Commissioner of Customs (Preventive) Lko. vs Anand Navalchand Pugaliya

SHEKHAR B. SARAF, J. : These three appeals, preferred by Commissioner of Customs (Preventive), Lucknow under Section 130 of the Customs Act, 1962 (hereinafter referred to as the 'Act') assail a common order dated April 23, 2025 passed by the Custom, Excise and Service Tax Appellate Tribunal, Allahabad (hereinafter referred to as the ‘CESTAT’) whereby the order passed by Commissioner (Appeal) was affirmed and order passed by Adjudicating authority holding absolute confiscation of gold bars alongwith packing materials used for concealment, silver bullion and cash was set aside.

Custom Appeal No.1 of 2026 concerns Shri Anand Navalchand Pugaliya (hereinafter referred to as ‘respondent’), the proprietor of M/s Pugaliya Jewellers, who asserts lawful ownership of the seized gold bars. Custom Appeal No.2 of 2026 and Custom Appeal No.3 of 2026 pertains to Shri Narendra Hiralal Tiwari and Shri Purmanand Ramchandra Mishra respectively, from whose possession the gold bars were recovered. Since all three appeals arise from a common order raising same questions of law regarding perverse findings and burden of proof under Section 123 of the Act, therefore, they have been heard together and are being decided by this common judgment.

Upon perusal of the records and having heard the learned counsel for the appellant, the following substantial questions of law have been raised by the revenue department and have been admitted:-I. Whether the CESTAT erred in law in misinterpreting Section 2(39) read with Section 111 of the Customs Act, 1962 with regard to the terms ‘smuggling’ and ‘confiscation’ of such goods?

II. Whether the finding of the Tribunal that the Burden of proof was discharged by the respondent is a perverse finding?

The factual matrix of the present lis is delineated below:

a. On November 28, 2020, acting on specific intelligence, officers of the Directorate of Revenue Intelligence (DRI), Lucknow Zonal Unit, intercepted Shri Nagendra Hiralal Tiwari and Shri Purmanand Ramchandra Mishra at Prayagraj while they were travelling in a bus en route from Nagpur. During a personal search conducted on their persons, two metal bars bearing the marking ‘Valcambi Suisse 1 KG Gold 995.0’ were recovered from Shri Narendra Hiralal Tiwari and one metal bar bearing the marking ‘Suisse 1 KG Gold 995.0’ was recovered from Purmanand Ramchandra Mishra. The aforesaid three yellow coloured metal bars weighing 2,997 grams valued at Rs. 1,43,85,600/-, were wrapped in tape and concealed inside the shoes of the intercepted persons.

b. When both the intercepted persons were questioned on November 28, 2020, they admitted that they were carrying the foreign origin smuggled gold for its delivery at Prayagraj on the direction of respondent. They further stated that they did not possess any valid documents with respect to purchase or import of the foreign origin gold. Hence, on the reasonable belief that the gold was brought into India by way of smuggling, and therefore, liable to confiscation under Section 111 read with Section 123 of the Act, the goods were seized by the DRI under Section 110 of the Act.

c. On the basis of the statements of both the intercepted persons, a follow-up inquiry was conducted on November 28, 2020 at the residential and business premises of Shri Anand Navalchand Pugaliya wherein, during the search, a Silver Bullion weighing 2,36,635 grams was recovered from his house while 7,005.64 grams of Silver Bullion was recovered from his shop, aggregating to a total of 2,43,640.64 grams. Simultaneously, cash amounting to Rs. 19,99,000/- was recovered from the house and Rs. 9,72,270/- from his shop, aggregating to a total of Rs. 29,71,270/-. Upon failure to produce any documents in relation to the recovered Silver Bullion and cash, both were seized under Section 110 of the Act on the reasonable belief that the Silver Bullion had been smuggled into India without payment of customs duty and the cash represented the sale proceeds of smuggled gold/silver.

d. The aforesaid metal bars were sent to the Chemical Examiner CRCL, New Delhi wherein the metal bars were confirmed to be gold with purity ranging from 99.35% to 99.67%.

