

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into India. He did not keep any

documents, neither had he bought gold

on documents nor did he sell the gold on

documents. He also stated that he

carried out the whole business illegally.

V. He used to buy illegally smuggled

gold of foreign origin from 1). Pradip

Gupta (mobile number 9830023195) at

47B, Nalini Seth Road Maa Ambay

Jelwers, Kolkata 7, 2nd floor. 2). Sanker

(mobile number 8910380072) at Sona

Patti, Kolkata 7, 3). Aloke (mobile

number 9903193619) at Sona Patti,

Kolkata 7. Apart from them, there are

some other people namely Gopal, Manoj

and Nandu who used to sell him

smuggled gold of foreign origin. Phone

number of Gopal is 9831426223 and

Nandu is 9874618102. But he doesn't

know phone number of Manoj and his

shops name and address. Sanakar and

Aloke delivers the gold by themselves

and Pradip Gupta of Maa Ambay

Jelwers sends his staff Rajesh to deliver

the smuggled gold. He takes delivery of

20/25/30 kg of smuggled gold of

foreign origin per month from them. As

per his knowledge, the smuggled gold of

foreign origin are brought into India in

Biscuits form, which are then melted to

transform into 1 kg Bar by the people of

Sonapatti. He had/has given

instructions to them to deliver only such

1kg gold bars without any marking on

them. On receiving the same, he used to

sell those gold bars to different parities,

among which, Mr. Anil Agarwal of

Banda, M.P, Mr. Abishek Agarwal @

Pawan (mobile number of 7080367020)

and Gurudas Babu (Land

phone0332258-1730) of Sonapatti were

his primary customers. Sometime, one 2025:CHC-OS:61-DB

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Deepak of Mirzapur (mobile number

9044381101) used to come to take

delivery of the gold. He also stated that

he used to make all the transaction in

cash and all those transaction did not

have any legal documents.

VI. He has an account in H.D.F.C Bank

and Axis Bank of Bourbourn Road

Branch. The total balance, at that time,

in both the accounts, amounts to Rs. 6

lac approximately. He also stated that

he did not have any other bank account

either in his name or in the name of his

company i.e. Rajendra Kumar

Mahaswari.

VII. On 06/08/2018, he reached his

Office at 72 Manohar Das Street,

Kolkata 700007, at around 11 AM in the

morning. As usual, his three Parties

namely, Maa Ambay Jewlers, Sankar

and Aloke came and gave delivery of

4kgs, 2 kgs and 2 kgs of gold bars of 1

kgs, of foreign origin without any

markings to him. With that he reached

his shop/godown at 17 Pageyapatty,

Kolkata - 700007. He already had 2.50

Kgs Gold in the Office. In the morning

only Shri. Anil Agarwal of Banda had

told him that to buy 4 kg gold for which

Shri. Anil Agarwal of Banda had sent

Rs. 1 Crore 8 lakh through his staff to

shop/godown at 17 Pageyapatty,

Kolkata - 700007 at around 12 noon. He

had kept 8 kgs gold in his shop/godown

at 17 Pageyapatty, Kolkata, took Rs. 35

Lakh with him and came back to his

Office at 72 Manohar Das Street,

Kolkata. Thereafter, Officers of DRI led

by Deputy Director along with 2

panchas came to his Office at 72

Manohar Das Street, Kolkata at around

1.30 PM. Then he narrated the whole 2025:CHC-OS:61-DB

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incidence of interception, search,

recovery, preliminary assaying and

seizure.

VII. On being asked, he stated that, Shri

Sanatan Behra @ Hari do the work of

cleaning the office at 72 Monohar Das

Street besides receiving illegal gold bar

and cash rupees from different parties.

He further stated that Bhola Rai do the

work of cleaning the office at 17 Paggay

Patty besides receiving illegal gold bar

and cash rupees from different parties.

He added that both of them are well

aware of his illegal business and he

used to pay Rs. 10,000 per month to

Sanatan Behra @ Hari and Rs. 9,000

per month to Bhola Rai.

