" (1) Appeal No. C/30072/2024 CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL HYDERABAD REGIONAL BENCH - COURT NO. – I Single Member Bench Customs Appeal No. 30072 of 2024 (Arising out of Order-in-Appeal No.HYD-CUS-000-APP-49-23-24(APP-I), dated 31.08.2023 passed by Commissioner of Customs & Central Tax (Appeals-I), Hyderabad) M/s Raj Jewellery Mall .. APPELLANT 27-4-7 & 8, Temple Street, Kakinada, Andhra Pradesh – 533 001. VERSUS Commissioner of Central Tax .. RESPONDENT Hyderabad - Customs Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana – 500 004. APPEARANCE: Shri Narasimha Murthy, Consultant for the Appellant. Shri K Sreenivasa Reddy, Authorised Representative for the Respondent. CORAM: HON’BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30343/2024 Date of Hearing:10.07.2024 Date of Decision:31.07.2024 [ORDER PER: A.K. JYOTISHI] M/s Raj Jewellery Mall (hereinafter referred to as appellant) has come in appeal against the Order-in-Appeal No. HYD-CUS-000-APP-49-23-24 (App-I) dated 31.08.2023 passed by Commissioner (Appeals). Commissioner (Appeals), vide impugned order, has rejected the appeal filed by the appellant against the Order-in-Original dated 31.03.2022 vide which the Adjudicating Authority has absolutely confiscated 4 pieces of gold bars of foreign origin weighing 100 gms each, engraved with marking of MMTC- PAMP, totally 400 gms, valued at Rs. 20,98,400/- under Section 111(d) and 111(f). He has also imposed a penalty of Rs. 4,20,000/- on the appellant under Section 112(b)(i) of Customs Act. (2) Appeal No. C/30072/2024 2. The issue, in brief, is that on the basis of specific Intelligence Officers of Customs (Preventive) examined certain consignments at Domestic Inbound Terminal, Air Cargo Complex, Rajiv Gandhi International Airport, Shamshabad on 10.11.2020. They, interalia, found that one M/s Sunil Kumar Saini, C/o Jai Mata Di Logistics had taken certain consignments of gold and gold jewellery weighing 2.60 Kg from different consignees which were to go to Mumbai. On examination, interalia, it was found to 11 individual packets containing gold biscuits/cut pieces of gold biscuits, jewellery etc., which were not accompanied by any proper documents. On further evaluation of these goods, it was found to contain various types of gold including pure gold of 999 purity, gold ornaments etc. They also found that, interalia, the appellant’s consignment of pure gold weighing 400 gms was accompanied by job work voucher no. 001 dated 09.11.2020. All these items were seized as Department felt that gold biscuits, jewellery etc., without proper bill were attempted to be smuggled and were liable for confiscation under Customs Act 1962 and CGST Act 2017. 3. The Department also recorded the statement of one Shri Sujit Kumar Jain, Managing Partner of the appellant on 04.12.2020, wherein, he was shown Panchanama dated 10.11.2020 pertaining to his consignments at serial no. 1 of the table mentioned in the panchanama. The appellant, interalia, submitted that the 400 gms of pure gold bars of 99.9% purity were purchased from one M/s Shubham Jewellers, Mumbai under invoice no. 62, dated 17.10.2020 and were now being sent to one M/s Tapasi Gold, Mumbai, under delivery challan voucher no. 001 dated 09.11.2020, for making ornaments on job work basis. The appellants further informed that payment for the said purchases have been made through Cheque No. 307102, SBI, SME Branch, Kakinada and there is also reflection of the said transaction in (3) Appeal No. C/30072/2024 the GSTR-2A of Raj Jewellery Mall, Kakinada, which shows that they have legitimately purchased the said gold bar from M/s Shubham Jewellers, Mumbai. However, on being pointed out by the Department that M/s Shubham Jewellers have dis-owned the delivery of the said impugned gold to them, the appellants stated that they were not aware as to why he was denying the fact of not selling the impugned gold bars to them. Further, since these gold bars were also carrying mark “MMTC-PAMP melted assayer 999.0 purity”, the Department investigated the matter from MMTC-PAMP India Private ltd., who clarified that these gold bars were not manufactured by them. In view of the said position, the Department felt that there was no proper document for the purchase of said gold bars by the appellant and therefore it appeared to them that these gold bars were smuggled in nature and therefore liable for confiscation. Department also invoked provisions of Section 123 of Customs Act vide para 13(h) of show cause notice. 