e. During the course of the investigation, in response to summons, Shri Anand Navalchand Pugaliya vide letter dated January 14, 2021 submitted certain documents with regard to GST returns, purchase invoices of gold and silver, a gift deed in relation to silver, a delivery note, labour charges paid to a refiner, balance sheet, sale and purchase ledger, stock statements and bank statements. f. Upon receipt of a document pertaining to labour charges paid to a refiner namely Shri Vijay Anandrao Devkar, the DRI officers summoned him, and in response to the said summons, he submitted a notarized affidavit dated February 8, 2021, wherein it was stated that Shri Anand Navalchand Pugaliya had given him 38 pieces of gold weighing approximately 3 kg for melting and converting into 3 bars of 1 kg each, for which he received Rs. 1,500/- in cash. Moreover, in his statement recorded on September 22, 2021, Shri Vijay Anandrao Devkar corroborated his earlier statement regarding melting and conversion of the gold and further stated that he did not possess any dye bearing a marking akin to marking engraved on the seized gold bars. He further confirmed, upon being shown photographs of the seized gold bars bearing the marking "Valcambi Suisse 1 KG Gold 995.0", that he had not given any such marked gold bar to any person during the preceding two years.

g. Statements of Shri Anand Navalchand Pugaliya were recorded under Section 108 of the Act on April 22, 2021, April 23, 2021, June 2, 2021, June 4, 2021 and October 18, 2021. In his statement dated April 22, 2021, he stated that the recovered gold was purchased from two different sellers, namely Safari Bullion and Jewellers Jasraj Shantilal Baid. However, in his subsequent statements dated June 2, 2021 and June 4, 2021, he modified his earlier statement and claimed that the gold was purchased from Safari Bullion only. He also failed to provide details of the artisan at Prayagraj, namely Shri Raju Bhai, to whom the recovered goods were allegedly destined for delivery.

h. During the investigation, it was found that Shri Anand Navalchand Pugaliya had on an earlier occasion manipulated his books of accounts to validate bogus cash proceeds from the sale of gold bullion in order to establish the ownership of the impugned cash and as a result an order dated December 31, 2020 under Section 24(4)(b)(i) of the Prohibition of Benami Property Transaction Act, 1988 (hereinafter referred to as ‘PBPT Act’) was passed provisionally attaching the impugned cash of Rs. 67.50 lakhs as ’Benami Property’ under Section 2(9)(D) of the PBPT Act.

Based on the aforesaid facts and other material available on record, a show cause notice dated November 26, 2021 was issued for contravening Section 7, 11 and 123 of the Act to the respondent proposing confiscation of the seized gold bars, silver bullion, cash, and for imposition of penalty. In response to the show cause notice, defence replies were filed on behalf of the respondent.

j. After considering the show cause notice, relied upon documents and affording opportunity of personal hearing, the adjudicating authority vide order dated November 14, 2022 had ordered absolute confiscation of the seized foreign origin smuggled gold weighing 2997 grams valued at Rs.1,41,16,791/- and silver bullion weighing 2,43,640.64 grams valued at Rs.1,37,96,297/-. The said confiscations were ordered in terms of Section 111(a)(b)

& (m) of the Act. Apart from the aforesaid confiscation, learned adjudicating authority also ordered confiscation of cash amounting to Rs.29,71,970/- under Section 121 of the Act besides imposing penalty of varying amounts on the respondent and the two intercepted persons under Section 112(b) of the Act.

k. However, a volte-facie was observed at the appellate stage, when the Commissioner (Appeal) vide order dated June 5, 2023, has allowed the appeal filed by the respondent alongwith the two intercepted persons and set aside the order of confiscation passed by adjudicating authority.

l. This decision of Commissioner (Appeal) was affirmed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) vide order dated April 23, 2025 with the observation that Commissioner (Appeal) has duly analyzed the evidence tendered and produced before the lower authorities in support of their contentions.

m. Being aggrieved by the order of the CESTAT dated April 23, 2025, the revenue has preferred the present appeal before this Court under Section 130 of the Act raising substantial questions of law arising from the impugned final order.

