The Customs, Excise and Service Tax Appellate Tribunal, Kolkata, has set aside the absolute confiscation of a gold strip and a penalty of Rs. 4,00,000 imposed on a domestic passenger, ruling that the revenue failed to establish the gold's foreign origin - a prerequisite for invoking the reverse burden under Section 123 of the Customs Act, 1962. The Tribunal held that a seizure at a domestic airport without any foreign markings, standard purity, or corroborative evidence of smuggling cannot sustain confiscation under Sections 111(d), 111(l) and 111(m), and that a retracted statement recorded under duress cannot substitute for the statutory 'reason to believe'.
Background & Facts
The Dispute
The appellant, Md. Mostafa Kamal, a resident of Sepahijala, Tripura, was travelling on a domestic flight from Kolkata to Agartala on 25.07.2022 when CISF personnel detected a gold strip in his baggage at pre-embarkation security. The gold was handed over to the Air Intelligence Unit, Customs, NSCBI Airport, Kolkata, and seized. The adjudicating authority, by Order-in-Original (OIO) No. KOL/CUS/A&A/ADC/AIU CELL/25/2024 dated 28.06.2024, absolutely confiscated one gold strip weighing 255.210 grams valued at Rs. 13,14,331 under Sections 111(d), 111(l) and 111(m) of the Customs Act, 1962, and imposed a penalty of Rs. 4,00,000 under Section 112(b). The appellant's appeal before the Commissioner (Appeals) was dismissed on the ground of delayed filing, prompting the present appeal before the Tribunal.
Key Facts
- 25.07.2022: Appellant travelling Kolkata to Agartala by IndiGo Flight 6E 994; gold strip detected at pre-embarkation security
- Gold description: One strip weighing 255.210 grams, valued at Rs. 13,14,331; no foreign markings; purity 99.7% (not standard 99.9% for foreign gold); not of standard 24K gold size/quantity
- Seizure context: Domestic sector travel; gold carried openly in hand luggage, not concealed
- Statement recorded: 25/26.07.2022 - appellant disowned gold; appellant claims this was under threat of arrest
- 28.07.2022: Appellant retracted statement by letter sent via Speed Post and e-mail to Additional Commissioner of Customs (Airport), Kolkata; retraction acknowledged in Para 7 of Show Cause Notice
- Appellant's case: Gold made by melting old family ornaments for pledge against gold loan at Agartala
- OIO dated 28.06.2024: Confiscation under Sections 111(d), 111(l), 111(m); penalty under Section 112(b)
- Penalty recovery notice: Received by appellant on 04.10.2024
- RTI application: Filed seeking copy of OIO; copy provided by RTI authority on 30.10.2024
- Appeal before Commissioner (Appeals): Filed on 25.11.2024 (within 60 days of OIO receipt)
Procedural History
- 25.07.2022: Seizure of gold strip at NSCBI Airport, Kolkata
- 28.06.2024: Order-in-Original passed by Adjudicating Authority (OIO No. KOL/CUS/A&A/ADC/AIU CELL/25/2024)
- 04.10.2024: Penalty recovery notice received by appellant
- 30.10.2024: RTI authority provides copy of OIO to appellant
- 25.11.2024: Appeal filed before Commissioner (Appeals) - within 60 days of OIO receipt
- 17.02.2025: Commissioner (Appeals) dismisses appeal on ground of delayed filing (Order-in-Appeal No. KOL/CUS(AIRPORT)/KS/71/2025)
- 08.10.2026: Hearing before CESTAT Kolkata
- 28.10.2026: Final Order No. 76537/2026 pronounced
Relief Sought
The appellant sought setting aside of the OIO dated 28.06.2024, restoration of the seized gold strip (255.210 grams, value Rs. 13,14,331), waiver of penalty of Rs. 4,00,000, and consequential relief as per law.
The Legal Issue
The central questions were: (1) whether the seizure under Section 110(1) was founded on any 'reason to believe' the gold was smuggled; (2) whether the burden under Section 123 shifts to the person from whom unmarked gold is seized in a domestic town seizure where foreign origin is neither alleged nor proved; (3) whether absolute confiscation and penalty can rest solely on a retracted statement; and (4) whether the essential ingredients of Sections 111(l) and 111(m) are satisfied in a domestic passenger case.
Arguments Presented
For the Appellant
The appellant contended that the CISF/Customs authorities lacked the requisite 'reason to believe' the gold was smuggled, as there was no proof of foreign origin. The seizure was based on mere suspicion, not belief formed on reasonable grounds, violating fundamental rights. The gold strip bore no foreign markings, was of 99.7% purity (not 99.9%), and was not of standard foreign gold dimensions. The initial statement disowning the gold was given under threat of arrest and retracted within three days - a fact acknowledged in the Show Cause Notice. The appellant relied on Gian Chand v. State of Punjab (1962 AIR 496) holding mere suspicion insufficient for seizure; Union of India v. Mahesh Raj (1990 SCC (3) 115) that Section 123 burden arises only with prima facie evidence of foreign origin; D. Bhoormull (1974 AIR 859) that suspicion is no substitute for evidence; and Umrao Lal v. Commissioner of Customs (2016 (331) ELT 216 (Tri.-Del.)) that confiscation is unsustainable without markings or material evidence of foreign origin. The appellant also cited Maya Devi v. Smt. Raj Kumari Batra (Civil Appeal No. 10249 of 2003) for the Tribunal's discretion to decide the appeal finally without remand.
