2010 (7) TMI 419 - HC - Customs

Penalty on captain of ship smuggling illegal sale of high speed diesel by chief Engineer of a vessel to a barge Captain of vessel not admitting having knowledge about it and also denied any share in such earnings - telephonic records do not show any interaction between himself and any of the other notices - no foreign currency or Indian currency was recovered either from the person or the cabin of the Captain - no direct evidence against the Captain for imposing any penal liability

Issues Involved:
1. Whether the order of the CESTAT in confirming the findings of the Commissioner of not imposing penalty under Section 112(a) & (b) of the Customs Act, 1962, is based on no evidence or partly relevant or partly irrelevant evidence and is otherwise perverse and arbitrary?

Issue-wise Detailed Analysis:

1. Facts:
The SIIB (Import) received specific information on 23rd May 2006 about the supply vessel 'Sea Bulk Toota' involved in the illegal sale of smuggled diesel around Mumbai Docks. The vessel was expected to deliver around 30,000 to 40,000 litres of diesel to barges that night. The SIIB (Import) arranged for a search operation. However, initial attempts to locate the barges were unsuccessful. Eventually, the Customs team located the vessel and a barge named 'ML Anchor' receiving diesel from it. Upon apprehending the barge, the Tandel admitted to purchasing 40 MTs of diesel illegally. Further searches revealed that the Chief Engineer of 'Sea Bulk Toota' admitted to selling diesel illegally and foreign currency amounting to US $45,650 was found on the vessel. The total diesel seized was 1,75,000 litres, valued at Rs. 36,75,000/- (CIF) and Rs. 70,00,000/- (market value).

2. Show Cause Notice and Adjudication:
A Show Cause Notice was issued on 15th November 2006 under Section 124 of the Customs Act, calling upon the Captain and another respondent to show cause why penalties under Section 112(a) & (b) should not be imposed. The Commissioner of Customs adjudicated the notice and held that there was no direct evidence against the Captain or the other respondent, and thus, no penalty was imposed.

3. Appeal to CESTAT:
The Committee of the Chief Commissioner reviewed the Order-in-Original and directed an appeal to CESTAT, questioning the correctness and legality of the non-imposition of penalties. The CESTAT dismissed the appeal on 5th August 2008, agreeing with the Commissioner's findings.

4. Appeal to High Court:
The Revenue filed an appeal to the High Court, challenging the CESTAT's order as arbitrary and perverse, arguing that the CESTAT ignored evidence, particularly the statements of the Chief Engineer and other witnesses implicating the Captain.

5. Submissions:
The Revenue argued that the CESTAT ignored key evidence, including the Chief Engineer's statement implicating the Captain and other corroborative statements. The respondent's counsel argued that there was no direct evidence against the Captain, and mere statements without corroboration were insufficient for penal action.

6. High Court's Analysis:
The High Court reviewed the evidence and the findings of the Adjudicating Authority and CESTAT. It noted that the Captain had not admitted to knowledge of the smuggling, and no other noticees implicated him. The telephonic records did not show any incriminating interactions. The Chief Engineer's statement about sharing profits with the Captain was uncorroborated, and no currency was found with the Captain. Thus, the evidence at most raised suspicion but did not justify penal liability.

7. Conclusion:
The High Court held that the CESTAT's order was not arbitrary or perverse. The findings of the Adjudicating Authority and CESTAT were well-reasoned and based on the evidence. The statements relied upon by the Revenue raised suspicion but were insufficient for a conclusive finding of guilt. Therefore, the appeal was dismissed, and the question of law was answered in the negative, with no order as to costs.

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