Upon perusal of the order passed by the Tribunal, the core controversy in the present appeal is with regard to whether the Tribunal, being the last fact finding authority, has acted in a proper manner in appreciating the evidence that was provided by the respondent with regard to the seizure of gold, silver and cash. The Tribunal held that the Burden of proof that was cast upon the respondent under Section 123 of the Act had been discharged and that it was incumbent upon the revenue to contradict the veracity of evidence furnished by the respondent.

The first aspect to be considered in the case in hand is with regard to on whom the burden of proof lies. We would like to examine Section 123 of the Act, which reads as follows:-

Thus, it is clear that Section 123 casts the burden of proof on the person from whom the goods are seized or the owner of the goods, for proving that the goods are not smuggled goods. Accordingly, it is up to such person to show that the goods are not of foreign origin and hence not smuggled or that the goods are of foreign origin but not smuggled goods, having been lawfully acquired.

One must be mindful of the fact that Section 123 initially vests the burden of proof on the revenue before shifting it towards the assessee. Three conditions must be fulfilled by the revenue for discharging their onus before applicability of Section 123 of the Act, that is, firstly seizure of goods to which this section applies, secondly, seizure must be under the Customs Act and thirdly, seizure on the reasonable belief that they are smuggled goods. When these three conditions are fulfilled, the presumption of smuggled goods arises, and the burden shifts to the assessee to show that they are not smuggled goods.

Applying the aforesaid conditions for seizure of three gold bars, we find that first and second conditions are fulfilled. The third condition of ‘reasonable belief’ is based on foreign marking on gold as well the clandestine manner of transportation and statements of the intercepted persons. Therefore, the initial burden that was vested on the revenue was discharged.

Having noted the above legal position, we are required to examine as to what was the statement of the respondent, the intercepted persons and the refiner about foreign marking gold. As could be seen from the discussion and findings of the investigation in the show cause notice as well as in the adjudicating order, a plethora of inconsistency was brought to light.

The statements dated November 28, 2020 of Narendra Hiralal Tiwari and Purmanand Ramchandra Mishra under Section 108 of the Act were recorded whereby they admitted carrying foreign origin smuggled gold. The relevant paragraph from the findings in show cause notice is quoted hereinbelow:-

Furthermore, the refiner in his statement claims to have received 38 pieces of gold for converting the same into three gold bars without any marking for respondent. The relevant paragraph from the findings in show cause notice is quoted hereinbelow:-

***

On the contrary, respondent in his statement dated February 28, 2021 stated that he had handed over 35 pieces of gold to the refiner for melting and converting into three bars. The relevant paragraph from the findings in show cause notice is quoted hereinbelow:-

Moreover, respondent who asserts lawful ownership of the seized gold in his statement dated April 22, 2021 stated that he had purchased the gold from Safari bullions and Jewellers Jasraj Shantilal Baid whereas in a statement dated June 2, 2021 and June 4, 2021 he stated to have purchased the gold from Safari bullions only. The relevant paragraph from the findings in show cause notice is quoted hereinbelow:-

During investigation, the adjudicating officer had observed certain inconsistencies. The observation in the show cause notice were as follows:

Based on the aforesaid statements and relied upon documents, the adjudicating authority had passed an extensive order in relation to seized gold bars whereby he had held that the seized gold is smuggled gold of foreign origin and liable for confiscation under Section 111 of the Customs Act. The relevant paragraphs of the order passed by adjudicating authority have been delineated below:-

(Emphasis added)

A volte-face from the findings of adjudicating authority was observed at the appellate stage before the Commissioner (Appeal) whereby the Commissioner (Appeal), setting aside the confiscation of three gold bars, had observed that mere foreign markings on the gold does not establish the smuggled nature of the gold. Moreover, the respondent who claimed his legal ownership over the gold bars had also submitted the GST paid purchase invoice duly certified by chartered accountant whose entry has also been reflected in the stock ledger. The relevant paragraphs of the order passed by Commissioner (Appeal) in relation to three gold bars are delineated below:

