Case at a Glance
A passenger flying from Kolkata to Agartala on a domestic flight had a 255.210-gram gold strip in his bag. The CISF found it at the pre-embarkation security check and handed it to Customs, which confiscated it absolutely and imposed a penalty of Rs 4 lakh. The CESTAT held that the gold had no foreign markings and that the Department had not shown foreign origin. In those circumstances the burden under Section 123 of the Customs Act never shifted to the passenger. The case rested largely on a statement he had retracted within days. Confiscation under Section 111 and the penalty under Section 112(b) were set aside.
On 25 July 2022 the appellant, a resident of Sepahijala district in Tripura, was flying from Kolkata to Agartala on a domestic IndiGo flight. At the pre-embarkation security check, the CISF found a gold strip in his baggage and handed him and the gold over to the Air Intelligence Unit of Customs, which seized it. The seizure inventory described the item only as “believed to be gold” and recorded no belief that it was of foreign origin. The gold had no foreign markings, and testing put its purity at 99.7%. The appellant said it had been made by melting old family ornaments to raise a gold loan.
The adjudicating authority confiscated the gold absolutely 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 case relied heavily on the appellant’s statement of 25/26 July 2022 disowning the gold. He said it was made under threat of arrest and retracted it by letter of 28 July 2022. The appellant said the adjudication order was never served on him. He learned of it from a recovery notice of 4 October 2024, obtained a copy through RTI on 30 October 2024 and appealed on 25 November 2024. The Commissioner (Appeals) dismissed the appeal.
The Key Question Before the Court
When unmarked gold is seized from a passenger on a domestic flight and foreign origin is neither alleged nor proved, does the burden under Section 123 of the Customs Act shift to the passenger, and can absolute confiscation and a penalty rest on a retracted statement?
Why the Tribunal set aside the confiscation
The Tribunal first held that the appeal before the Commissioner (Appeals) had been filed on time. The Revenue had produced no evidence that the adjudication order was served earlier, so the dismissal was erroneous. With both sides’ consent, the Tribunal took up the merits itself instead of remanding the matter. It noted that the gold was carried in a bag, not concealed, bore no foreign marks and was not a standard 24-carat bar. It also noted that the Department’s case rested largely on a statement retracted within days.
Relying on decisions including Om Sai Trading Company v. Union of India (Patna High Court, affirmed by the Supreme Court) and Commissioner of Customs, Patna v. Lalit Krishna Agrawal (CESTAT Kolkata), the Tribunal held that the Revenue had failed to establish foreign origin, so the burden under Section 123 never shifted to the appellant. It further held that a domestic passenger cannot be equated with an international passenger making a baggage declaration under Section 77. The ingredients of Sections 111(l) and 111(m) were therefore absent, and the penalty under Section 112(b) could not stand.
What the Court Actually Held
- The appeal before the Commissioner (Appeals) was within time, because the Revenue showed no earlier service of the adjudication order.
- The Revenue did not prove that the unmarked gold was of foreign origin, so the Section 123 burden did not shift to the passenger.
- A domestic passenger is not in the position of an international passenger bound to declare baggage under Section 77. Sections 111(l) and 111(m) were not attracted.
- The adjudication order was set aside, together with the absolute confiscation and the Rs 4 lakh penalty. The appellant is eligible for consequential relief as per law.
Why This Judgment Matters
- Travellers on domestic flights often carry family jewellery or gold for loans. The ruling says Customs must show foreign origin before treating such gold as smuggled.
- It limits the use of retracted statements as the main basis for confiscation and penalty.
- It also shows that an appeal cannot be thrown out as time-barred when the Department cannot prove it served the order.
What Should Advocates Take Away From the Judgment?
For Travellers
- Gold without foreign markings found on a domestic flight is not presumed smuggled. The Department must first show foreign origin.
- If you sign a statement under pressure, retract it in writing promptly, as the appellant did within three days.
- If you learn of an order only through a recovery notice, obtain a copy (RTI worked here) and file the appeal promptly from that date.
For Counsel
- Check the seizure memo. Here it recorded only “believed to be gold”, with no belief about foreign origin.
- Argue that Section 77 declaration obligations and Section 111(l)/(m) do not fit a domestic flight.
- On limitation, put the Revenue to proof of service of the adjudication order.
Key Takeaways
- For domestic passengers, Customs must establish foreign origin before Section 123 shifts the burden.
- Absolute confiscation and penalty cannot rest mainly on a promptly retracted statement.
- Sections 111(l) and 111(m) did not apply to a domestic passenger with no Section 77 obligation.
- The Rs 4 lakh penalty and confiscation of 255.210 g of gold were set aside, with consequential relief as per law.
Frequently Asked Questions
Can Customs seize gold on a domestic flight?
It can seize gold if it has reason to believe it is smuggled. But in this case CESTAT held that without proof of foreign origin, the burden under Section 123 did not shift to the passenger, and confiscation failed.
What was the value of the gold?
The 255.210-gram strip was valued at Rs 13,14,331 and tested at 99.7% purity.
What relief did the passenger get?
The adjudication order, the absolute confiscation and the Rs 4 lakh penalty were set aside, and he was held eligible for consequential relief as per law.
Conclusion
The Tribunal drew a firm line between international arrivals, where baggage rules and the Section 123 presumption commonly operate, and domestic travel, where the Department must first lay a foundation of foreign origin. Without that, unmarked gold and a retracted statement were not enough.
Practical takeaway: In domestic gold seizures, focus on the seizure memo, the absence of foreign markings and any retraction. Insist that the Department prove foreign origin before any presumption is applied.
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