Statements Relied on Without Section 138B Compliance Cannot Prove Gold Smuggling: CESTAT Mumbai

CESTAT Mumbai set aside confiscation of 12 kg of gold and penalties on a Kolkata jeweller, rejecting reliance on untested retracted statements and an arithmetic estimate of 618 kg smuggled earlier.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, has held that statements recorded under Section 108 of the Customs Act, 1962 cannot sustain a finding of smuggling where the procedure in Section 138B was not followed and cross-examination was refused. It set aside the confiscation of 12 kg of gold and all penalties on the appellant [Anirudh Verma v. Principal Commissioner of Customs (Prev) -Mumbai, 2026-juristway.com-3329-CESTAT(Mumbai)-Customs].

The order was passed by the Bench of Ajay Sharma, Member (Judicial), and M.M. Parthiban, Member (Technical). On 20 Jan 2016, the DRI intercepted two passengers arriving at Mumbai on a domestic flight from Kolkata with 12 gold bars of 1 kg each, valued at ₹3,17,16,000. Their statements admitting smuggling from Bangladesh were retracted on 22 Jan 2016. The appellant, proprietor of a Kolkata jewellery firm, was arrested and his statement was also retracted. The Department estimated past smuggling of 618 kg by multiplying 103 alleged journeys by 6 kg each. The order dated 9 May 2017 confiscated the gold under Sections 111(b), (d) and (l) and imposed penalties.

The Tribunal relied on Additional Director General v. It’s My Name Pvt. Ltd. (2021) for the rule that Section 138B must be followed before Section 108 statements become relevant. Cross-examination had been sought and refused. A statement cannot be admitted merely by declaring it voluntary in the adjudication order, although retraction alone does not make it inadmissible. Since the statements were the principal basis for the finding of smuggling, and there was no independent link to any import, the finding failed.

The 618 kg figure fell too. The Tribunal said: “Proof that a person undertook a journey does not establish that gold was carried on that journey”. The adjudicating authority had itself noted that international travel was attributed to a carrier who held no passport. The presumption under Section 123 could not supply the missing foundation, and the penalty under Section 114AA needed proof of a false document knowingly used.

The impugned order was set aside, with the penalties under Sections 112(a), 112(b) and 114AA, and the appeal was allowed.

2026-juristway.com-3329-CESTAT(Mumbai)-Customs