CESTAT Hyderabad Overturns Confiscation of Gold and Currency

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 11.05.2026

CESTAT Hyderabad Overturns Confiscation of Gold and Currency

This article examines the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Hyderabad’s decision in the appeal filed by Kishore Kumar Gilda, a gold and silver ornaments trader, against the absolute confiscation of gold and Indian currency by customs authorities. The case highlights critical legal principles regarding seizure, confiscation, and penalties under the Customs Act, 1962.

Case Background

1. Seizure Details:
   • On February 5, 2015, customs officers searched Kishore Kumar Gilda’s premises and seized 10 gold biscuits (100 grams each, with foreign markings) and Indian currency amounting to Rs. 33,56,000.
   • The authorities alleged the gold was smuggled and the cash represented sale proceeds of smuggled gold.
   • The appellant’s statement was recorded under Section 108 of the Customs Act but later retracted.
2. Adjudication:
   • The Commissioner of Customs ordered absolute confiscation of gold under Section 111, confiscation of currency under Section 121, and imposed penalties under Sections 112 and 117.

Key Legal Issues and Tribunal Findings

1. Validity of Seizure (Section 110)

• The Customs Act requires the proper officer to have “reason to believe” before seizing goods.
• The Tribunal found no independent reasons recorded prior to seizure, only a general statement in the panchanama.
• Citing Delhi High Court precedents, the Tribunal held that failure to record reasons vitiates the seizure and subsequent proceedings.

2. Burden of Proof (Section 123)

• Section 123 shifts the burden to the person from whom goods are seized, but only if the initial seizure is valid.
• Since the seizure was not valid, the burden did not shift to the appellant.
• The appellant explained the gold was purchased locally, and no evidence of smuggling was established.

3. Foreign Markings as Evidence of Smuggling

• The Tribunal emphasized that foreign markings alone do not prove smuggling.
• Gold circulates in the domestic market and may bear foreign inscriptions even when legally acquired.
• No investigation established the origin of the gold or any link to smuggling.

4. Reliance on Retracted Confessional Statement

• The Tribunal noted that a retracted confession cannot be relied upon unless corroborated by independent evidence.
• No such corroboration existed in this case.

5. Confiscation Without Specifying Clause (Section 111)

• The order did not specify which clause of Section 111 applied.
• Supreme Court and Tribunal precedents require clear specification; failure to do so is a serious defect.

6. Absolute Confiscation vs. Redemption (Section 125)

• Gold is a restricted, not prohibited, item.
• The Tribunal held that absolute confiscation is not justified; redemption should be offered unless exceptional circumstances exist.

7. Confiscation of Currency (Section 121)

• The Department must prove the cash represents sale proceeds of smuggled goods.
• No evidence established a nexus between the seized cash and smuggled gold.
• Confiscation of currency was deemed unsustainable.

8. Penalty Imposition (Section 112)

• Penalty provisions must be strictly interpreted and cannot be invoked without clear findings.
• No evidence of conscious involvement in smuggling; penalty was not sustainable.

Tribunal’s Decision

• The Tribunal set aside the confiscation and penalties, allowing the appeal with consequential relief.
• The decision reinforces the importance of procedural safeguards, evidentiary standards, and strict interpretation of penalty provisions under customs law.

Conclusion

This case underscores the necessity for customs authorities to follow due process, record valid reasons for seizure, and provide clear evidence before imposing confiscation and penalties. The Tribunal’s ruling serves as a precedent for similar cases, ensuring protection of traders’ rights and adherence to legal standards.

Source: CESTAT Hyderabad

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