The aforesaid order of Commissioner (Appeal) went into appeal before the CESTAT, whereby the order passed by Commissioner (Appeal) was affirmed by simpliciter replication of the latter’s order and observing that the burden of proof cast upon the respondent was duly discharged by production of GST paid invoices certified by chartered accountant and it was expected that the revenue contradict the veracity of said invoices. The relevant paragraph of the order passed by CESTAT in relation to three gold bars are delineated below:-

Learned counsel appearing on behalf of appellant submitted that the invoices produced by the respondent were domestic GST invoices and GSTR-2A returns representing intra-state paper transactions but that cannot validate genuine purchase as that would have been discharged only by the production of Bill of entry or duty payment at port of entry. It was further contended that the statements of refiner and respondent were inconsistent as respondent claimed that the three bars were procured via melting and converting 35 pieces of gold into three bars from a local refiner whereas refiner stated that he received 38 pieces of gold and converted it into three bars but he had not embossed any marking on the bars as he did not have dyes for the same. He further relies on the Supreme Court judgement in Collector of Customs, Madras vs. D. Bhoormull^{11.(1974) 2 SCC 544} to contend that revenue is not required to prove smuggling with mathematical certainty as circumstantial probability supported by foreign markings is sufficient to cast onus under section 123 on the assessee. He has further relied on Hero Vinoth (Minor) vs. Seshammal^{22.(2006) 5 SCC 545}, Vijay Kumar Talwar vs. Commissioner of Income Tax^{33.(2011) 1 SCC 673}, K. Ravindranathan Nair vs. Commissioner of Income Tax^{44.(2001) 1 SCC 135} and Triveni Rubber and Plastics vs. Collector of Central Excise^{55.1994 Supp (3) SCC 665} to contend that the finding of CESTAT is perverse, if it ignores the primary physical evidence.

Learned counsel appearing on behalf of the respondent/noticee submits that under Section 123 of the Act, initial burden is on the person from whose possession goods are seized, however, once plausible documentary evidence is produced, burden shifts to the revenue. In the present case, since, the respondent had submitted all the documentary evidence via submission of books of accounts, copy of GSTR2A of the relevant period along with CA Certificate, therefore, he has substantiated that the goods were duly recorded. Moreover, the revenue has not discredited such documentary evidence anywhere in the Show cause notice or in the adjudication order. By submission of such documents, the burden of proof as required under Section 123 of the Customs Act has been discharged by the respondent and the same had been observed by Commissioner as well as CESTAT in their respective orders.

Learned counsel appearing on behalf of respondent relies on Triveni Rubber & Plastics vs. Collector (supra), Sumitomo Heavy Industries Ltd. vs. O.N.G.C.^{66.(2010) 11 SCC 296}, S.R. Tewari vs. U.O.I.^{77.(2013) 6 SCC 602}, Vijay Kumar Talwar vs. CIT^{88.(2011) 1 SCC 673} and Hero Vinoth vs. Seshammal^{99.(2006) 5 SCC 545} to contend that reappreciation of evidence that has already been considered by the Tribunal cannot be done by the High Court as the Tribunal is the last fact finding body.

On a perusal of the respective orders passed by the adjudicating authority and the Commissioner (Appeals) and after sifting through the documents that were produced before the adjudicating officer, it is clear that the adjudicating authority had correctly observed that the burden of proof under Section 123 of the Customs Act was not discharged by the respondent.

The facts that the gold was being carried in a surreptitious and clandestine manner without any invoices, the statement given by the carriers, the contradictory statement given by Mr. Anand Pugaliya (owner of the goods), the statement given by the refiner Sri Vijay Anand Rao Devkar which is clearly at variance with that of Mr. Pugaliya, the lack of specific invoices corresponding to the three gold bars and the fact that foreign markings were found on the three gold bars that have not been explained by the owner of the gold and the approved purity of gold ranging between 99.35% to 99.37% (purity only found in foreign gold) patently establishes the presumption of smuggling of goods so as to make it liable to confiscation under Section 111 of the Act.

