Unverified Statements u/s 108 Cannot Sustain Customs Penalty: CESTAT Quashes ₹50 Lakh Penalty [Read Order]
The Tribunal held that statements recorded during investigation must meet statutory evidentiary safeguards before forming the basis for any penal action.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi Bench, has set aside a penalty of ₹50 lakh under the Customs Act 1962, holding that penalties cannot be sustained on the basis of unverified statements recorded under Section 108 without compliance with verified evidence.
The issue emerged from an investigation conducted by the customs department against smuggling and incorrect declaration of imported goods. Committed Logistics Pvt. Ltd., a logistics company, and its Director were proceeded against for allegedly facilitating the clearance of consignments of goods by sending delivery orders to non-existent parties.
As a result penalties of ₹25 lakh were imposed jointly on the company and its Director under Section 112(a) of the Customs Act, 1962.Hence the penalties imposed by the revenue department was based largely on statements recorded under Section 108 of the Customs Act, without adducing any independent corroborative evidence.
The appellants submitted that the mere facilitation of logistics services cannot be said to amount to abetment unless the requisite knowledge and intention to facilitate smuggling are proved. It was also submitted that the show cause notice itself did not make any allegation of mens rea or deliberate facilitation on the part of the appellants.
However it was submitted that the provisions of Section 138B of the Customs Act which regulates the admissibility of statements were not complied with. The persons whose statements were relied upon were not produced before the adjudicating authority nor was any opportunity for cross examination given and therefore the statements were not admissible.
Subsequently, the revenue department has supported the penalties imposed on them and claimed that statements under Section 108 are evidence and were sufficient to prove the case against the appellants.
The Tribunal overruled the Revenue’s contention and held that statements under Section 108 are not substantive evidence. CESTAT clarified that Section 138B prescribes mandatory requirements and failure to comply with these requirements renders the statements unreliable.
The two-member bench of Justice Dilip Gupta and P.V. Subba Rao, also clarified that abetment under Section 112 requires knowledge or intentional aid, which was entirely absent in the case at hand. The penalties based solely on untested statements were held to be unsustainable in law.
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