The burden of proof under Section 123 of the Customs Act, 1962, shifts to the possessor of notified goods (like gold) once a reasonable belief of smuggling is established; procedural requirements like cross-examination are not absolute and depend upon whether their denial results in actual prejudice to the assessee.

The present appeal has been filed against the Order-in-Appeal No. HYD-CUS-000-APP1-061-24-25 dated 26.02.2025 passed by the Commissioner of Customs and Central Tax (Appeals-I), Hyderabad, whereby, the appellate authority upheld the absolute confiscation of 844 grams of gold valued at Rs. 34,68,840/- and penalty of Rs. 3,50,000/- imposed upon the appellant under Section 111 and 112 of the Customs Act, 1962.

The fact in brief is that the appellant is holder of Indian Passport No. 23948664, who had arrived from Singapore to Hyderabad by Fly Scoot Flight no TR-574 on 15.02.2020, was intercepted by the officials of Central Industrial Security Force (CISF) at the exit of the arrivals at RGI Airport after he had passed through the green channel, as he was moving suspiciously. The CISF officials found that the appellant was carrying four packets covered with polythene paper concealed on his body. The CISF officials vide letter dated 15.02.2020, informed the AIU officials that two packets each weighing 200 grams were recovered from his socks and another 2 packets each weighing 350 grams were recovered from his undergarments, that the appellant himself admitted that the four packets were gold in paste form. The appellant along with his two checked-in bags and one hand bag and the 4 packets said to contain gold in paste form weighing approximately 1100 grams and which were recovered from his body by the CISF officials was handed over to the Customs. The officers questioned the passenger as to whether he has any contraband items with him to which the passenger has replied that he had arrived from Singapore by Flight No. TR-574 on 15.02.2020 at 01:10 hrs and that he tried to smuggle out gold in paste form and that he concealed the gold in paste form in his socks and also in his undergarments. Then the officers in the presence of passenger and in the presence of independent witnesses (Panchas) scanned the said two checked-in baggages with Tags numbering 0668575138 and 0668575142 and one hand bag and found no contraband in it. Further, the officers in the presence of panchas screened the passenger through Hand Held Metal Detector (HHMD) in the AIU room, and no contraband was found on the body of the passenger. The officers approached a goldsmith who, in the presence of appellant and panchas, melted the paste in the four packets and extracted two lumps in the shape of bars. The assayer certified that the extracted Jumps which are in the shape of bars are gold bars of 24 ct with 999 purity with total net weight of 844.000 grams and valued at Rs.34,68,840/-. A statement of the appellant was recorded under Section 108 of the Customs Act, 1962, wherein the appellant has voluntarily admitted that he has resorted to this activity smuggling of Gold in India so as to sell the same at profit. Thereafter, the Customs officers seized the impugned gold bars from the appellant on the reasonable belief that the same were liable for confiscation.

A Show Cause Notice has been issued on 22.09.2020 proposing confiscation of the said gold under Section 111 of the Customs Act and imposition of penalty under Section 112 of the Customs Act, 1962. Initially, ex-party OIO dated 22.02.2021 was passed confiscated the gold absolutely imposed penalty of Rs. 7,00,000/-.

On appeal, the Commissioner (Appeals), remanded the matter to the Adjudicating Authority for fresh adjudication after following principles of natural justice.

In the denovo proceeding, the Adjudicating Authority again order absolute confiscation of 844 grams of gold and imposed penalty of 7,00,000/-.

In the appeal, the Commissioner (Appeals), reduce the penalty to 3,50,000/- while upholding confiscation by impugned order. Hence, the present appeal before this Tribunal.

Learned Counsel for the appellant submits that the entire proceedings are vitiated on following grounds. Firstly, the appellant was intercepted by CISF officials outside the customs area, which is beyond the jurisdiction of customs of