The respondent in his statement dated April 22, 2021 has stated that three gold bars were purchased from two different sellers namely Safari Bullion and Jewellers Jasraj Shantilal Baid but in his statement dated June 2, 2021 and June 4, 2021 he stated that the said gold bars were purchased from Safari Bullion only. The respondent in his previous statement dated February 28, 2021 stated that the seized gold bars were procured after conversion of 35 small pieces of gold into three bars by a refiner, Shri Devkar. However, the refiner in his statement dated February 8, 2021 has stated that respondent had given him 38 pieces of gold weighing approximately 3 kgs for converting them into 3 bars of 1 kg each.

The story that has been tried to be established by the respondent by producing GST invoice that he had purchased gold with foreign marking from Safari Bullions and simultaneously stating that the three gold bars were produced by melting and converting 35 pieces of gold into three bars is completely shattered by the unretracted statement given by the refiner who clearly stated that he had converted 38 pieces of gold into three bars without any foreign marking as he did not have dyes for the same. Moreover, on being shown the photographs of the seized gold bars, the refiner vindicated that he had not given the gold shown in the photograph to any person in the last two years. The dichotomy between the statements of respondent taken on different occasions and with the statement of the refiner clearly establishes that the gold that was seized was not the gold that had been received after refining by the refiner. There is a clear mismatch in facts that has not been answered by the respondent. Secondly, the adjudicating authority has categorically stated that the documents that were submitted by the owner of the goods did not correspond with the gold that had been seized. Even with respect to the invoices that were produced and relied upon by the Commissioner (Appeals) to indicate that there has been shift of burden of proof by the owner to the revenue is without any basis in law as the invoices that have been relied upon by the Commissioner (Appeal) did not specify that the gold that had been purchased had foreign markings. We find that two stands have been taken by the owner which are in complete contradistinction to each other. Firstly, he submits that gold bars were purchased from a dealer namely Safari bullions, and secondly, he submits that three gold bars were produced by the refiner after melting and converting 35 pieces into three gold bars of 1 kg each. It is to be specifically noted that no explanation has been provided with regard to the ‘foreign marking’ on the three gold bars.

It is flabbergasting to note the perfunctory manner in which the Commissioner (Appeal) as well as the CESTAT have dealt with the entire matter. A perusal of the relevant portion of the order of the Commissioner (Appeal) indicates that he has simpliciter shifted the burden of proof from the assessee to the revenue on the basis of invoices that were produced by the owner. It is to be noted that the adjudicating officer after due diligence has categorically stated that these invoices that were provided by the owner have no nexus with the gold bars that were seized. The Commissioner (Appeal) has jettisoned the other evidences in relation to the statement of the carrier of gold, the statement of the refiner, the contradictory statements made by the owner, the genuineness of the invoices, the lack of specific entry with regard to the gold that was seized in the books of accounts of the owner and has simpliciter held that the revenue did not controvert the genuineness of the documents produced by the owner.

In our view, the entire exercise that has been carried out by the Commissioner (Appeal) as well as by the CESTAT is superfluous and without due application of mind wherein relevant and cogent materials have been overlooked and disregarded by both the Commissioner and the CESTAT.

The Hon'ble Supreme Court in Commissioner of Customs vs. Vijay Dasharath Patel^{1010.[2007] 2007 taxmann.com 1333 (SC)} has held that High Court should intervene in the order passed by Tribunal where material and relevant facts have been ignored, legal principles have not been applied correctly in appreciating evidence and decision has been arrived at by taking into consideration irrelevant factors. The relevant paragraphs of the judgement are quoted hereinbelow:-

The Hon'ble Apex Court in the case of Arulvelu vs. State^{1111.(2009) 10 SCC 206} has defined 'perversity' and held that a finding is perverse if it is not only against the weight of evidence but is altogether against the evidence itself. The term perversity was defined by tracing various earlier precedents, which is extracted hereinbelow:

(Emphasis added)

Furthermore, the Hon'ble Supreme Court in the case of S.R. Tewari vs. Union of India^{1212.(2013) 6 SCC 602} has laid down the attributes of perversity in the following manner:-