For the Respondent
The authorised representative submitted that the appellant failed to produce any licit documents for the gold at the airport or during adjudication, justifying confiscation and penalty.
The Court's Analysis
The Tribunal first addressed the limitation issue, holding that the appeal before the Commissioner (Appeals) was filed within time. The OIO was received by the appellant only on 30.10.2024 via RTI, and the appeal filed on 25.11.2024 was within the 60-day period. The revenue produced no evidence of earlier service. The dismissal on limitation grounds was therefore erroneous.
On merits, the Tribunal found the seizure was a 'town seizure' - the appellant was travelling domestically from Kolkata to Agartala, not arriving from an international destination. The gold was carried openly, not concealed. Critically, the gold strip had no foreign markings, was not of standard 24K gold dimensions, and assayed at 99.7% purity. The case rested almost entirely on the initial statement, retracted within days.
The Tribunal surveyed a consistent line of authority. In Commissioner of Customs, Patna v. Lalit Krishna Agrawal (Customs Appeal No. 75499 of 2022, Final Order No. 77506/2023), the Kolkata Tribunal held that without seizure at a port/airport or foreign markings, the onus is on the revenue to form a reasonable belief of third-country origin. The Patna High Court in Om Sai Trading Company v. Union of India (2020 (372) ELT 542 (Pat.), affirmed by SC 2022 (382) ELT 9 (SC)) ruled that reasons for 'reason to believe' cannot be supplemented by affidavit post-hoc, and mere suspicion cannot substitute for belief. Tata Chemicals Ltd v. Commissioner of Customs (2015) 11 SCC 628 established that 'reason to believe' is not the officer's subjective satisfaction but the belief of an honest, reasonable person based on reasonable grounds. Aslam Mohammad Merchant v. Competent Authority (2008) 14 SCC 186 required proper application of mind and material on record before issuing a show cause notice.
The Tribunal relied heavily on Daleep Kumar Verma (Customs Appeal No. 75315 of 2022), where gold bangles without foreign markings were held not liable for confiscation, and Principal Commissioner of Customs (Prev.), Delhi v. Ahmed Mujjaba Khaleefa [2019 (366) ELT 337 (T)] and Commissioner of Customs (Prev), Shillong v. Manisha Devi Jain [2019 (370) ELT 401 (T)] holding that Indian-origin remelted gold cannot be confiscated. The Tribunal also cited Triveny Spinning Mills, Shabnam Synthetics, and Market Chase Advertising for the principle that documentary evidence prevails over statements, and that retracted statements of co-accused without corroboration cannot prove smuggled nature.
"The burden under Section 123 arises only if there is prima facie evidence indicating foreign origin, which is entirely absent in this case."
The Tribunal concluded that Section 123 applies only to gold/silver bullion seized on reasonable belief of smuggling. Without foreign markings or material evidence of foreign origin, the reverse burden does not operate. The essential ingredients of Sections 111(l) and 111(m) - which pertain to goods imported in violation of import restrictions or without declaration - were absent in a domestic passenger case. The ratio of the cited decisions was squarely applicable.
The Verdict
The appellant succeeded fully. The Tribunal set aside the impugned Order-in-Original dated 28.06.2024. The absolute confiscation of the gold strip (255.210 grams, valued at Rs. 13,14,331) under Sections 111(d), 111(l) and 111(m) was set aside. The penalty of Rs. 4,00,000 under Section 112(b) was set aside. The appeal was allowed, and the appellant was held eligible for consequential relief as per law.
What This Means For Similar Cases
Foreign Origin Must Be Proved Before Section 123 Burden Shifts
The judgment reinforces that Section 123 of the Customs Act does not automatically apply to every gold seizure. The reverse burden of proof - requiring the person from whom goods are seized to prove they are not smuggled - is triggered only when the revenue first establishes a 'reason to believe' the goods are of foreign origin. In town seizures of unmarked gold, this foundational requirement cannot be presumed. Practitioners should:
- Challenge seizures where no foreign markings, standard purity (99.9%), or standard dimensions are present
- Demand the revenue produce the material on which 'reason to believe' was formed at the time of seizure
- Argue that post-hoc justifications via affidavit are impermissible under Om Sai Trading Company
Retracted Statements Cannot Sustain Confiscation Without Corroboration
The Tribunal's reliance on Daleep Kumar Verma and Triveny Spinning Mills establishes that a statement recorded under duress and retracted promptly carries little evidentiary weight, especially when uncorroborated by independent evidence. Practitioners should:
- Document the circumstances of statement recording (threats, duration, access to counsel)
- Ensure retraction is communicated formally and promptly (Speed Post, e-mail, acknowledged receipt)
- Cite the principle that confessional statements cannot override contemporaneous documentary records
Domestic Passenger Carriage Is Not Equivalent to International Import
The Tribunal's distinction between a domestic passenger carrying gold and an international passenger making a baggage declaration under Section 77 is critical. Sections 111(l) and 111(m) target violations of import restrictions and declaration requirements at customs frontiers. Their application to purely domestic movement of unmarked gold, without any nexus to cross-border smuggling, exceeds statutory scope. Practitioners handling similar town seizures should:
- Emphasise the domestic nature of travel and absence of customs frontier crossing
- Highlight that the gold was not concealed and no import declaration was required
- Argue that the revenue must prove the gold entered India illegally, not merely that it was found in domestic transit
