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Evidences Required for Sustaining Penalties Imposed

MAY 13, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

MANY Adjudicating authorities are of the impression that penalty under 112 of Customs Act 1962 is default penalty and once confiscation of imported goods has been ascertained there is no need to discuss anything else and pass an Order for imposition of penalties under 112 of Customs Act 1962on the Noticees involved. Such imposition would not stand judicial scrutiny in appellate forums.

2. In a recent case, the Hon'ble CESTAT has upheld Penalty under Section 112 of Customs Act 1962 in the case of one Noticee and dropped the penalty imposed upon other two Noticees.

3. FACTS OF THE CASE : It is a case of illegal import of 31 MT of fire crackers (whose import is restricted), 170 MT of glass Chattons, industrial needles, fabrics, cosmetics, etc.. in 19 containers during the period from 24-06-2015 to 27-08-2015. There are 10 noticees to the Show cause Notice and subsequent Order-in-Original (SCN/OiO).

It was found that these goods were imported in the name of five firms (noticees no. 1 to 5 to SCN/OiO) all owned by Shri Inder Preet Singh Bhalla and Shri Manish Kumar. Shri Bhalla is noticee no. 6 and Shri Manish is noticee no. 7 in the SCN. There are no appeals by any of these seven before Hon'ble CESTAT against the confiscation of goods or imposition of penalties. Only noticee no. 8 Shi Sushil Aggarwal, noticee no. 9 Shri Sunil Aidasani and noticee no. 10 Shri Naveen Gulabani have filed appeal against the penalty imposed on them under Sec 112 and 114 AA of Customs Act 1962 .

4. APPEALS :

4.1. Customs Appeal No. 50144 of 2020 is filed by Shri Sunil Aidasani @ Vicky aggrieved by the penalty of Rs.1,00,00,000/- under Section 112 (a) & (b) and penalty of Rs. 50,00,000/- under section 114AA of the Customs Act, 19628 imposed on him.

4.2. Customs Appeal No. 50144 of 2020 is filed by Shri Sushil Agarwal aggrieved by the penalty of Rs.2,00,00,000/- under Section 112 (a) & (b) and penalty of Rs. 1,00,00,000/- under section 114AA of the Act imposed on him.

4.3. Customs Appeal No. 50899 of 2020 is filed by Shri Naveen Gulabani aggrieved by the penalty of Rs.20,00,000/- under Section 112 (a) & (b) and penalty of Rs. 10,00,000/- under section 114AA of the Act imposed on him.

No other noticee has filed an appeal.

5. ROLE PAYED AND EVIDENCE AVAILABLE ;

5.1. Shri Sushil Aggarwal : In the voluntary statements recorded from Shri Sushil Aggarwal on 14-10-2015 and 23-11-2015, he has confessed to working as an indentor, connecting buyers with sellers in China, receiving commissions upon order placement. He acknowledged receiving Original Bill of Lading from Inderpreet Singh Bhalla, delivering it to the Custom House Agent (CHA) for import clearance. He monitored container movement, assisted in unloading at Sitapur Godown. His active role spanned procurement, concealment, transportation, customs clearance, and delivery for financial gain. Manish Kumar managed goods, distributing them as directed by Bhalla or Aggarwal. Aggarwal handled money collected by Kumar, distributing it to CHA, Kumar, and Bhalla's wife.

5.2. Shri Sunil Aidasani :-The appellant is said to be foreign national and said to be residing in China and said to be working as sourcing agent in China, for M/s. S S Import and Export Ltd. Shri Inderpreet Singh Bhalla stated that M/s. S. S. Import and Export Co. Ltd. China, consignor of 12 containers out of 19 containers under investigation, was owned by Shri Sunil Aidasani @ Vicky of China. The alleged involvement of Shri Sunil Aidasani was only on the basis of the statements of Shri Sushil Aggarwal, Shri Inder Preet Singh Bhalla and Shri Brijendu Kumar of M/s. Innovative Cargo Services.

Shri Sunil Aidasani has not appeared for recording statement even though multiple summons were issued. Shri Inder Preet Singh Bhalla has retracted his statement at later stage. The OIO was passed based on retracted statements of co-accused Shri Inder Preet Singh Bhalla. These statements had no corroborative evidence

5.3. Shri Naveen Gulabani:- The allegation against Shri Gulabani in the SCN is that he was an employee of Shri Sunil Aidasani @Vicky, the owner of M/s. S S Import &Export Co. Ltd. which was the overseas supplier of the goods which have been seized. Summons had been issued to Shri Gulabani but he did not appear to give his statements.

6. Hon'ble CESTAT HELD :- The Ho'nble CESTAT has passed Final Order No. 55702-55704/2024 dt 30-04-2024 (2024-TIOL-454-CESTAT-DEL) stating :

(a) Customs Appeal No. 50194 of 2020 filed by Sushil Aggarwal is dismissed and the impugned order is upheld qua Sushil Aggarwal. (b) Customs Appeal No. 50144 of 2020 filed by Sunil Aidasani is allowed and the penalties imposed on him in the impugned order are set aside with consequential relief to Aidasani. (c) Customs Appeal No. 50899 of 2020 filed by Naveen Gulabani is allowed and the penalties imposed on him in the impugned order are set aside with consequential relief to Gulabani.