4. On adjudication, the Adjudicating Authority has held that the said gold bars were of foreign origin, which were re-melted and affixed with fake marking of MMTC-PAMP with an intention to mis-lead the Customs Authority that the said gold was purchased from a nominated agency M/s MMTC. He also held that the appellant failed to discharge burden of proof that these were not smuggled gold in terms of Section 123 of the Customs Act 1962 by relying on certain judgments including D. Srinivas Vs Commissioner of Customs, Bangalore [2002 (148) ELT 946 (Tri-Bang)], Subhash Jain Vs State [2016 (333) ELT 51 (Del)] and Baburaya Narayan Nayak Vs Commissioner of Customs, Bangalore [2018 (364) ELT 811 (Tri-Bang)]. He has also relied on the Hon’ble Supreme Court’s judgment in the case of Om Prakash Bhatia Vs Commissioner of Customs, Delhi [2003 (155) ELT 423 (SC)] to hold that said goods were liable for confiscation. Further, by holding that the said goods (4) Appeal No. C/30072/2024 were prohibited in nature, he confiscated gold bars absolutely without giving any option to pay the fine in lieu of confiscation as provided under Section 125 of the Customs Act, 1962. 5. Commissioner (Appeals) has mainly dealt with the issue of absolute confiscation and held the order of the Adjudicating Authority proper and legal. He has, however, not dealt adequately with the contention of the appellant’s that Department has not established that said seized gold bars were initially illegally imported by appellant or anybody in violation of Customs Act and that burden is not on appellant to prove the legal acquisition of gold in India but it’s on Department to establish illicit import. 6. The Learned Advocate has mainly contended that there was no ground to have reasonable belief of gold being liable for confiscation in first place under Section 110 as said gold which were confiscated were being transported under the cover of proper documents. He relied on the judgment of Tribunal in the case of Commissioner of Customs (P), Kolkata Vs Shri Bajrang Ingole [2023 (11) TMI 423 – CESTAT-Kolkata], Shantilal Mehta Vs Union of India & Others [1982 911) TMI 56 – HC, Delhi] in support that there was no grounds for holding reasonable belief so as to seize the gold in first place. They have also pointed out that while Department relied on one e-mail sent by supplier, in response to e-mail from Department but no such documents were relied upon in show cause notice. 7. Learned DR reiterates the grounds for absolute confiscation in original adjudication order. He also relied on order of Hon’ble Supreme Court in Om Prakash Khatri Vs Commissioner [2019 (11) TMI 796 – SC]. Further, by way of additional submission, he has submitted that M/s Shubham Jewellers’s, (5) Appeal No. C/30072/2024 Mumbai e-mail dated 27.11.2020 confirms the sale but categorically deny delivery of said seized goods and also that no statement was recorded from M/s Shubham Jewellers by the Department. 8. Heard both the sides and perused the documents. 9. The core issue to be decided is whether in the facts of the case (i) the seizure of 400 gms of gold bars of alleged foreign origin valued at Rs. 20,98,400/- from air cargo complex were in the nature of smuggled gold bars and that there was a reasonable belief by the Customs Officers that such gold bars were liable for confiscation on the date of seizure i.e. 10.11.2020. ii) whether in the facts of the case, the Department has been able to establish conclusively that said gold bars were of foreign origin and were smuggled initially and subsequently re-melted and affixed with false markings. iii) whether in the facts of the case, presumptions available under Section 123 can be invoked or otherwise against the appellants. 10. On going through the facts of the case, it is obvious that acting upon certain Intelligence, Officers of Customs Branch went through the details of the consignments booked from Vijayawada to Mumbai via Hyderabad and verified the goods carried under Air Way Bill No. 312/VGA/7109650 dated 10.11.2020 where the shipper was found to be one Shri Sunil Kumar Saini of Jai Mata Di Logistics. On physical verification of consignment under the reasonable belief that the consignment contained foreign marked smuggled gold bars, the box was opened and found to have contained 11 individual small packets. On screening of individual packets, Officer identified some (6) Appeal No. C/30072/2024 images of gold biscuits/cut pieces of gold biscuits in 4 packets which were respectively not accompanied by any proper document. The Officers also observed presence of jewellery/ornaments without proper valid documents in the remaining packets. 