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Aadil Majeed Banday (S) v. C.C. Amritsar Asst. Commissioner Of Customs (S).
Structured Summary of the Opinion delivered by Member (Judicial) Mr. Ashok Jindal — Order pronounced on 06.05.2021
Factual and Procedural Background
The appellant appealed an adjudication in which a gold biscuit marked "PAMP SUISSE 100g FINE GOLD 999.9 C107781" was absolutely confiscated and a penalty of Rs. 10,000/- was imposed under Section 112 of the Customs Act, 1962. The gold was recovered on 23.04.2018 when the appellant was travelling by domestic flight No. A1-821 from Jammu to Srinagar and was checked at the exit point of Srinagar Airport by Customs Preventive Staff. The gold was seized on the stated reasonable belief that it was liable for confiscation and that it was a notified item under Section 123 of the Customs Act, 1962. The appellant challenges that order before this Tribunal.
A preliminary procedural objection was raised on behalf of the revenue (Ld. AR) that, under the proviso to Section 129A(1)(d), the appeal was not maintainable before the Tribunal because the goods constituted baggage. The Tribunal heard the parties and addressed both the maintainability/jurisdiction question and the merits of the confiscation and penalty.
Legal Issues Presented
- Whether the gold recovered from the appellant constituted "imported goods" or "baggage" so as to render the appeal not maintainable before this Tribunal (issue of jurisdiction and characterization under Section 2(25)).
- Whether the revenue had a "reasonable belief" that the goods were smuggled goods so as to shift the burden under Section 123 of the Customs Act, 1962.
- Whether the absolute confiscation under Section 111 and penalty under Section 112 were sustainable in the circumstances, including adequacy and specificity of the show cause notice.
Arguments of the Parties
Appellant's Arguments (Ld. Counsel for the appellant)
- The gold was recovered while the appellant travelled on a domestic flight (Jammu to Srinagar); the goods therefore are not "imported goods" within Section 2(25) of the Customs Act (which requires bringing goods into India from a place outside India).
- The market inquiry relied on by the adjudicating authority was for valuation only; no chemical or other testing of the gold was conducted and no expert opinion was produced to establish foreign origin.
- There was no evidence in the orders to substantiate that the gold was of foreign origin; the appellant never admitted foreign origin or smuggling.
- Decisions relied upon by the revenue (e.g., Sudip Saha and Malabar Diamond Gallery) are distinguishable because, in those cases, the carrier/owner had admitted foreign origin or smuggling.
- The marked gold (brand and markings) is available for sale in the Indian market (example: listing on www.indiamart.com), and revenue did not controvert that fact.
- No specific provision of Sections 111 and 112 was invoked in the show cause notice; precedents (Amrit Foods, Max G.B. Ltd., Delco Precitone, B. Lakshmichand) support that vague or unspecific show cause notices or imposition of penalty absent specific findings are unsustainable.
- By analogy to Hanif Khan (NDPS jurisprudence on reverse burden), the appellant argued that the initial reasonable belief must be established by the revenue before shifting the burden; on facts the revenue did not establish such reasonable belief.
- Result requested: set aside the impugned order of absolute confiscation and penalty.
Revenue's Arguments (Ld. AR / Assistant Representative)
- Preliminary: Under the proviso to Section 129A(1)(d), the appeal is not maintainable before the Tribunal because the goods are baggage and appeals against baggage are barred.
- On merits: Under Section 123 of the Customs Act, once revenue has a reasonable belief that goods are smuggled, the burden shifts to the appellant to prove they are not imported/contraband; the appellant failed to discharge that burden.
- Document dated 14.04.2015 from Shah Jewellers produced by the appellant is a mere estimate and not a valid supporting document.
- Gold is a prohibited item under Section 2(33) read with Circular 34/2013 dated 04.09.2013; under the Customs Act, smuggled goods can be seized anywhere in India and proceedings can be initiated against the person from whose possession the goods are recovered.
