Case law

Custom, Excise & Service Tax Tribunal · 13 Mar 2026

Navnath Zanje vs Chennai Iii

Legal principle

Where gold is seized under reasonable belief that it is smuggled, Section 123 casts the burden of proving it is not smuggled on the person from whose possession it was seized even if the gold is melted and bears no foreign markings, but penalty proceedings under Section 112 fail where the show cause notice does not specify the sub-clause invoked and set out its essential ingredients, and a penalty on a deceased person cannot be enforced against his legal heir.

Court decision

The Tribunal upheld the absolute confiscation of the gold and currency, but set aside the penalties imposed on all the appellants — dropping penalty proceedings because the SCN did not specify the Section 112 sub-clause, in keeping with the jurisdictional Madras High Court's Lakshmichand ruling — and separately set aside the penalty on the deceased Shri R. Uttam Kumar Patankar as personal and unenforceable against his legal heir. The appellants therefore succeeded on penalties only; the Department succeeded on confiscation.

Facts

DRI officers, acting on specific intelligence, intercepted three employees of M/s. RU Gold at Sowcarpet, Chennai on 16.04.2024 carrying gold bars marked 'RU999', and a search of the premises yielded 8 gold bars with assorted gold bits weighing 6,821.85 grams plus ₹25,61,200/- in cash, all seized under a mahazar on reasonable belief they were smuggled goods and sale proceeds thereof. The Adjudicating Authority ordered absolute confiscation of the gold and currency and imposed penalties of ₹1.5 crore each on the three Patankars and ₹15 lakh each on the three carriers under Section 112(a) of the Customs Act, 1962. The Commissioner (Appeals) dismissed the appellants' appeals, leading to the present appeals before the CESTAT, Chennai.

Key provisions