7. WHY DID HO'NBLE CESTAT ALLOW THE APPEALS OF SHRI SUNIL AIDASANI AND SHRI NAVEEN GULABANI

There were no statements recorded from Shri Sunil Aidasani and Shri Naveen Gulabani. The alleged involvement of these two persons was only on the basis of the statements of Shri Sushil Aggarwal, Shri Inder Preet Singh Bhalla and Shri Brijendu Kumar of M/s. Innovative Cargo Services. That too Shri Inder Preet Singh Bhalla has retracted his statement at later stage.

8. BASIC REQUIREMENTS FOR IMPOSISTION OF PENALTY UNDER SEC 112& 114AA of CUSTOM ACT 1962

8.1. ROLE :-For imposition of penalty under Sec 112 of Customs Act 1962, it is necessary that the Adjudicating Authorities examine the role played by the Notoneee especially whether there was any 'abetment' by the Noticee in the Office. It is essential to prove the element of abetment as envisaged under Section 107 of the IPC. Without the element of abetment being present and discussed in the OiO, the penalties on noticees would not sustain

8.2. RELIANCE ON STATEMENTS WITHOUT CORROBORATIVE EVIDENCE :- Though, it is without any doubt that a statement under Section 108 of the Customs Act is a valid piece of evidence, yet imposition of penalty under Sec 112 of Customs Act 1962only on the basis of statement, most of the times, fails to sustain the judicial scrutiny. The reasons could be subsequent retraction, denial of cross-examination or non-corroboration with facts. The investigating Officers to make a case solely based on statements without culling out material piece of evidences, usually does not sustain judicial scrutiny. Thus the Adjudicating Authority may impose penalties under Sec 112 of Customs Act 1962 only where the statements are corroborated with material evidences.

8.3. ON THE BAIS OF STATEMENT OF ONE PERSON ,ANOTHER PERSON CAN NOT BE PELALISED :-In the instant case penalties were imposed Shri Sunil Aidasani and Shri Naveen Gulabani on the basis of the statements of Shri Inder Preet Singh Bhalla. The Hon'ble CESTAT in this Final Order No. 55702-55704/2024 dt 30-04-2024 (2024-TIOL-454-CESTAT-DEL) (in para 26 ) has held that "A statement made by Bhalla under section 108 of the Customs Act will be relevant to prove the case only as per section 138B. This requires the adjudicating authority to examine the person making the statement and decide if it is to be admitted in evidence. Needless to say that if it is admitted in evidence and is proposed to be used against another person, such person should be allowed to cross examine the person making the statement."

8.4. PENALTIES UNDER SECTION 114AA :- In most of the OiOs or OiAs where penalties under 114AA of the Customs Act, 1962 is imposed by original authority or affirmed by appellant authority, there is no discussion about the role of the noticee and valid reasons for such penalty. It is emphasized by Appelate Tribunals that this penalty is specifically for 'use of false and incorrect material' and it is essential for the original authority to discuss clearly as which false and incorrect material was used. Merely stating that the declaration under Bill of Entry which was filed under Section 46 of Customs Act 1962 was incorrect or mis-declared is not sufficient to impose penalty under 114AA of the Customs Act, 1962.

9. The Hon'ble CESTAT has been repeatedly passing such Orders of dropping penalty on these grounds in many cases. To illustrate one such recent example is the case of Customs Appeal No. 50782 of 2020 Principal Commissioner of Customs (Preventive), Commissionerate vs Shri Amit Goel where in Hon'ble CESTAT has passed Final Order No. 55113 /2024 dt 07-03-2024 - 2024-TIOL-293-CESTAT-DEL. In this case statements of two of the employees of Shri Rajesh Kumar viz., Shri Ajay Mahto and Shri Manoj Kumar were also recorded who also confirmed that Shri Amit Goel would regularly send foreign marked gold to Shri Rajesh Kumar for sale. Hon'ble CESTAT took a view that (ref para 32) Shri Manoj Kumar and Shri Ajay Mahto were not examined as required under section 138B of Customs Act 1962 and therefore, their statements can not be relied upon. The Hon'ble CESTAT dismissed the Departmental appeal for imposition of penalty which was set aside by Commissioner (Appeal).

10. Considering all the above the take aways from these case laws are :

a) For imposition of Penalties, statements under Section 108 of Customs Act 1962 from the Noticees have to be recorded. In these statements, the 'abatement' to the offence shall be brought on record for imposition of penalty under Section 112 of Customs Act 1962

b) Relying upon mere statements would not help. The statements shall be corroborated with material evidences.

c) Statements which are subsequently retracted can not be relied upon .

d) If there is any request for cross-examination, the same may be considered positively by the adjudicating authority

e) The Adjudicating Authority may examine the persons under section 138B of Customs Act 1962 as witness who have given these statements before relying upon them as evidence

f) For imposition of penalty under for section 114AA of Customs Act 1962 ,it is to be proved that the person 'knowingly or intentionally uses false and incorrect material'

(The views expressed are personal and not in official capacity)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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