- Revenue relied on a market inquiry report that estimated, by eye, the purity as 999.9 and valued the gold at Rs. 3,22,000/-, and also relied on precedents including Malabar Diamond Gallery and Sudip Saha.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sudip Saha v. CC 2019 (369) ELT 1039 (T) | Relied upon by revenue to support treatment of recovered gold as foreign-origin smuggled goods where carrier/owner admitted foreign origin. | The Court held this precedent not applicable to the facts because, unlike that case, here the appellant did not admit foreign origin and the revenue did not establish reasonable belief of smuggling. |
| Malabar Diamond Gallery Pvt. Ltd. v. Addl. Director General of Revenue Intelligence 2016 (341) ELT 65 (Mad) | Relied upon by revenue for the proposition that admission of foreign origin in earlier cases supported confiscation where such admission exists. | The Court found it inapplicable on present facts because there was no admission by the appellant that the goods were brought illicitly from abroad. |
| Amrit Foods v. CCE 2005 (190) ELT 433 (SC) | Cited in support of the proposition that a vague show cause notice or lack of invocation of specific statutory provisions renders proceedings unsustainable. | The Court relied on this precedent to conclude the show cause notice in this case was vague (no particulars of Sections 111/112 specified) and that this defect contributed to setting aside the proceedings. |
| CCE v. Max G.B. Ltd. 2008 (221) ELT 491 (P & H) | Cited for the principle that a vague show cause notice on specific violations is not sustainable. | The Court treated this precedent as supporting the conclusion that the show cause notice in the present case was vague and thus inadmissible as a basis for confiscation/penalty. |
| Delco Precitone Jewellers (P) Ltd. vs. CC 2000 (124) ELT 1105 (T) | Relied on to argue that imposing penalty without a specific finding with reference to clause (a) or (b) of Section 112 is unsustainable. | The Court considered the precedent as supportive of the appellant's contention that the penalty imposition lacked the necessary specific findings and therefore was not sustainable. |
| B. Lakshmichand v. Government of India 1983 (12) ELT 322 (Mad) | Relied on by the appellant (citation used to support arguments about procedural defects and proof). | The Court noted the reliance but did not make any distinct factual finding solely based on this precedent; it formed part of the appellant's body of authority cited to challenge procedural sufficiency. |
| Hanif Khan @ Annu Khan v. Central Bureau of Narcotics 2019-TIOL-387-SC-NDPS | Cited by appellant's counsel for the principle of reverse burden in NDPS law (Sections 35 & 54 of NDPS Act)—used analogically to discuss burdens under Section 123 of the Customs Act. | The Court accepted the explanatory value of the decision on reverse burden doctrine but held that, irrespective of reverse burden principles, revenue had not established the initial reasonable belief required to invoke Section 123 in this case. |
Court's Reasoning and Analysis
The Court proceeded in two main phases: jurisdiction/maintainability and merits/substantive legality.
-
Jurisdiction / Maintainability:
The Tribunal examined Section 2(25) of the Customs Act which defines "imported goods" as goods brought into India from a place outside India. The undisputed fact was that the appellant boarded a domestic flight from Jammu to Srinagar and had not travelled from abroad. Therefore, the goods could not be characterised as imported goods. The preliminary objection by the Ld. AR that the appeal was not maintainable under the proviso to Section 129A(1)(d) (baggage exception) was rejected. The Tribunal held it had jurisdiction to hear the appeal.
-
Application of Section 123 (reverse burden) and evidence of "reasonable belief":
The Court analysed Section 123 of the Customs Act which, in the statutory scheme, places the burden on the possessor to prove that goods are not imported/smuggled once the revenue forms a "reasonable belief" that they are smuggled. The Court emphasised that revenue must first establish the existence of that reasonable belief. On the record, the adjudication relied only on market enquiries for valuation and a market estimate of purity; there was no testing of the gold, no expert opinion establishing foreign origin, and no evidence that the markings were genuine indicators of foreign origin. The Court found that revenue did not establish the initial reasonable belief necessary to invoke Section 123. Therefore Section 123 was not applicable on the facts of the case.
