K Srinivasa Rao vs. The Union Of INDIA

Held

The Court held that the petitioners' case, when verified against the available material, prima facie raised suspicions regarding their version. The investigation was still in its nascent stage and not completed. The Court found it inappropriate to conclude that the statements were recorded under threat or coercion at this stage. The truthfulness of the petitioners' claims and the alleged coercion could only be determined after the completion of the investigation and during a trial. Consequently, the Court found no merit in the petitioners' plea for the release of the seized gold. The Court dismissed the writ petition, with an observation that the respondent authorities should proceed with the investigation without being influenced by the Court's observations. No costs were awarded.

Facts

The petitioners, including a GST-registered trader (1st petitioner) and his associates (petitioners 2-5), filed a writ petition challenging the seizure of re-melted Indian origin gold weighing 2000 grams, valued at Rs. 1.20 Cr. The gold was seized by Customs officials from petitioners 2-5 while they were transporting it from Chennai to Guntur. The petitioners claimed the gold was purchased from M/s. SRR Traders, Chennai, on credit, supported by tax invoices, and that the seizure was illegal as it was Indian origin gold and the procedure under Section 108 of the Customs Act, 1962, was not followed. They also alleged that statements were obtained from petitioners 2-5 under coercion. The respondents contended that the petitioners failed to produce any supporting documents like invoices or delivery challans at the time of interception, suggesting smuggling. They also raised doubts about the credit transaction and the delay in the petitioners producing the invoices and challenging the seizure.

Key Issues

1. Whether the Customs authorities had the jurisdiction and authority to seize the gold, given the petitioners' contention that it was of Indian origin and transported under valid invoices, thereby making the provisions of the Customs Act, 1962 inapplicable? 2. Whether the statements recorded from petitioners 2-5 under Section 108 of the Customs Act, 1962, were obtained illegally, under coercion, and without following the prescribed procedure, thus rendering them inadmissible? Petitioner's Arguments: The petitioners argued that the gold was of Indian origin and transported with valid invoices, thus the Customs Act was not applicable, and the seizure was illegal. They contended that the statements were obtained under coercion and without following Section 108 of the Customs Act. They relied on the principle that seizure of goods not liable to confiscation under the Customs Act is illegal. Revenue's Arguments: The respondents argued that several suspicious circumstances indicated the gold was of foreign origin and smuggled. These included the recent establishment of M/s. SRR Traders, the unusual credit transaction for a large quantity of gold, the failure of petitioners 2-5 to produce invoices at the time of interception, and the delay in the 1st petitioner submitting a formal application for release. They also pointed out discrepancies between the gold bars sold by M/s. SRR Traders and the gold seized.