Customs Penalty Remains Unsustainable u/s 112 without Examination and Cross-Examination Of Statements: CESTAT [Read Order]

The CESTAT set aside the customs penalty imposed under Section 112(a)(i) of the Customs Act, 1962 on the grounds that the reliance placed solely on the statements recorded under Section 108 which is without examination and cross-examination as required under Section 138B and makes the penalty not legally sustainable.

The appellant Nawal Kishore Singh was penalized by the adjudicating authority for the alleged abetment of smuggling activities. The case against the appellant was mainly made out through statements recorded during the investigation under Section 108 of the Customs Act.

The Department of Revenue alleged that the appellant assisted in the clearance and financial transactions, such as the drawing of cheques to help the alleged smuggling operation. There were no recovered goods from the appellant nor was there any independent evidence to show his willful involvement.

The appellant argued that the penalty was imposed mechanically without adhering to the mandatory statutory provisions under Section 138B. It was also argued that statements recorded during the investigation cannot be said to be substantive evidence unless the person making the statement is examined before the adjudicating authority and an opportunity of cross-examination is provided.

The appellant also submitted that the mere fact of issuing cheques or being an authorised signatory cannot prove employment or knowledge of smuggling activities and cannot lead to an inference of guilt.The respondent relied on the evidentiary statements to prove the guilt of the appellant.

The Tribunal overruled the Department’s position and noted that Section 138B prescribes a mandatory procedure for treating statements as admissible evidence. In the absence of examination of the statement makers and denial of cross-examination the statements cease not to be of any evidentiary value.

The Bench held that abetment under Section 112 requires conscious knowledge and intention to aid which cannot be inferred solely on the basis of procedural facilitation and financial transactions.The Tribunal further held that adverse inference cannot be drawn solely on the basis of the notice's decision to respond to the summons through counsel.

The appeal was allowed by the CESTAT and the impugned order of penalty was set aside reiterating that customs penalties cannot be based on assumptions or unverified statements.

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