(Emphasis added)

One may also look into the Division Bench judgment of the Calcutta High Court in Commissioner of Customs Preventive Kolkata vs. Shri Anil Kumar Soni^{1313.2026 SCC OnLine Cal 3106} wherein the High Court set aside the order passed by the Tribunal as the Tribunal had disregarded the evidentiary value of the Section 108 statement and effectively reversed the statutory burden of proof on the revenue without the same having being discharged by the assessee. The relevant paragraphs of the judgment are quoted herein below:

In fact the question of controversy arising here is settled by the Supreme Court in Vijay Dasharath Patel (Supra), Arulvelu (Supra) and S.R. Tewari (Supra) and the High Court in Shri Anil Kumar Soni wherein it has been held that a finding of fact recorded by the Tribunal does not give rise to a substantial question of law merely because the High Court may disagree with it. A substantial question of law arises when vital material evidence has been overlooked by the Tribunal, or when the Tribunal has made a patent error in appreciation of the evidence, or when the finding reached by the Tribunal is perverse in the sense that it could not reasonably have been arrived at on the material before it. Furthermore, if the Tribunal misdirected itself by overlooking salient features of the case and reached an erroneous conclusion, that constitutes a substantial question of law and warrants interference by High Court so as to prevent miscarriage of justice.

In the present case, it is clear that the Commissioner (Appeals) as well as CESTAT have dealt with the entire manner in a cavalier fashion and has forsaken their responsibility with regard to the examination of all the evidence that had been produced and had been relied upon by the adjudicating officer.

The discussion in the foregoing parts clearly brings to fore that the discharge of the onus under Section 123 of the Act does not mean the mere production of any document or set of documents relating generally to the business activities of the owner of the smuggled goods. It means the production of specific, relevant, credible, and genuine documents that directly and traceably establish the lawful acquisition of the gold that are the subject matter of seizure. The mere production of documents which are irrelevant adds nothing to the discharge of the burden and does not shift the evidentiary obligation towards the revenue.

We are, accordingly at consensus ad idem with the observation and conclusion of the adjudicating authority that the procurement of the seized gold bars is highly suspicious and that the evidence produced by the respondent is wholly insufficient to discharge the onus cast upon them under Section 123 of the Customs Act. The adjudicating authority correctly noted that the invoices produced bore no specific nexus to the seized gold bars, and correctly held that the respondent had failed to discharge the burden of proving lawful acquisition of the specific seized articles.

The Commissioner (Appeals) and the Tribunal fell into a manifest error of law as they did not consider the clandestine manner under which the gold was recovered, the foreign marking of gold, the inconsistencies in the statement of the carriers, the owner and the refiner. Furthermore, failure to observe the purity of gold as well as the foreign marking is clearly an act of perversity. The Tribunal characterization of these discrepancies as mere ‘extraneous’ is perverse. The observation of the Tribunal with regard to accepting the GST invoices without regard to whether the same had a nexus to the specific seized gold bars as sufficient to discharge the burden under Section 123 is a patent error of law. This approach is a fundamental misunderstanding of the nature and scope of the burden of proof under Section 123 of the Act. It conflates the mere production of documents with the discharge of burden. Accordingly, we hold the confiscation of gold to be justified. The substantive questions of law I and II with regard to the confiscated gold are answered in the affirmative.

With regard to the confiscated silver, we observe that the provisions of Section 123 of the Act are applicable only when it is established that the silver in question is smuggled into India. In relation to the silver, it may be noted that the silver was seized from the residential as well as business premises of Mr. Pugaliya. Neither the silver was seized when it was being transported in a surreptitious manner nor the carriers, who were intercepted, had tendered any statements with regard to smuggling of silver. Furthermore, there was no foreign mark on the silver that was seized. The reason given by the adjudicating authority for seizure of the silver bullion is that the seized silver was more than what was shown available in the stock ledger. We are of the view that unless the customs authorities are able to clearly bring a nexus between the silver and its smuggling, the burden of proof under Section 123 of the Act would not shift on the respondent. We are of the view that the views taken by the Commissioner (Appeal) and the CESTAT with regard to the silver is based on adequate material available on record including the stock ledger, and GST paid puurchase invoices that were duly certified by the chartered account.

