On 29 October, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad held that the absence of purchase invoices for gold does not, by itself, establish that the gold was smuggled into India.
A Bench comprising Judicial Member Angad Prasad set aside the confiscation of 377.08 grams of gold worth Rs. 19.12 lakh and the penalty of Rs. 3.83 lakh that Customs authorities imposed on Mohammed Abdul Razzak, proprietor of Iqbal Jewellers, under the Customs Act, 1962. The Tribunal observed:
“The fact that the gold was not accompanied by purchase invoices cannot, by itself, be equated with proof of its illegal importation.”
The case arose after Customs officers intercepted domestic air cargo consignments at Hyderabad Airport in October 2020. The department seized gold belonging to several jewellers, including 377.08 grams that Razzak claimed as his own, alleging that he had smuggled it into India without paying Customs duty.
Razzak contended that he had obtained the gold by melting old jewellery purchased from local customers and was transporting it to a jeweller in Mumbai. He submitted that the gold bore no foreign markings and that the Government Approved Assayer could not determine whether it originated in India or abroad.
The Customs authorities rejected his explanation and ordered absolute confiscation of the gold along with a penalty. The Commissioner (Appeals) upheld the order, prompting Razzak to appeal to the Tribunal.
Examining Section 123 of the Customs Act, which governs the burden of proof for goods suspected of being smuggled, the Tribunal held that the department must first establish a reasonable belief of smuggling based on relevant material and circumstances before shifting the burden to the person claiming ownership.
The Tribunal observed that the absence of documents and the manner of transportation could raise suspicion and warrant investigation. However, the authorities had failed to explain how these circumstances established that the gold was smuggled. The department had also failed to verify Razzak's explanation with the identified recipient or the gold melting laboratory.
Further, the Bench held that the authorities had not established the requirements for confiscation under Sections 111(d), 111(i) and 111(j) of the Customs Act. It also found insufficient evidence that Razzak had participated in smuggling or possessed the requisite knowledge to attract a penalty under Section 112.
Accordingly, the CESTAT set aside the confiscation and penalty and granted consequential relief in accordance with law.
For the Appellant: Advocate Y. Sreenivasa Reddy
For the Revenue: K. Prasanth Kumar, Authorised Representative