2013 (11) TMI 1229 - AT - Customs

Smuggling - Import of bulk (commercial) quantity of Chinese silk textiles - Import done in contravention of provisions of Customs Act, 1962 - Import prohibited/restricted goods under Para 5.6 EXIM Policy 1997-2002 read with Section 3(2) and (3) and 11(1) of Foreign Trade (Development and Regulation) Act, 1992 and Rule 14 of the Foreign Trade (Regulation) Rules 1993 - Confiscation u/s 111 - Whether the appellants, who are the dealers in textiles and are alleged to have purchased illicitly imported Chinese Silk fabrics, are liable for penalty under section 112(b) of Custom Act 1962 - Held that - Revenue proved acquaintance, contacts, conscious knowledge of the appellant including the nature and character of the offending goods dealt by him - conscious knowledge of the trader appellant about character and nature of the goods illicitly imported and his deal theron was established by the seller racketeers. His ill will and deal satisfied essential ingredients of section 112 (b) of the Act. The appellant was aware of the origin and destination of goods demonstrating his intimacy with the racketeers by telephone contacts before and after arrival of the smuggled goods in India which come to record from Table 10 and 11 of show cause notice. Positive act of the appellant making conscious breach of law brought him to penal consequence of law. Perfect proof with mathematical precision in this imperfect world seldom exists. Appellant did not deny conscious dealing of the offending goods by him. In substance, offending goods found its destination at the place of business of the appellant. Accordingly when the appellant failed to go out of the scope of Section 112 (b) of the Act, penalty was bound to be suffered. It is only the quantum thereof needs determination on the gravity of the matter since value of goods dealt by the appellant was not quantified by learned Adjudicating Authority. Considering that the appellant was involved in dealing with the smuggled goods came to in India on 22 occasions as per column A of Table -14, in the fitness of the circumstances of the case, levy of penalty of ₹ 10,000/- for each such occasion may not be improper. Interaction was not for supply of Indian goods but for purchasing foreign goods and therefore it is difficult to accept the contention of the appellants that they did not have knowledge of smuggled nature of goods and this contention is rejected. Since the commissioner in his order has held the goods mentioned in Colum-3 of Table-1 liable for confiscation under Section 111 of the Act, the appellants are also liable to penalty under Section 112(b) of the Act - Penalty redeuced - Decided partly in favour of assessee.

Issues Involved:
1. Illicit importation of Chinese silk textiles.
2. Alleged involvement of traders in acquiring and trading smuggled goods.
3. Evidence supporting the allegations.
4. Legal grounds for imposing penalties under Section 112(b) of the Customs Act, 1962.
5. Denial of natural justice due to non-allowance of cross-examination.
6. Evaluation of telephonic contact records as evidence.
7. Differing judgments by tribunal members.

Detailed Analysis:

1. Illicit Importation of Chinese Silk Textiles:
The investigation revealed that a passenger arrived at IGI Airport, New Delhi, with approximately 81,160 yards of Chinese silk textiles valued at Rs. 155.82 lakhs. These goods were imported in contravention of the Customs Act, 1962, and other related regulations, making them liable for confiscation.

2. Alleged Involvement of Traders:
Extensive inquiry indicated a racket involving Afghan nationals, customs officers, and traders in smuggling Chinese silk. Traders were found to be acquiring and trading these smuggled goods, causing revenue loss. Penalties were imposed on traders under adjudication, which was later contested.

3. Evidence Supporting the Allegations:
Key evidence included statements from individuals involved in the smuggling racket, telephonic contact records between traders and smugglers, and the circumstances of the transactions. Statements from Abdul Qahar, Dil Agha, and Walliullah implicated the traders in dealing with smuggled goods.

4. Legal Grounds for Imposing Penalties:
Under Section 112(b) of the Customs Act, penalties can be imposed on individuals who knowingly deal with goods liable for confiscation. The tribunal had to determine if the traders had knowledge or reason to believe that the goods were smuggled.

5. Denial of Natural Justice:
The traders argued that they were denied natural justice as they were not allowed to cross-examine the witnesses whose statements were used against them. The tribunal acknowledged this concern, noting that cross-examination is essential to test the probative value of the statements.

6. Evaluation of Telephonic Contact Records:
Telephonic contact records between traders and smugglers were used as circumstantial evidence. The frequency and timing of these calls suggested involvement in smuggling activities. However, the traders contended that these calls were for legitimate business purposes.

7. Differing Judgments by Tribunal Members:
The tribunal members had differing views on the sufficiency of evidence and the imposition of penalties. One member found the evidence sufficient to uphold penalties, while another argued that the evidence did not conclusively prove the traders' knowledge of the smuggled nature of the goods.

Final Judgment:
The majority order, following the third member's opinion, imposed a reduced penalty of Rs. 2,20,000/- on the appellant, considering the frequency of interactions and the circumstantial evidence of involvement in smuggling activities. The appeals were partly allowed, reducing the penalties initially imposed.

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