CESTAT Allahabad Sets Aside Gold Seizure, Finds Customs Relied On Unreliable Panchnama And Retracted Statements

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Allahabad, has set aside a customs order confiscating gold jewellery and bullion. It held that the panchnama forming the foundation of the case was unreliable because the Department failed to substantiate it by examining the panch witnesses.

A bench of Judicial Member P.K. Choudhary and Technical Member P. Anjani Kumar held that the Revenue's case also rested on statements that had been retracted at the first available opportunity while the makers were in judicial custody. It observed that the Revenue neither rebutted those retractions nor examined the makers of the statements during adjudication.

The tribunal observed, "the whole case of the Revenue have been made on the basis of statements which are not reliable." It further held that "there is no corroborative evidence in support of the statement of these persons" and that "the Panchnama is not reliable piece of evidence as Revenue have failed to substantiate the same by examining the panch witnesses in the adjudication proceedings."

The tribunal added that "Such failure to examine the punch witnesses in spite of specific request made by the Appellants, goes to the very root of the matter."

The case arose from a Directorate of Revenue Intelligence (DRI) investigation into allegations that Raj Jewellers, a unit in the Noida Special Economic Zone, diverted duty-free gold jewellery meant for export into the domestic market. According to the Department, proprietor Ashok Kumar Verma exchanged baggage with Ajit Singh at Delhi's IGI Airport after obtaining export clearance. It further alleged that the jewellery was routed through Shokeen Jewellers Pvt. Ltd. for export under duty drawback claims.

Based on these allegations, the Customs Department confiscated more than 13 kg of gold jewellery seized at the airport. It also confiscated nearly 13 kg of gold bullion and jewellery recovered from Raj Jewellers' premises. The Department demanded customs duty of more than ₹4.53 crore and ordered recovery of nearly ₹62 lakh in duty drawback. It also imposed penalties on the firms and individuals.

The appellants argued that the statements relied upon by the Department had been obtained under threat and coercion. They submitted that the statements were retracted at the first available opportunity while they were in judicial custody. They also contended that repeated requests to cross-examine the witnesses, including the panch witnesses, were denied.

The tribunal found no independent corroborative evidence supporting the allegations. It also held that the Revenue's allegation that jewellery exported by Raj Jewellers had been diverted and rerouted through Shokeen Jewellers was "unbelievable and not supported by cogent evidence."

The tribunal further observed that the adjudicating authority denied repeated requests for cross-examination without giving reasons. It also failed to consider the request for hearing made during the Covid-19 pandemic.

The tribunal set aside the original order and allowed all four appeals. It held that the appellants were entitled to consequential benefits, including the return of the seized gold and gold jewellery.

For Appellants: Advocates Rahul Raheja, Gaurav Prakash and A. P. Mathur

For Respondent: A. K. Choudhary, Authorized Representative.