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Sufficiency and specificity of the show cause notice; confiscation and penalty:
The Court scrutinised the show cause notice and adjudication for compliance with requirements under Sections 111 and 112. It found the show cause notice vague because it did not specify particular provisions under Section 111 for confiscation or under Section 112 for imposition of penalty. The Tribunal relied on precedents cited by the parties (including Amrit Foods and Max G.B. Ltd.) which hold that a vague show cause notice or lack of particularised violation is unsustainable. Given lack of evidence of foreign origin, absence of an initial reasonable belief by revenue, absence of specific statutory invocation, and procedural vagueness, the Court concluded that proceedings against the appellant were bad in law.
Holding and Implications
Core Ruling: The appeal is allowed and the impugned adjudication order is set aside.
Consequential effect on the parties: The Tribunal found the confiscation and penalty proceedings to be legally infirm for the reasons stated (no jurisdictional defect as to appeal maintainability was upheld; but on merits revenue failed to prove reasonable belief of smuggling, failed to produce adequate evidentiary testing or expert opinion, and the show cause notice was vague). As a result, the impugned order of absolute confiscation and the penalty are not sustainable and have been set aside.
The opinion does not record any intention to create or announce a novel precedent beyond applying existing authorities; it confines its decision to the facts and procedural defects found in the record.
Order pronounced on: 06.05.2021. Member (Judicial): Ashok Jindal.
Date of Hearing:07/04/2021 Date of Decision:06.05.2021 Per : Mr. Ashok Jindal The appellant is in appeal against the impugned order wherein the gold recovered from the appellant has been absolutly confiscated and penalty of Rs. 10,000/- has been imposed under Section 112 of the Customs Act, 1962.
2. The brief facts of the case are that the appellant was travelling by air from Jammu in domestic flightNo. A1-821 to Srinagar on 23.04.2018. At Srinagar Airport, the appellant was checked at the exit point of Airport by Customs Preventive Staff and one gold biscuit bearing marks PAMP SUISSE 100g FINE GOLD 999.9 C107781 was recovered. The said gold was seized on the reasonable belief that C/60114/2020 same is liable for confiscation and the gold is a notified item under section 123 of Customs Act 1962. The gold was seized absolutely and penalty of Rs. 10,000/- was imposed under section 112 of Customs Act. Against the said order, the appellant is before me.
3. A preliminary objection was raised by the Ld. AR that as per proviso to section 129A (1) (d), the appeal is not maintainable before this Tribunal being baggage as any goods imported or exported as baggage, the appeal is not maintainable before the this Tribunal. The Ld. AR further submitted that as it is a case of baggage goods, therefore, the appeal is not maintainable before this Tribunal.
4. The Ld. AR was heard and the issue arose whether the goods
i.e. the gold in question is imported or exported goods as baggage or not?
5. The admitted fact of the case is that the appellant is boarded the flight from domestic Airport at Jammu for Srinagar. The appellant was never travelling from abroad to India, in that circumstances, it is to be seen that whether the goods in question is imported goods or not ? Section 2(25) of the Act defines imported goods means any goods brought into India from a place outside India, but, does not include goods which have been cleared for home consumption. Admittedly in the case in hand, the goods were travelling by the appellant from Jammu to Srinagar. Both the places are located within India, therefore, the impugned goods is not having the character of the imported goods. In that circumstances, a preliminary objection raised by the Ld. AR is not acceptable and is against the spirit of law. Therefore, I hold that this Tribunal is having jurisdiction to hear the appeal. C/60114/2020
6. On merit, the Ld. Counsel for the appellant submits that gold biscuit bearing marks as explained Para 2 herein above was recovered from him and in the Adjudication order allegations were made against the appellant that to ascertain the present market value of the seized gold biscuit, market inquiry was made from the M/s RajeshJeweller, Srinagar and M/s Kewal Ornaments, Srinagar who has opined that the current market price of the seized gold biscuit is Rs. 3,22,000/- and it was concluded that it is evident that the appellant was in possession of one gold biscuit of foreign origin, as per details given above and he has failed to produce any valid documents to discharge the burden of proof under section 123 of the Act. Therefore, it appears that the said gold biscuit has been smuggled into India without following the proper import procedure and without payment of appropriate customs duty.