IX. On being asked about Shri Abhishek

Kumar Agrawal he stated that at the

time of search at his 17 Paggay Patty

office, Shri Abhishek Kumar Agrawal @

Pawan came to buy gold bar from him in

illegal manner. He also stated that

previously, i.e. more or less 10 days ago

from that day Shri Abhishek Kumar

Agrawal @ Pawan bought about 500 gm

of gold bar from him. Also Shri Abhishek

Kumar Agrawal stated that he

possessed Rs. 15 lakh (which was

recovered from Abhishek Kumar

Agarwal) and he came to take delivery

of 500 gram gold.

X. Earlier only once he delivered gold to

Shri Abhishek Kumar Agrawal @

Pawan.

XI. For the last two years, he was in

that business of buying and selling gold

bar in an illegal manner due to which

his business accelerated and those

recovered and seized cash amount were

results of that illegal business. He also 2025:CHC-OS:61-DB

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stated that he received those cash

amount on selling gold bar in an illegal

way.

XII. His prime source of income is

buying and selling the gold in an illegal

way. He further stated that the cash

amount recovered from his

residence was the sale proceeds of

the gold.

XIII. He used to keep contact with

Sankar and Aloke through his mobile

no. 9831111575 and 8334042852. He

mentioned that Aloke roam around to do

this work and Sankar has one Jewelry

shop which is situated near Dhramkata

at Sonapatti. He visited twice or thrice to

his shop, but he did not have the exact

details of his shop. He did not know

anything about their residential

address.

15. The authority while issuing the show cause notice dated

28.07.2019 after considering the statement given by the respondent herein

and other matters connected therewith, explained the role of the respondent

in paragraphs 27.1 of the show cause notice which is as follows:-

27.1 Shri Rajendra Kumar Damani alias

Raju Damani: From the statement dated

06.08.2018 and 07.08.2018 of Shri Rajendra

Kumar Damani alias Raju Damani, recorded

under Section 108 of the Customs Act, 1962,

it could be seen that Shri Rajendra Kumar

Damani used to do trading of the smuggled

gold and silver of foreign origin by way of

procuring them from different person at Sona

patti, Kolkata. The very fact that he never did

the trading of Gold and silver under cover of

legal documents establishes that the Gold

and silver which he used to trade are

procured illegally. Shri Rajendra Kumar 2025:CHC-OS:61-DB

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Damani, in his Statements, given under Sec.

108 of Customs Act, 1962, has categorically

admitted that the 11 pieces of gold bars

seized from his possession are smuggled

gold of foreign origin which had been melted

and were delivered to him without markings,

as per his instructions. It is ostensible that

the huge cash in India currency, recovered

from the office and residential premises of

Shri Rajendra Kumar Damani were the sale

proceeds of the illegal gold. Shri Rajendra

Kumar Damani alias Raju Damani, has

failed to produce documents evidencing their

licit source. Moreover, Shri Rajendra Kumar

Damani alias Raju Damani, in his statements

recorded under Sec. 108 of Customs Act

1962, has admitted that these are the sale

proceeds of the smuggled gold and also that

he had been involved in the said illicit

trading of smuggled gold in the past also.

Most importantly, in the said seized Indian

Currency Notes, one Indian Currency of

denomination of Rs. 2000/- has been found

to be Fake Currency (FICN), which also

clearly indicates that the entire amount was

sale proceed of the smuggled gold which

came into his possession, by way of Hawala

transactions. He personally controlled and

headed this illegal business of smuggled

gold, in lure of money. The magnitude of

smuggling in which he engaged himself is

shocking. The unexplainable Indian Currency

recovered from the Office and residential

premises of Shri Damani established the fact

of his involvement in the business of

smuggling gold for long time causing havoc

on the economy of the Country. In the

statement of Shri Rajendra Kumar Damani

alias Raju Damani, recorded under Section

108 of the Customs Act, 1962, on 06.08.2018

and 07.08.2018 he stated that he took

delivery of 4 kg, 2 kg and 2 kg of gold of

foreign origin from his three parties namely 2025:CHC-OS:61-DB

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Maa Ambay Jelwers (Prop. Pradip Gupta),

