2017 (10) TMI 521 - HC - Customs

Smuggling - Gold - contraband item - Whether in the facts and circumstances of the case the findings imposing penalty rendered by the Commissioner of Customs-Respondent No.1, and CESTAT are perverse as they are based on the statements of three eye witnesses to the incident, viz., Vincy, Baptista and Sebastian, who were not allowed to be cross-examined by the Appellant? Held that - Section 111 of the Act lists the goods liable to confiscation. Section 112(a) of the Customs Act, set out above, speaks of an act or such omission that results in the goods liable to confiscation. Section 112(b)(i) stipulates a penalty not exceeding the value of the goods or ₹ 5000. Without cogent material of the contraband itself, its value, weight and purity, there is simply no basis for the penalties imposed. The CESTAT confused the issues of relevance and proof. A statement may be relevant, but it yet needs to be proved. The fact that a statement is made and recorded, and is statutorily said to be relevant, does not mean it is proved. That statement, like all testimony, must be subjected to the rigours of cross-examination, to be drawn into the evidentiary pool to form a basis for reasoning or conclusion. Section 138B does not say, and could not say, that statements can be taken as proved even without cross-examination. This, however, is how the CESTAT has misunderstood the section. All that the section says is that for want of production of a witness, his Section 108 statement does not automatically cease to become relevant. Questions of relevancy and proof are yet determined by the Indian Evidence Act, and the CESTAT wholly failed to take these into account. The contention of the Learned Counsel for the Appellants that Section 138(B) of the Customs Act applies only to prosecution of offences under the Customs Act and not to departmental adjudication proceedings is not well-founded. A bare perusal of Section 138(B)(1) (set out above) tells us otherwise. It is not possible to hold that the word proceeding excludes departmental adjudication proceedings. Indeed, even the CESTAT did not think so, and we see no reason to consider this plea now - Consequently, if there were gaps, retractions and inconsistencies, and even if the Section 108 statements of the three witnesses (Vincy, Sebastian and Baptista) were relevant, those statements demanded proof and corroboration. They could not, on their own, and without the witnesses being made available for cross-examination, survive the tests we demand of proof. There is no substitute for evidence and proof, and no amount of pungent story-telling can make up for it; nor is it permissible to borrow selectively and out-ofcontext from one order while ignoring another that is much closer to the issues at hand, or to misread and misunderstand the purport of a statute. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Imposition of penalty under Section 112(a) of the Customs Act without seizure or confiscation of contraband gold.
2. Application of Section 138B of the Customs Act to departmental adjudication proceedings.
3. Reliance on Supreme Court observations from a separate case for proof of contraband.
4. Credibility of retracted statements under Section 108 of the Customs Act without cross-examination.
5. Sufficiency of sole testimony for determining the value of alleged contraband.

Issue-wise Detailed Analysis:

1. Imposition of Penalty Without Seizure or Confiscation:
The court questioned whether penalty proceedings under Section 112(a) of the Customs Act could be initiated without the actual seizure or confiscation of the alleged contraband. The absence of the contraband itself was deemed a critical flaw. The judgment emphasized that the Customs Act relies on "evidentiary certainty," which was not met as the contraband's existence and value were based solely on conjecture and the uncorroborated testimony of a single officer.

2. Application of Section 138B to Departmental Adjudication:
The court examined if Section 138B, which pertains to the relevance of statements in prosecution for offences under the Customs Act, could be applied to departmental adjudication proceedings. The judgment clarified that while Section 138B makes certain statements relevant, it does not equate to proof without cross-examination. The CESTAT's reliance on this section was found to be a misinterpretation, as the statements needed to be subjected to the rigors of cross-examination to be considered as evidence.

3. Reliance on Supreme Court Observations from a Separate Case:
The CESTAT's reliance on the Supreme Court's observations in a separate case involving the same officer (Fernandes) was scrutinized. The Supreme Court's decision in Fernandes' case was related to his prosecution under Section 155 of the Customs Act and did not establish the existence of contraband gold. The CESTAT's interpretation that the Supreme Court had concluded the presence of gold was incorrect and misleading.

4. Credibility of Retracted Statements Without Cross-Examination:
The court highlighted the importance of cross-examination for the credibility of statements recorded under Section 108 of the Customs Act. The non-availability of key witnesses for cross-examination was a significant breach of natural justice. The judgment referenced precedents that underscored the necessity of cross-examination for the admissibility and reliability of such statements.

5. Sufficiency of Sole Testimony for Determining Contraband Value:
The judgment critically assessed the reliance on Fernandes' sole testimony regarding the value and quantity of the alleged contraband. Fernandes' estimation, based on his experience and without any scientific or metric examination, was deemed insufficient. The court emphasized that the valuation of goods under the Customs Act requires specific metrics and proof, which were absent in this case.

Conclusion:
The court allowed all five appeals, quashing the impugned orders dated 14th October 1994 and 13th December 2004. The judgment underscored the necessity of evidence and proof in penalty adjudication proceedings under the Customs Act, rejecting conjecture and uncorroborated testimonies. The court also criticized the inappropriate language used in the CESTAT order, emphasizing the need for sobriety and adherence to legal principles in judicial proceedings.

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