7. In counter, the contention of the Ld. Counsel is that the market enquiry was conducted in respect of valuation of impugned goods. There was no test of gold was conducted nor any report is placed on record. There are neither any expert opinion nor any market enquiry was conducted to establish that the gold in question is of Foreign Origin. Further, there is no evidence referred in order-in-original and the impugned order to substantiate that impugned gold are of foreign origin. The appellant in his statement never deposed that the goods are of foreign origin. It is his submission that the decision of this Tribunal in the case of Sudip Saha Vs. CC 2019 (369) ELT 1039 (T) relied upon by the revenue is not applicable to the facts of this case, as in the said case, the carrier and the owner admitted that the goods are of foreign origin. He further submits that the decision of Honble Madras High Court in the case of Malabar Diamond Gallery C/60114/2020 pvt. Ltd. Vs. Addl. Director General of Revenue Intelligence 2016 (341) ELT 65 (Mad) relied upon by revenue is not applicable in this case, as in the said case the appellant admitted that the gold jewellery smuggled from Singapore. It is his submission that there is no allegation that appellant alighted from International Flight and took domestic flight. He further submitted that the impugned gold is freely available in Indian market and on website www.indiamart.com. Sales the gold of the mark mentioned in Paragraph 2 herein above in India and the same has not been controverted by the Revenue. In that circumstances, the order of absolute confiscation is bad in law. He further submits that no specific provision of section 111 & 112 of Customs Act has been invoked, therefore, the gold cannot be confiscated. Consequently, no penalty can be imposed as held by the Honble Apex Court in the case of Amrit Foods Vs. CCE 2005 (190) ELT 433 (SC). He further submitted that the Honble Punjab and Haryana High Court in the case of CCE Vs. Max G.B. Ltd. 2008 (221) ELT 491 (P & H)also held that show cause notice is vague on specific violation not sustainable. He also relied on the decision of this Tribunal in the case of Delco Precitone Jewellers (P) Ltd. vs. CC 2000 (124) ELT 1105 (T) wherein it has been held that imposing penalty without arriving at any specific finding with reference to clause (a) or (b) of section 112 of Customs Act is not sustainable. He also relied on the decision of Honble Madras High Court in the case of B.Lakshmichand vs. Government of India 1983 (12) ELT 322 (Mad).
8. He further submitted that the adjudicating authority has erred in upholding that the appellant has not discharged the burden under C/60114/2020 Section 123 of Customs Act, 1962. It is his submission that the section
35 of NDPS Act cast reverse burden of proof like section 123 of Customs Act and the Honble Apex Court while dealing with section 35 & 54 of the NDPS Act, 1985 in the case of Hanif Khan @ Annu Khan Vs. Central Bureau of Narcotics 2019-TIOL-387-SC-NDPS has held that the prosecution under the NDPS Act carries a reverse burden of proof with a culpable mental state of the accused. He is presumed to be guilty consequent to recovery of contraband from him, and it is for the accused to establish his innocence unlike the normal rule of criminal jurisprudence that an accused is presumed to be innocent unless proved guilty. But that does not absolve the prosecution from establishing a prima facie case only where after the burden shifts to the accused. By relying on the decision of Hanif Khan (supra), he submits that as the gold was seized on the reasonable belief that said goods is liable to confiscation under section 111 of customs Act. The initial burden of forming reasonable belief has not been discharged. There was neither testing of gold done nor there is any evidence brought on records that the seized gold is of foreign origin, therefore, the provisions of Section
123 of Customs Act are not applicable to the facts of this case. It is his submission that in terms of Section2 (25) of the Customs Act, 1962, the goods in question are not imported goods. Therefore, burden lies on the revenue to prove that the goods in question are imported goods. Therefore, he prayed that the impugned order is to be set-aside.
