CESTAT Kolkata Overturns Gold Confiscation

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

Date: 19.06.2026

CESTAT Kolkata Overturns Gold Confiscation

A recent decision by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata, has set a significant precedent regarding the confiscation of gold and the imposition of penalties under Indian customs law. The case involved appeals by Shri Akhil Maheshwari, Shri Anil Kumar Yadav, and Shri Nikhil Maheshwari against the absolute confiscation of gold bars and heavy penalties imposed by customs authorities.

Background of the Case

On August 9, 2020, the Directorate of Revenue Intelligence (DRI), Kolkata, acting on intelligence, intercepted Shri Anil Kumar Yadav at Howrah Railway Station. Upon searching, officers discovered a cloth belt around his waist containing four gold bars and twelve small cut pieces of gold, totaling 3,651.3 grams and valued at over Rs. 2 crore. Shri Yadav could not produce documents supporting the lawful possession or transport of the gold, leading to its seizure on the suspicion of being smuggled foreign-origin gold. Two mobile phones were also seized.

During the investigation, Shri Yadav stated that he was acting on instructions from Shri Akhil Maheshwari and that the gold was handed to him by a person named Mr. Goldy. The gold was intended to be transported from Kolkata to Meerut. Subsequently, Shri Nikhil Maheshwari claimed ownership of the gold on behalf of M/s Pooja Jewellers, submitting jobwork challans, GST invoices, stock registers, and other supporting documents to establish lawful procurement.

Proceedings and Arguments

The Additional Commissioner of Customs ordered the absolute confiscation of the gold under Sections 111(b) and 111(d) of the Customs Act, 1962, and imposed penalties of Rs. 20 lakh each on the three appellants. Their appeal to the Commissioner of Customs (Appeals) was rejected, prompting them to approach CESTAT Kolkata.

The appellants argued that:

1. The gold was locally procured and not of foreign origin, as evidenced by GST invoices, returns, and purchase records.
2. The minor difference in gold purity (99.6% as per test report vs. 99.5% in invoices) was not sufficient to reject their claim of lawful procurement.
3. All statutory requirements, including documentation and tax compliance, were fulfilled.

They cited several legal precedents supporting their position that documentary evidence and compliance with GST regulations should suffice to establish lawful ownership and movement of gold.

Tribunal’s Analysis and Findings

The Tribunal carefully examined the evidence, including:

• Purchase registers and invoices from M/s Pooja Jewellers
• GST returns and jobwork challans
• The absence of foreign markings on the gold

Key findings included:

• The gold was duty-paid, and all relevant GST documentation was in order.
• The gold was not proven to be of foreign origin or smuggled.
• The appellants had discharged their burden of proof under Section 123 of the Customs Act, 1962.

The Tribunal noted that the authorities had disregarded substantial documentary evidence provided by the appellants. The minor discrepancy in gold purity was not deemed sufficient to justify confiscation or penalties.

Final Order and Impact

CESTAT Kolkata set aside the orders of confiscation and penalties, directing the authorities to release the seized gold to the appellants. The Tribunal emphasized that when lawful procurement is established through proper documentation and tax compliance, confiscation is not justified.

Key Takeaways for Businesses and Legal Practitioners

1. Documentary Evidence is Crucial: Maintaining accurate purchase records, GST invoices, and jobwork challans is essential for businesses dealing in precious metals.
2. Burden of Proof: Under Section 123 of the Customs Act, the onus is on the person from whom goods are seized to prove lawful possession. Proper documentation can effectively discharge this burden.
3. Legal Precedents Matter: Citing relevant case law can strengthen appeals against confiscation and penalties.
4. Minor Discrepancies: Small differences in gold purity or documentation details, if explained and supported by records, may not be grounds for confiscation.

Conclusion

This CESTAT Kolkata ruling reinforces the importance of compliance and documentation in the gold trade. It provides relief to legitimate traders and sets a benchmark for future cases involving the seizure of precious metals. Businesses are advised to maintain meticulous records and ensure all statutory requirements are met to safeguard against arbitrary confiscation and penalties.

Source: CESTAT Kolkata

Disclaimer

Handy Download:

Write to us at office@aadrikaalaw.com

Tel: +91-11-4999 2707 I +91-9999005379

www.aadrikaalaw.com