11. The case against the appellant is that the Officers found 4 pieces of pure gold totalling 400 gms covered under job work gold issue voucher no. 001 dated 09.11.2020. Further investigation was carried out, wherein the statement of the appellant Shri Sujit Kumar Jain, Managing Partner of the appellant was recorded wherein, interalia, he clarified that 4 gold bars of 99.9 purity weighing 100 gms belongs to them. He further informed that the said gold bars were purchased from one M/s Shubham Jewellers, Mumbai vide invoice no. 62 dated 17.10.2020 for which payment was also made through cheque no. 307120, SBI, SME Branch, Kakinada and that the said transaction has been duly reflected in the GSTR-2A of Raj Jewellery Mall, Kakinada. However, on being informed by the Department that the said M/s Shubham Jewellers has dis-owned the delivery of the impugned gold bars, Shri Jain expressed his inability to explain as to why they were dis-owning the supply and admitted that they do not have any other document for impugned gold bars except for the invoice no. 62. 12. The Adjudicating Authority has basically relied on the fact that the so called supplier of the gold has said that the impugned gold bars were not supplied by them to the appellants as discussed by him in para 12 and 20 of the Order-in-Original. The adjudicator has brought out details with regard to non-supply of gold by M/s Shubham Jewellers as also letter from M/s MMTC- PAMP India Pvt Ltd., informing that their gold bars contain 7 digit unique number on one side of the bar and that the invoices issued by them contain (7) Appeal No. C/30072/2024 the serial number of the gold bar. Therefore, based on these two evidences, he concluded that the gold in question were neither supplied by MMTC-PAMP or by M/s Shubham Jewellers and therefore concluded that the appellants have procured the impugned gold bars without any proper document and were trying to attribute them to a different purchase of an identical gold bars by them from M/s Shubham Jewellers. He finally concluded that the impugned gold is of foreign origin which has been re-melted and affixed with fake mark of MMTC-PAMP with an intention to mis-lead the Customs Authority under the impression that the said gold is purchased from a nominated agency M/s MMTC and also that they have failed to discharge the burden of proof in terms of Section 123. He has also relied on various judgments in support that Section 123 is invokable in the facts of the case, as follows: a) D. Srinivas Vs Commissioner of Customs, Bangalore [2002 (148) ELT 946 (Tri-Bang)] b) Subhash Jain Vs State [2016 (333) ELT 51 (Del)] 13. Commissioner (Appeals) in his impugned order has merely upheld the order of the Original Authority for absolutely confiscating the gold bars. On perusal of records, I find that the case of the Department is that the seized golds were of foreign origin which were illegally imported smuggled golds and further re-melted on which certain markings were embossed by the appellant to mis-lead the Customs Authority. However, the arguments of the appellant that they have never claimed that said gold as the one which has been purchased from MMTC and the fact they had claimed that the said gold bars were purchased from M/s Shubham Jewellers, Mumbai would indicate that the gold in questions were not of foreign origin. One of the main thrusts of the Department is that so called supplier of impugned gold has refused to acknowledge that the said golds were supplied by him, (8) Appeal No. C/30072/2024 whereas, the appellants have brought evidence on record that they had purchased 4 gold bars totalling 400 gms under valid invoice which was also having the purity of 999. The fact that the M/s Shubham Jewellers has supplied to the appellant 400 gms of pure gold (Gold Bar 999) and received payment etc., or it’s reflection in GSTR-2A has not been disputed by either Department or appellant but what is being disputed or alleged is that the gold in question are not the same gold which were supplied by the Shubham Jewellers under the cover of invoice no. 62. 