9. On the other hand, the Ld. AR submits that in terms of Section
123 of the Customs Act, the appellant has failed to discharge the burden that the goods in question are not imported goods or have been imported. Therefore, she further submitted that the document C/60114/2020 dated 14.04.2015 of Shah jewellers, produced is a mere estimate and not a valid document in support of the appellant as the gold is a prohibited item under Section 2 (33) readwith Circular 34/2013 dtd. 04.09.2013 and as per harmonious construction of the Customs Act, any smuggled goods can be seized anywhere in India and legal proceedings initiated by the Customs against persons from whose possession the smuggled goods are recovered.
10. The ld. AR also produced the report of market inquiry on record which only said on eye estimation that the gold in question is of 999.9% and its market vaue is Rs. 3,22,000/- She also relied on the decision of Malabar Diamond Gallery (supra) and Sudip Saha (supra).
11. Heard the parties and considered the submissions.
12. On hearing the parties, it is a fact on record that the gold in question has been seized when the appellant was travelling in domestic flight from Jammu to Srinagar, in that circumstances, the goods in question cannot be said as imported goods. The revenue is heavily relying on Section 123 of the Customs Act say that when any goods on the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be on the appellant. Admittedly, if revenue is having a reasonable belief that they are smuggled goods, then the burden of proof that the goods are not imported lies on the appellant. But firstly, there should be a reasonable belief that the gold in question is smuggled one is to be established by the revenue to invoke Sec. 123 of the Customs Act.In the impugned order as well as adjudication order, nowhere it has been established that there was a reasonable belief that the goods in C/60114/2020 question are smuggled goods which is the bone contention to invoke Section 123 of the Customs Act, 1962. Further, the appellant has also brought on record that the marking on gold in question is freely available in the Indian market and at the website www.indiamart.com, the goods can be purchased by any Indian.
13. In that circumstances, revenue has failed to discharge that they are initial burden that on reasonable belief that the goods in question are smuggled goods. Further, it has been found that only market enquiry was done for valuation and purity of the goods in question. No fact has been brought on record by way of testing of the goods in question that the marking made on the goods are genuine or not. As no such investigation has been done to establish that the goods in question are of foreign origin, therefore, the provision of Section 123 of the Customs Act is not applicable to the facts of this case.
14. Further, the appellant has never admitted that the goods are of foreign origin or has been smuggled. The case laws relied by the Ld. AR are not applicable to the facts of this case as in those cases, the person from whose custody the gold/jewellery has been recovered has been recovered have admitted that the goods are of foreign origin and brought in India through illicit means. In that circumstances, the absolute confiscation of the gold in question is bad in law.
15. Further, on perusal of record, the show cause notice is vauge as no particular provisions of Section 111 of the Customs Act for confiscation of the gold and no provisions of Section 112 of the Customs Act for imposing penalty has been brought on notice. Therefore, the show cause notice is also vauge as held by the Honble Apex Court in the case of Amrit Foods(supra). Further, in the case C/60114/2020 of Max G.B. Ltd. (supra), the Honble Jurisdictional High Court had also held that the show cause notice is vauge on specific violation is not sustainable.
16. In the above discussion, I hold that the proceedings against the appellant are bad in law. Consequently, the impugned order is not sustainable, hence is set-aside.
17. In result, the appeal is allowed with consequential relief, if any. (Order pronounced on 06.05.2021) (Ashok Jindal) MEMBER (JUDICIAL) G.Y.
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