2020 (4) TMI 82 - AT - Customs

Penalty u/s 114 of CA - Smuggling - Red Sanders - prohibited goods - demand based on various statements - retraction of statements - confiscation of Red Sanders as well as cash - HELD THAT - The entire case against the appellant was made out by the department on the charge that the appellant have attempted to export the prohibited goods namely Red Sanders which were kept in the premises of the appellant. For making such charge the revenue has heavily relied upon various statements of various persons - it is found that almost all the statements were retracted in writing. Most of the statements recorded under section 108 of Customs Act, 1962 were retracted. The appellant despite the fact that the statements were retracted also requested for cross-examination of the persons whose statements were relied upon under section 138(B), however, the Learned Adjudicating Authority has not acceded to the request of the appellant and rejected the Cross-examination. It is a settled law that even any statement the Adjudicating Authority, intend to rely upon and the same is disputed by the person against whom the said statement is likely to be used, it is necessary for the Adjudicating Authority to grant the cross examination of such witnesses in terms of section 138(B) of the Customs Act, 1962. From the reading of the above section 138(B) it clearly comes out that even without asking for cross examination it is incumbent on the Adjudicating Authority to examine the witness before relying upon his statement for the Adjudication process. Therefore, in the present case in one hand most of the statements were retracted and over and above the appellant requested for cross examination. The Adjudicating Authority is duty bound under the statute to grant the cross examination. In absence of cross examination of the witnesses the statements given by them has no evidentiary value and same cannot be relied upon against the appellant. When the appellant sought for cross examination of the witness and if the request is not acceded to the adjudicating authority should not have relied upon the statements of such witness. The appellants case is on better footing as their request for cross examination is reinforced with the retraction of the most of the statements, therefore, since the adjudicating authority has not granted the cross examination, all the statements have no evidentiary value and case could have been decided without the support of such statements - In the present case except statements there is no evidence to show that the goods allegedly kept with intention to attempt the export thereof. No peace of document which show that the red senders stored were meant for export it is undisputed fact that the appellant is a licensed trader of red senders who purchase the red senders in Government auction and trade within the country, therefore, by any stretch of imagination it cannot be construed that the goods laying with the appellant were attempted to the export. The entire case made out only on the basis of statements which we held that the same do not have evidentiary value. The Revenue could not establish a case of attempt to export the prohibited goods. Therefore entire action is illegal and without authority of law - the confiscation of red senders, cash seized during the investigation are not sustainable - penalties also set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Legality of the seizure and confiscation of red sanders and cash.
2. Admissibility and evidentiary value of retracted statements.
3. Compliance with principles of natural justice, specifically the right to cross-examine witnesses.
4. Determination of whether the goods were intended for export.

Detailed Analysis:

1. Legality of the Seizure and Confiscation of Red Sanders and Cash:
The appellant was penalized under Section 114 of the Customs Act, 1962, and the red sanders and cash were confiscated. The department alleged that the appellant attempted to export prohibited goods. However, the appellant argued that during the relevant period, only the export of red sanders was prohibited, not their possession or trade within India. The confiscated goods were found in Delhi, far from any customs station, and there was no evidence of any attempt to export them from Mundra CFS in Gujarat. The adjudicating authority’s decision to confiscate the goods was based on a technical report not provided to the appellant, violating principles of natural justice.

2. Admissibility and Evidentiary Value of Retracted Statements:
The case against the appellant heavily relied on statements from various individuals, most of which were retracted. The appellant and other individuals retracted their statements soon after they were made, arguing that these statements lost their evidentiary value. The tribunal noted that retracted statements, without cross-examination, cannot be relied upon. The appellant's request for cross-examination was denied, which is a violation of Section 138B of the Customs Act, 1962. The tribunal referred to several judgments supporting the principle that retracted statements without cross-examination have no evidentiary value.

3. Compliance with Principles of Natural Justice:
The appellant argued that the adjudicating authority did not allow cross-examination of witnesses whose statements were relied upon, violating Section 138B of the Customs Act, 1962. The tribunal emphasized that it is mandatory for the adjudicating authority to grant cross-examination if the statements are disputed. The denial of cross-examination rendered the statements inadmissible. The tribunal cited various judgments reinforcing the necessity of cross-examination to uphold the principles of natural justice.

4. Determination of Whether the Goods Were Intended for Export:
The tribunal found no evidence indicating that the goods were intended for export. The red sanders were stored far from any port, and there were no documents like invoices or shipping bills suggesting an attempt to export. The appellant was a licensed trader of red sanders within India, and the goods were purchased in government auctions. The tribunal concluded that mere possession of red sanders does not imply an attempt to export. The appellant's previous exoneration in a similar case further supported this conclusion.

Conclusion:
The tribunal set aside the confiscation of red sanders and cash, as the department failed to establish that the goods were intended for export. The penalty imposed on the appellant was also set aside. The appeal was allowed, and the tribunal emphasized the importance of adhering to principles of natural justice, particularly the right to cross-examine witnesses.

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