14. In order to understand the circumstances under which the said gold bars were seized by the Customs Officers, I have perused the Panchanama dated 10.11.2020 under which, interalia, these goods were seized. The Panchanama gives the factual details as well as the background for inspecting and examining the consignment from Vijayawada to Bombay via Hyderabad. On going through the 11 packets, the Officers felt that there might be foreign origin gold biscuits and got these goods evaluated by the valuer to confirm that some packets contain yellow metal bars/cut pieces yellow metal bars of 999.0 purity. In respect of the gold bars of the appellant, the Panchanama at page no. 3 indicated that it was covered with not only job work gold issued voucher no. 001 dated 09.11.2020 but also GST purchase invoice no. 062 dated 17.10.2020 from M/s Shubham Jewellers, Mumbai indicating sale of 4 gold biscuits of 999.0 purity engraved with markings of MMTC-PAMP neither numbers nor purity were found different by Officer on the date of seizure. Admittedly, in the same consignment there were certain other gold of 999 purity or 24k where some documents were missing. The Officers entertained a view that the courier was admitting to smuggle gold biscuit without proper bills and also clearing gold jewellery, diamond jewellery, units of precious stone without payment (9) Appeal No. C/30072/2024 of customs duty and goods and service tax and therefore they were liable for confiscation under the provisions of Customs Act, 1962 and Central Goods and Service Act, 2017. No specific sections of Customs Act or CGST Act were quoted to show as to under which provision they were liable for confiscation. This Panchanama is a relied upon document for the show cause notice. Interestingly, Officers invoked provisions of both Customs Act, 1962 and CGST Act, 2017 for seizing goods covered from serial no. 1 to 11 of Panchanama (serial no. 1 is appellant’s) without distinguishing which law is applicable for which consignment. 15. In his statement dated 04.12.2020 Shri Sujit Kumar Jain, Managing Partner of the appellant, interalia, submitted that these were purchased from Shubham Jewellers, Mumbai under the cover of invoice no. 62 dated 17.10.2022 and were being sent to one M/s Tapsi Gold, Mumbai under their delivery challan voucher no. 1 dated 09.11.2020 for making ornaments on job work basis. He also submitted that such transactions have been reflected in their GSTR-2A and bank statement. However, the Customs Authority asked him to explain about dis-owning of the delivery of impugned gold bars by M/s Shubham Jewellers. He re-iterated the same statement and explained that he did not know why Shubham Jewellers, Mumbai was denying the fact that the said gold bars were sold to them. He also confirmed that they have provided the original delivery challan voucher no. 001 dated 09.11.2020 and a xerox purchase invoice no. 62 dated 17.10.2020 to the courier M/s Jai Mata Di Logistics for the purpose of transportation. However, the fact that Department had contacted M/s Shubham Jewellers via e-mail and their response was never disclosed or relied upon in show cause notice. Again, the fact that they had sent for verification the invoice to M/s Shubham Jewellers further confirms that (10) Appeal No. C/30072/2024 Department was in possession of supplier’s invoice even before they recorded statement of Shri Jain. 16. In the entire show cause notice, there is no details as to how investigation were carried out by the Department from M/s Shubham Jewellers, Mumbai and it was only in the course of the statement this fact was disclosed to the appellant. In fact, the Department has now by way of additional submission has accepted that Department had sent one e-mail dated 27.11.2020 to confirm the sale of gold to the appellant vide invoice no. 062 dated 17.10.2020 by attaching the image of seized 4 gold bars and in reply M/s Shubham Jewellers, Mumbai vide e-mail dated 27.11.2020, though confirmed the sale of gold bars vide invoice no. 062 but denied the delivery of the said impugned 4 gold bars. In view of the same, no statement was recorded from Shubham Jewellers, Mumbai. The response dated 27.11.2020 by M/s Shubham Jewellers is reproduced below for ease of reference: “Sir, We had sold 4 gold bars – 999 each weighing 100 gms total quantity 400=00 gms, to M/s Raj Jewellery Mall, #27-4-7 & *, Temple Street, Kakinada – 533 001, on 17.10.2020, Sale Invoice No. 062 and the delivery was pick from our office. The images of 999 bars which u have mailed me is not delivered us. Regards Shubham Jewellers” 17. What is obvious here is that the entire investigation as regards the source of supply disclosed by the appellants at the time of shipment itself as well as later was carried out behind the back of the appellant and the related documents have not been relied upon in show cause notice so as to enable the appellant to defend the case and rebut changes. It is also not disputed that no statement under Section 108 has been recorded from M/s Shubham (11) Appeal No. C/30072/2024 Jewellers as evident from the show cause notice. It also appears that on denial of Shubham Jewellers, of having not supplied impugned gold to the appellant, no further efforts were made to investigate at both ends to conclusively arrive at the conclusion that the gold in question were different than the gold which were purportedly sold by Shubham Jewellers. 