Sanker and Aloke respectively. However,

from the Call Detail Report (CDR) of the

mobile number 9831111575, stated to be

used by Shri Rajendra Kumar Damani alias

Raju Damani, it could be seen that no call

was made from Rajendra Kumar Damani to

his said three parties or vice-versa and also

that in the statement of the said three

persons they have denied of supplying the

said gold to Shri Rajendra Kumar Damani

alias Raju Damani. Further, it could be seen

from the statements of Shri Ashok Kumar

Jalan @ Pappu Jalan and Shri Amit Jalan

and the CDR of the mobile number

9831111575, that the actual supplier of the

10.5 Kg gold seized from the shop of

Rajendra Damani was Shri Ashok Kumar

Jalan and Amit Jalan. However, Shri Raju

Damani knowingly suppressed the true fact

with an intention to shield his principal

supplier and tried to jeopardize the

investigation. On the other hand he tried to

rope in some small traders which proves his

criminal intention.

From the foregoing, it appears that Shri

Rajendra Kumar Damani, knowingly

indulged himself in smuggling of gold for

monetary benefit. Further, Shri Damani

appears to have suppressed the name of

actual supplier of the smuggled gold by

naming some of the name of small

businessman of Sonapatti, Kolkata with a

mala-fide intention to hide the actual supplier

of the smuggled gold from the clutch of law of

the land.

Thus it appears that Shri Rajendra Kumar

Damani had been knowingly involved in the

Illegal activity of smuggling gold and he in

connivance with Shri Bhola Ray @ Bholi Ray

and Shri Sanatan Behera alias Hari

smuggled 11 pcs of gold weighing 10500.800 2025:CHC-OS:61-DB

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gms valued at Rs.3,15,02,400/-, 9 pcs of

gold coin, valued at Rs. 2,07,000/- and

509.100 grams of silver granules, valued at

Rs. 19,448/-, in the instant case of seizure,

along with seized Indian Currency Note of

Rs. 1,74,76,500/-. It therefore appears that

he is involved in carrying, removing, keeping

and dealing with the said goods in any other

manner which he knew were liable for

confiscation under Section 111(b),111 (d) &

121 of the Customs Act, 1962, and thus

appears to be liable for penalty under Section

112(a) and/or 112(b) & 117 of the Customs

Act, 1962.

16. In the reply to the show cause notice which has been noted by the

adjudicating authority in paragraph 30.1, it was contended that the gold did

not have any foreign markings or any foreign inscription to establish that

the seized gold was of foreign origin and in spite of the same these officers

formed the reasons to believe that the seized gold bars were of foreign origin.

Reiterating the submissions made in the reply dated 26.11.2019, it was

stated that the seized gold bars and coins were obtained after importing of

old and used gold jewellery which were by no means smuggled. Further it

was contended that the chemical tests report also does not proof that the

gold to be of foreign origin and smuggled as eleven pieces of seized gold bars

the purity has been found to be 99.5% and the purity of nine gold coins

have been found to be about 91% and therefore there are no grounds to

presume that the gold under seizure was of foreign origin and smuggled into

India. With regard to the seized Indian currency, it was submitted that no

incriminating records or gold or goods were found along with the Indian 2025:CHC-OS:61-DB

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currency, therefore it cannot be considered as sale proceeds of the smuggled

goods.

17. As could be seen from the statement recorded under Section 108

of the Act on 06.08.2018, the respondent has admitted that he indulged

himself into illegal business of gold bullion and he was in that illegal

business for the last two years and whatever gold he sold and purchased

had illegally been smuggled into India and he did not keep any documents

neither had he brought gold with documents nor did he sell the gold on

documents. He had also stated that he carried out the whole business

illegally and he used to buy the illegally smuggled gold of foreign origin from

six persons and that for the last two years, he was in the business of buying

and selling gold bars and that the recovered and seized cash amount were

result of selling of the smuggled gold bars.