The Constitution Bench of the Hon'ble Supreme Court in Gian Chand vs. State of Punjab^{1414.1961 SCC OnLine SC 388} as well as in Collector of Customs vs. Nathella Sampathu Chetty^{1515.1962 SCC OnLine SC 30}, while dealing with Section 178-A of the Sea Customs Act, 1878 akin to Section 123 of the Customs Act,1962, has settled the law that reasonable belief is a sine quo non in relation to the power of seizure that the statute confers on the officer. Reasonable belief must be backed by sufficient evidence of smuggling and mere suspicion is not sufficient to justify seizure, and the prosecution must provide substantive evidence of foreign origin. If there are no foreign markings or documentation, the Customs authorities cannot simply assume that the silver in question were smuggled goods.

In this regard, it is relevant to cite the judgment of Delhi High Court in Shanti Lal Mehta vs. Union of India^{1616.1982 SCC OnLine Del 303} wherein it was held that reasonable belief must be based on some material, not mere suspicion. The relevant paragraphs of the judgment are quoted hereinbelow:

In the facts and circumstances of the case, we observe that the initial burden of proof under Section 123 of the Customs Act was not satisfied, and therefore, the burden of proof did not shift to the respondent. The Customs authorities must first establish the foreign origin before invoking the presumption of smuggling. So, we are of the view that in this case, the responsibility was on the Revenue to show that the silver in question was smuggled into the country without payment of appropriate duties of Customs thereon, which the department failed to discharge in this case. Thus, we hold that the burden of proof under Section 123 of the Customs Act does not shift to the respondent so far as it relates to silver.

In relation to the confiscation of cash, it may be noted that the cash was seized along with the silver from the residential and business premises of Mr. Pugaliya. In the instant case, the cash seized was in Indian currency, which falls outside the ambit of Section 123 of the Customs Act, being a non-notified item. Nevertheless, the same was held liable to confiscation on the presumption that it constituted the sale proceeds of smuggled gold and silver having regard to the antecedents of owner viz pendency of proceedings under the Benami Property Transactions Act, 1988. The Revenue seized the cash merely on the basis of suspicion, without there being any cogent evidence to establish that it represented the sale proceeds of smuggled gold and silver. Neither was the cash recovered in a clandestine or secretive manner, nor was there any evidence to suggest that the cash constituted the sale proceeds of smuggled goods. In the absence of any such reasonable basis, the presumption that the cash represented the sale proceeds of smuggled goods was not tenable and shifting the burden of proof onto the respondent under Section 123 of the Act was not justified. In this regard, we are in agreement with the orders passed by the Commissioner (Appeals) and the CESTAT.

In light of the above findings, the substantial questions of law I and II are answered in the affirmative with regard to the three gold bars and accordingly, we direct the restoration of the order passed by the adjudicating authority so far as it relates to the confiscation of the gold bars. In relation to silver and cash, the order passed by the Commissioner (Appeal) and the CESTAT are correct, and therefore, the substantial questions of law I and II are answered in the negative with regard to the silver and cash. Ergo, the order dated November 14, 2022 passed by the adjudicating authority in so far as it relates to the three gold bars is to be reinstated.

In relation to the penalties that have been imposed on the owner of the goods, Mr. Anand Navalchand Pugaliya and the two carriers being Nagendra Hiralal Tiwari and Purmanand Ramchandra Mishra, it is to be noted that the Commissioner (Appeals) had quashed the entire penalties imposed upon the aforesaid three persons. In order to bring quietus to the lis, the penalties imposed by the adjudicating officer are reduced to 50% on the respondent in the three appeals before us, since we have upheld the confiscation of gold only. Accordingly, Custom Appeal No.2 and Custom Appeal No.3 are disposed of in aforesaid terms.

With the above directions, the custom appeals are partly allowed and, accordingly, disposed of.