Per Shri T.P. Nambiar :

Appeal No. C/65/96/MAS. This appeal is filed by appellant Rajendra Prabhu against the order passed by the Collector of Central Excise & Customs, Kochi in terms of which he confiscated 30 gold bars bearing foreign markings. He also imposed a penalty on the appellant. The facts of the case are that on 22.10.94, one Shri Rajendra Prabhu, was intercepted by the Circle Inspector of Police, Chalakudy, near Petta Ashram, Chalakudy. The police recovered 30 Gold bars with foreign markings from him. Shri Rajendra Prabhu was handed over to the Supdt. SCP Unit, Kodungalloor. In a statement given by him on the same day, Shri Rajendra Prabhu, said that he purchased the gold from Shri Puthupally Thomas, Kottayam, on payment of Rs. 15 lakhs and he did not have any document to prove the licit importation of the gold. Therefore, the gold was seized under the Customs Act, on the reasonable belief that the gold bars were liable to confiscation. On 23.10.1994 he gave a statement before the Customs Officers, wherein he reiterated that gold was purchased from Shri P. Thomas and gave one telephone number at Kottayam belonging to Shri Thomas. Efforts made to locate Shri P. Thomas were not successful. The telephone number given by Shri Rajendra Prabhu was found to be telephone number of State Bank of Travancore, Mannanam Branch. Subsequently, on 28.10.94 Shri Balan, Malayil House, Nanmanda, PO Kozhikode District, wrote a letter to the Central Excise Supdt, SCP Unit, Kodungalloor and claimed that he brought 42 gold biscuits from Dubai on 19.10.94 and cleared the same on payment Customs duty through Trivandrum Airport. He also claimed that he handed over 30 Gold biscuits to Shri Rajendra Prabhu for selling them at Coimbatore. He enclosed copy of the receipt indicating the payment of duty on 42 Gold biscuits. On 31.10.1994. Shri Rajendra Prabhu wrote a letter corroborating the claim of Shri Balan. He gave a statement on 14.11.94 wherein he retracted his statement dated 23.10.94 and confirmed the claim of Shri Balan. According to him he made this revised claim as soon as he was released on bail from judicial custody. On 14.11.1994, Shri Balan appeared before the Supdt.Customs and Central Excise, SCP Unit, Kodungalloor and confirmed his claim. Shri Rajendra Prabhu gave two different versions regarding the possession of the gold and since he had no documents to prove the licit origin of the gold as soon as it is seized, a show cause notice was issued to Rajendra Prabhu asking why the Gold should not be confiscated and penalty should not be imposed. SCN was also issued to Shri Balan, asking why penalty should not be imposed on him under the Customs Act.

2. Thereafter the appellant replied to the show cause notice and the impugned order was passed.

3. Shri M. Rajendran, learned Consultant appearing for the appellant contended that since the gold bars were seized by the police the provisions of Section 123 of the Customs Act, 1962 cannot be invoked against the appellant in this case. He therefore, pointed out that it was for the department to prove that the gold in question is smuggled. In this connection he pointed out that the initial statement of appellant Rajendra Prabhu cannot be taken into account as it was taken under duress and coercion. He further pointed out that the gold in question was imported by Balan and he had given claim before the adjudicating authority. He pointed out that appellant Rajendra Prabhu had established that the gold was legally imported by producing baggage receipt issued in his favour. He also pointed out that the statement of Shri Balan was also taken under Section 108 of the Customs Act, 1962. He had stated that he had brought 42 gold biscuits which he had purchased for Rs. 10,07,738. He also produced baggage receipt in question. Therefore, he pointed out that the department has failed to prove that the gold in question was smuggled. It was further pointed out that the statement of Rajendra Prabhu was