18. The adjudicating authority on facts found that the respondent

and the other two noticees who were also the appellants before the tribunal

could not produce any document in support of importing/ possessing/

carrying/ otherwise dealing with gold so recovered and seized from them

and therefore held that they failed to discharge the burden of proof as

required under Section 123 of the Act. Further the adjudicating authority

held that no documents could be produced by the respondent and the two

other co-noticees in support of legally possessing the silver granules. With

regard to the Indian currency notes which was seized the adjudicating

authority holds that the respondent failed to produce any documents

evidencing the source of the said cash and has referred to the admission in

the statement recorded under Section 108 of the Act that they are the sale 2025:CHC-OS:61-DB

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proceeds of the smuggled goods. In the background of these facts, the order

of absolute confiscation and imposition of penalty was passed.

19. Before the appellate authority, the grounds raised by the

respondent and other co noticees before the adjudicating authority were

reiterated in a more elaborate fashion and the decisions of the courts were

referred to. The appellate authority considered the stand taken by the

respondent and the other two co noticees and found that the respondent

and other co noticees could not produce any document in support of

importing/ possessing/ carrying/ otherwise dealing with the gold so

recovered and seized from them and they had failed to discharge the burden

of proof as required under Section 123 of the Act and accordingly affirmed

the view taken by the adjudicating authority. Reliance was placed on the

decision of the Hon’ble Supreme Court in Om Prakash Katari Versus

Commissioner

2 which upheld the decision of the High Court of Kerala

wherein it was held that the appellant therein having been unable to explain

the source of the gold which was confiscated, the order passed by the High

Court cannot be interfered and the appeal was dismissed.

20. Thus, it is seen that though a faint plea was taken before the

appellate authority as well as before the adjudicating authority that the gold

came into possession through purchase of old gold jewellery was never

established by the respondent and other co noticees at any point of time

that apart that no documents were produced with regard to the source of

the money which was seized which was the Indian currency. In the light of

2

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the above factual conclusion, the appellate authority affirmed the order

passed by the adjudicating authority.

21. When the matter travelled on appeal to the learned tribunal

what was required to be seen is whether the respondent and other co

noticees were able to establish the stand taken by them that the gold was

obtained by them by purchasing old gold jewellery. Before the tribunal,

apart from reiterating the stand taken before the appellate authority, it was

contended that the respondent and the other noticees have retracted their

statements on the ground that they were not voluntary and therefore the

statement recorded under Section 108 cannot be relied on. The department

contended that in terms of Section 123 of the Act, the burden is on the

respondent and having failed to discharge the burden, the adjudicating

authority rightly ordered for absolute confiscation and imposed penalty.

22. With regard to the effect of an alleged retractive statement and

its evidential value, the department referred to several decisions which

include the decision of the Hon’ble Supreme Court in Percy Rustomji Basta

Versus State of Maharashtra

3 and Surjeet Singh Chhabra Versus

Union of India and Others

4. The learned tribunal in paragraphs 17

records that during the course of investigation, it was found that there was

no mark on the gold seized and the purity of the gold was found to be 99.5%

and not 99.9% and during the course of investigation, the respondent has

made a statement stating that the source of procurement of the said gold is

made from old jewellery purchased in exchange of cash during the long

3

1983 ELT 1443 (SC)

4

1997 89 ELT 646 (SC) 2025:CHC-OS:61-DB

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period of time and due to the stock of gold was melted through the said old

jewellery and converted into gold bars. The tribunal holds that this fact has

not been verified by the revenue. After recording such a finding, the tribunal

has referred to certain decisions and holds that he noticees have explained

the source of procurement of gold which is not denied by the revenue and

further having no mark on the gold and purity of the gold is not in

conformity of the foreign gold, the benefit of doubt goes in favour of the

noticees.