18. Therefore, as far as the first issue whether there was a reasonable belief by Customs Officers that such gold bars were liable for confiscation on the date of seizure is concurred, facts would say that since there were many consignments containing different types of gold and jewelleries and in view of certain un-specified intelligence/information, there could have been a reasonable belief by the Department that certain goods were of offending nature and were liable for confiscation under the Customs Act. However, what is important to note is that in order to invoke Section 123, the seizure of the gold has to be under reasonable belief that it was smuggled gold. When the gold was covered under proper documents like job work gold invoice vouchers and GST purchase invoice etc., as apparent from Panchanama, there did not exist any reasonable belief that the said golds were smuggled in nature, on the date of seizure. Therefore, merely on presumption without any tangible documents or belief, invokation of the Section 123 for the purpose of shifting the onus of burden cannot be sustained. Further, the fact the Departmental Officers were themselves not sure as to under which provisions said goods were liable to confiscation i.e whether Customs Act or CGST Act, they cannot have reasonable presumption that impugned goods were smuggled in nature, as a pre condition for invoking Section 123 of Customs Act. It is also noted that certain other relevant factors like seizing it from domestic inbound terminal of Air Cargo Complex, immediate clarification about covering documents and (12) Appeal No. C/30072/2024 ownership etc., by authorised representative of courier company M/s Jai Mata Di Logistics, and appellant not shyning away from ownership of said item would also make the presumption of reasonable belief about impugned goods being smuggled in nature, untenable. 19. On going through Section 123 & 110 of Customs Act, what is obvious is that seizure under Section 110 can be made if reasonable belief exists for the for them being liable to confiscation under Customs Act, Section 123 can be invoked only when seizure has been made under reasonable belief that it was of smuggled nature. The definition of smuggling under Section 2(39) of Customs Act defines where the goods are liable for confiscation either under Section 111 or Section 113 of Customs Act. Thus, smuggled goods require it’s confiscation under Section 111 or 113. Whereas, Section 110 only requires reasonable belief for any goods being liable for confiscation under Customs Act. It is observed that Section XIV of Customs Act provides for different situations under which goods would be liable for confiscation under different sections in addition to Section 111 and 113 for example Section 115, 118, 119, 120 & 121 of Customs Act. In this, Panchanama reveals that no specific provisions were invoked for them to believe that gold were liable for confiscation under Section 111 or 113, whereas for invoking Section 123, there should be reasonable belief that goods were liable for confiscation under Section 111 or 113 of Customs Act. 20. Therefore, I hold that though the goods which were seized under the reasonable belief that they were liable for confiscation under the Customs Act and CGST Act, there was no sufficient material available to the customs officials on the date of seizure to form a reasonable belief in respect of appellants gold that they were smuggled gold or were of foreign origin. (13) Appeal No. C/30072/2024 21. The issue as regards presumption under Section 123 has been decided in various cases decided by Hon’ble Supreme Court, High Courts, Tribunals etc. In most of these decisions and orders, the facts become very important as to what were the circumstances under which the reasonable belief could be farmed and the gold could be considered to be of foreign origin, and smuggled or otherwise. In general, I find that the issue whether there was material before Customs Officer to form a reasonable belief that the seized golds were smuggled goods or otherwise was the subject matter dealt with extensively by the Hon’ble Supreme Court in the case of Indru Ram Chand Bharvani Vs Union of India [1988 (7) TMI 78 SC] where after examining after the provisions of Section 123, and 110 read with 123, interalia, held that there must be materials to confirm a reasonable belief that the goods in questions are smuggled. In the case, the