Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 05.11.2026
CESTAT Ahmedabad Quashes Gold Confiscation After GST Records Support Lawful Domestic Purchase
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad has allowed the appeals of V. Navinchandra Hirachand Malji Jewellers & Co. and its authorised signatory, ruling that Customs could not sustain confiscation of two foreign-marked gold bars after the appellants produced GST invoices, stock records and a documented domestic transit trail that the Department did not properly investigate.
The dispute: 200 grams of foreign-marked gold seized in domestic transit
The case concerned two gold bars weighing 200 grams, marked βARGOR-HERAEUS, SAβ and assessed at 999 purity. The bars were valued at Rs. 12.10 lakh and were being transported within India through an angadia carrier when DRI officers intercepted the parcels outside Kalupur Railway Station, Ahmedabad, on 7 June 2023.
Customs treated the bars as smuggled because of their foreign refinery markings and the absence of import documents accompanying the shipment. The goods were subsequently seized, absolutely confiscated under the Customs Act, 1962, and penalties were imposed on both the jewellery firm and its authorised signatory.
The adjudication order imposed separate penalties of Rs. 1.50 lakh under Section 112(b) and Rs. 25,000 under Section 117 on each appellant. The Commissioner (Appeals) upheld the confiscation and penalties, prompting the appellants to approach CESTAT.
The jewellerβs case: domestic purchases were recorded and supported
The appellants did not dispute that the gold bars were foreign-origin products. Their central case was that foreign manufacture does not, by itself, establish illegal importation.
They relied on:
- GST purchase invoices from Surat-based suppliers, including N.R. Jewellers and Vidhi Jewellers;
- their trading stock ledger;
- entries showing an opening gold stock of 400 grams and subsequent purchases of 450 grams and 80.6 grams from the stated suppliers; and
- documentation supplied to the angadia carrier for the domestic consignment.
According to the appellants, the 200 grams were sent to Pahini Jewellers Ltd., Ahmedabad, toward settlement of outstanding dues arising from earlier jewellery purchases. They argued that once they furnished domestic purchase records, the Department had to verify the suppliers and disprove the claimed lawful supply chain.
Customsβ position: local invoices could not replace import documents
The Department argued that Section 123 of the Customs Act places the burden on the possessor or claimant of seized gold to prove that it is not smuggled. It submitted that GST invoices and stock ledgers were insufficient because they did not trace the specific bars to lawful import documents, such as Bills of Entry or customs-clearance records.
Revenue also relied on the authorised signatoryβs statement that the business had not obtained import documents from suppliers and that gold sold in retail could possibly have entered through Mumbai or Surat airports. It contended that the foreign refinery marks, 999 purity and lack of import documentation justified the reasonable belief that the goods were smuggled.
Tribunalβs finding: the evidentiary burden shifted after credible domestic records were produced
CESTAT held that the Departmentβs case failed because the appellants had produced invoices through the GST system, stock records and documentation consistent with the stated purity of the seized gold. There was no allegation that the suppliers had not actually supplied the goods or that the GST invoices were fabricated.
The Tribunal also gave weight to the angadia partnerβs statement. The carrier confirmed that it had received delivery challans and invoices relating to the consignment and that it routinely transported valuable goods on the basis of customer-supplied documentation.
On these facts, the Tribunal concluded that the initial burden under Section 123 had been met sufficiently to require the Department to investigate further. Customs should have verified the suppliers, examined whether their records were genuine and determined whether the supply chain was tainted. It did not do so.
The Tribunal emphasized that where a GST-recorded invoice, matching purity details and accounting entries exist at both the supplier and purchaser levels, foreign markings alone cannot displace the documentary evidence. It also noted that lawful channels for foreign gold bullion exist, including authorised channels such as banks and GIFT City-related arrangements.
Why the seizure was set aside
The decisive issue was not whether the bars were foreign-made, but whether the evidence established that they were smuggled. CESTAT found that Customs had not investigated the upstream supply chain despite having supplier details and contemporaneous invoices.
The Tribunal observed that if the gold were offending goods in the appellantsβ hands, the same concern would extend to the suppliers in the chain. Yet the Department neither investigated all relevant parties nor issued them show-cause notices. In the face of unchallenged documentary records, the Department could not maintain that it had a sustainable reasonable belief that the gold was smuggled.
Outcome and legal significance
CESTAT Ahmedabad vacated the seizure, set aside the confiscation and granted consequential relief to the appellants. The appeals were allowed by Final Order Nos. 10810-10811/2026, pronounced on 4 November 2026.
The ruling reinforces an important principle in inland gold-seizure cases: foreign refinery markings and high purity may trigger scrutiny, but they do not conclusively prove smuggling where the claimant produces credible, GST-backed domestic purchase and stock documentation. Once such records establish a plausible and documented supply chain, Customs must conduct a meaningful supplier-side verification rather than reject the records solely because direct import documents are unavailable.
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Source: CESTAT Ahmedabad
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