23. Further the tribunal holds that the statements recorded during

the investigation was retracted by the respondent and other two co noticees

and they are not admissible in absence of corroborative evidence. After

referring to certain decisions, the tribunal hold that the currency seized

from the respondent and the other two co noticees were not established by

the revenue with corroborative evidence to show that the same are the sale

proceeds of smuggled gold and then proceeds to refer to a certain decision

and has recorded its conclusion in paragraph 26 holding that the

respondent and the two co noticees have submitted that the

smuggled/procured gold in question is made out of old gold jewellery

purchased in cash and the said fact has not been denied by the revenue by

any cogent evidence, therefore the gold in question is not liable for

confiscation and the same is required to be released. Further the tribunal

holds that the revenue has failed to establish the fact that the cash

recovered from the respondent and the two co noticees are the sale proceeds

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and the same is required to be released. Further the tribunal holds that no

penalties are imposable on the respondent and the two co noticees.

24. What is important to note is that though the respondent took a

plea that the gold bars was made out of old gold jewellery purchased in cash

it was a very faint plea which was raised by the respondent and the co

noticees. Assuming such a plea was required to be considered, the onus is

on the respondent and the co noticees to establish with documents that the

gold which was seized was from and out of the old gold jewellery purchased

by cash. This aspect of the matter was never established by the respondent

and the co notices. Therefore, the learned tribunal erroneously shifted the

burden on the department stating that the same has not been denied. The

question of denial will come only if the onus is discharged by the respondent

and the co noticees as required under Section 123 of the Act. Thus, without

any document placed by the respondent and the co noticees, the tribunal

could not have come to the conclusion that the department did not establish

the same by cogent evidence. This finding is absolutely perverse and

contrary to the scheme of Section 123 of the Act.

25. The respondent and the other co noticees would contend that

the purity of the gold not been 99.9%, it is established that it is not

smuggled gold. Such conclusion cannot be arrived at in the absence of any

proof to show that the gold was from and out of the gold jewellery which was

purchased for cash. That apart, merely because the statement is said to

have been retracted, it cannot be regarded as involuntary or unlawfully

obtained. In this regard, the revenue has rightly placed reliance on the

decision of the Hon’ble Supreme Court in Vinod Solanki Versus Union of 2025:CHC-OS:61-DB

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India and Others

5. If the learned tribunal was of the view that the

statement recorded under Section 108 of the Act was not admissible on

account of the retraction, that by itself cannot render the statement as

involuntary. It is the duty casts upon the court to examine the correctness

of the validity of the retraction, the point of time at which the retraction was

made whether the retraction was consistent and whether it was merely a

ruse. These aspects have not been examined by the learned tribunal

resulting in perversity. The mobile phones which were recovered and the call

details record which were obtained have all been elaborately discussed by

the adjudicating authority. This aspect has not been dealt with by the

learned tribunal. The seizure cannot be denied by the respondent since the

seizure list was drawn in the presence of two independent witnesses and the

DRI officers and copy of which was handed over to the respondent and the

other two co noticees. Further we find there was nothing on record before

the learned tribunal to hold that mere melting of old gold jewellery will yield

gold of less purity and considering the quantity which has been seized, it

can never be the case of the respondent or the other two co noticees that

they have done the melting process at their residence as such melting

requires expertise and also use of several chemicals. Thus, the observations

of the tribunal have to be held to be without any basis or foundational facts

or documents.

26. Thus, for all the above reasons, we find that the order passed by

the tribunal suffers from perversity and calls for interference.

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27. In the result, the appeal is allowed and the order passed by the

learned tribunal is set aside and the order passed by the adjudicating

authority as affirmed by the appellate authority is restored. The substantial

questions of law are answered in favour of the revenue.

(T.S. SIVAGNANAM, CJ.)

I Agree

(HIRANMAY BHATTACHARYYA, J.)

(P.A – SACHIN)

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