Hon’ble Supreme Court found that there was no trust worthy evidence, documentary etc., as regards legal acquisition and therefore it was rightly invokable. The Department’s reliance on the case law of Om Prakash Katri Vs Commissioner in support of that it requires only a reasonable belief as far as gold is concerned that it was smuggled and in the given facts there was reasonable belief, is not tenable in view of discussion in foregoing paras that on the date of seizure there could not have been any reasonable belief to hold said goods as smuggled goods by the Departmental Officer in view of the documents covering the consignment. In the case of Collector of Customs, Madras Vs Nathela Sarpathu Shetty [1999 (110) ELT 157 (SC)] Hon’ble Supreme Court, inter alia, observed in para 44 that reasonableness of the belief has to be judged by all the circumstances appearing at that moment. Therefore, even though subsequently they would have found some evidence to suggest that one of the documents might not be authentic document for coverage of the impugned gold, at the time of seizure, there was no material ground to hold (14) Appeal No. C/30072/2024 such a belief. Therefore, in the given set of facts, I do not find that Section 123 was invokable. 22. In so far as the issue whether Department was able to establish that said gold bars were of foreign origin and were smuggled and subsequently re-melted as held by the Original Adjudicating Authority, I find that there is no evidence in support of that these have entered into India without discharging proper duty or meeting any policy restrictions, if any. In fact by accepting the invoice of Shubham Jeweller as genuine, the Department is accepting the fact that Shubham Jewellers was otherwise selling gold of purity 999 on payment of applicable GST and that gold was not of offending nature. Further, emphasis made by Department on the denial by the Shubham Jewellers that the gold in question were not supplied by them cannot be relied against appellant due to various infirmities including non- reliance of any material evidence or statement etc., from the supplier of gold in show cause notice or disclosure of material to the appellant before the issue of the show cause notice. Interestingly, availability of this invoice has not been disclosed in show cause notice even though it is clearly indicated in the Panchanama. In fact, as discussed in foregoing paras since Section 123 is not invokable in the present case, therefore, onus was on the Department to conclusively prove that the gold in question were smuggled and subsequently re-melted etc., as concluded by the Original Adjudicating Authority and upheld by the Appellate Authority. There is also force in the submissions of the appellant that they have never claimed that the golds were purchased from MMTC and in fact the Adjudicating Authority has also held that it is case of a wrong marking to mislead Customs. Therefore, the Adjudicating Authority accepts that these markings were not of foreign origin. Therefore, when the markings were not of the foreign origin and fact (15) Appeal No. C/30072/2024 that gold of purity 999 can be sold in domestic market under legitimate invoices etc., the Customs needs to have proved with sufficient evidence that the gold was actually made out of re-melted gold bar initially smuggled into India. There is no evidence to that effect in the show cause notice. Thus, the conclusion drawn by the adjudication is based on presumptions and surmisings. 23. Thus, the Department has not been able to prove conclusively that the said gold bars were of foreign origin which were subsequently smuggled and re-melted and were carrying fake markings. Since Section 123 cannot be invoked and appellants had already discharged the initial burden by disclosing the source of legitimate purchase, it was for the Department to carry out further investigation and establish that such golds were actually smuggled gold and were liable for confiscation under the Customs Act 1962. 24. Therefore, in the facts of the case, the confiscation and more so absolute confiscation of the seized gold is not legally tenable and therefore the order of the Commissioner (Appeals) upholding the absolute confiscation is required to be set aside. Since, the seized goods were not liable for absolute confiscation, the penalty is also not imposable on the appellant. Therefore, the order of the Commissioner (Appeals) is set aside with consequential benefits, if any, to the appellants as per law. 25. Appeal allowed. (Order Pronounced in open court on 31.07.2024_) (A.K. JYOTISHI) MEMBER (TECHNICAL) jaya "