2015 (9) TMI 343 - HC - Customs

Conspiracy to make fictitious exports Retraction of statement Cross-examination of Witness Tribunal in second round allowed Revenue appeals and imposed penalty under section 14(1) of Customs Act, 1962 upon appellant by concluding that both appellant and one other were involved in transactions which led to inflated and bogus claims of refund / rebate / drawback Held that - Adjudicating Authority observes that allegations against appellant are that he entered into conspiracy to make fictitious export to Russia against repayment of state credits granted to erstwhile Soviet Union Republic (USSR) and colluded with others Appellant retracted his statements at first available opportunity He filed additional interim reply specifically stating therein that DRI and his officials coerced him to write statement inculpating him This affidavit, though received by DRI, has not been rebutted Tribunal has not concluded that Commissioner s reasoning is either perverse or vitiated by any error of law apparent on face of record Instead, Tribunal makes reference to general principle that retraction of statement and cross-examination of certain persons would not make any dent in plethora of evidence produced by Department and confessions of various persons Therefore, further finding that case cannot be demolished merely by cross-examination of witnesses by ignoring circumstances and corroborative evidence is equally vitiated because crossexamination may contain admissions Thus, Tribunal s conclusions cannot be sustained and are vitiated by errors of law apparent on face of record Tribunal s order deserves to be quashed and set aside Decided in favour of appellant.

Issues Involved:
1. Legality of the Tribunal's imposition of penalty on the appellant.
2. Validity of retracted statements and their evidentiary value.
3. Whether the Tribunal ignored relevant material and relied on irrelevant material.
4. Procedural fairness and adherence to principles of natural justice.
5. Delay in the pronouncement of the Tribunal's order.

Detailed Analysis:

1. Legality of the Tribunal's Imposition of Penalty on the Appellant:
The appellant, Kiran Nagindas Vora, challenged the Tribunal's order imposing a penalty of Rs. 15 lakhs under section 14(1) of the Customs Act, 1962. The Tribunal reversed the findings of the Commissioner, who had previously exonerated Vora. The Tribunal concluded that Vora colluded with others to create front companies and availed of inflated and bogus claims of refund/rebate/drawback. The High Court noted that the Tribunal failed to provide independent corroborative material to support its conclusion that Vora was involved in the alleged fraudulent activities.

2. Validity of Retracted Statements and Their Evidentiary Value:
The appellant had retracted his statements made to the Directorate of Revenue Intelligence (DRI), claiming they were coerced. The Commissioner had accepted these retractions, noting that they were made at the first available opportunity and were not rebutted by the DRI. The Tribunal, however, relied on these retracted statements without providing sufficient corroborative evidence. The High Court emphasized that retracted statements must be corroborated by independent material to be admissible, which was lacking in this case.

3. Whether the Tribunal Ignored Relevant Material and Relied on Irrelevant Material:
The appellant argued that the Tribunal ignored relevant material and relied on irrelevant material while reversing the Commissioner's order. The High Court found that the Tribunal did not adequately address the findings of the Commissioner, who had concluded that there was no independent corroborative material linking Vora to the alleged fraudulent activities. The Tribunal's general and sweeping observations were deemed insufficient to overturn the Commissioner's detailed reasoning.

4. Procedural Fairness and Adherence to Principles of Natural Justice:
The High Court highlighted the importance of adhering to principles of natural justice, noting that the Tribunal and the Adjudicating Authority must ensure that evidence is properly tested through cross-examination. The Tribunal's failure to provide a detailed analysis of the corroborative material and its reliance on retracted statements without independent verification was found to be procedurally unfair.

5. Delay in the Pronouncement of the Tribunal's Order:
The appellant pointed out that there was a delay of four months and eleven days in the pronouncement of the Tribunal's order, which was delivered much after the specified period. The High Court acknowledged this delay but did not find it to be a decisive factor in its judgment. Instead, the focus remained on the substantive issues of law and evidence.

Conclusion:
The High Court quashed and set aside the Tribunal's order, finding it to be vitiated by errors of law and perverse due to the omission of relevant material and reliance on insufficient evidence. The appeal was allowed, and the matter was remanded back to the Tribunal for a fresh decision on merits, with directions to ignore its earlier conclusions and permit the parties to advance their contentions based on the record. The High Court clarified that it did not express any opinion on the merits of the case and kept all contentions of both sides open.

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