2020 (5) TMI 506 - HC - Customs

Principles of Natural Justice - request for cross examination denied - valuation of imported goods - short duty paid goods - HELD THAT - Though it was submitted that the statements recorded from the petitioners were retracted, there are no material on record found - Neither the petitioner nor the respondents have filed any of the statements of the persons recorded under Section 108 of the Customs Act, 1982 nor the letter of retraction. Since the primary purpose of obtaining statement under Section 108 of the Customs Act, 1962 was for investigation and not for obtaining confessional statements/admission of liability, the respondents were asked to find out whether they could proceed with the show cause proceedings based on evidence gathered without placing primary reliance on the statements recorded from any of the three persons - the object of empowering an officer of the customs department to record evidence under section 108 is to collect information of the contravention of the provisions of the Customs Act, 1962 or concealment of contraband or avoidance of duty of Excise so as to enable them to collect the evidence of the proof of contravention of the provisions of the act for initiating proceedings for further action of confiscation of the contraband or imposition of penalty under the Act etc. The adjudication proceedings under the Customs Act, 1962 cannot solely be based on the inculpatory statements of witnesses and noticee alone. Such statements can be only used for corroborating the case which the Department proposes to establish before the quasi-judicial authorities - The department is bound to prove the case based on balance of probabilities as per well-recognised principle of law in the case of departmental adjudications The 1st respondent is directed to complete the adjudication proceedings within a period of 9 months from date of receipt of this order since the dispute pertains to import made by the petitioner between 2010 and 2013 - It is for the 1st respondent to take a call as to whether it proposes to solely rely on the statements recorded under section 108 of the Customs Act, 1962 for confirming the demand in which case, the 1st respondent shall produce such persons for cross examination by the petitioners - petition dismissed.

Issues Involved:
1. Rejection of request for cross-examination of persons whose statements were recorded under Section 108 of the Customs Act, 1962.
2. Validity and reliance on statements recorded under Section 108 of the Customs Act, 1962.
3. Allegations of coercion and threat during the recording of statements.
4. Adjudication process and reliance on independent evidence versus statements.

Detailed Analysis:

1. Rejection of Request for Cross-Examination:
The petitioners were aggrieved by the impugned communication dated 19.1.2016, wherein the 1st respondent rejected their request to cross-examine individuals whose statements were recorded under Section 108 of the Customs Act, 1962, and the officers who recorded such statements. The petitioners had sought cross-examination to challenge the validity of the statements used against them in the show cause notice issued by the Directorate of Revenue Intelligence.

2. Validity and Reliance on Statements Recorded under Section 108:
The court examined the purpose and validity of statements recorded under Section 108 of the Customs Act, 1962. It was noted that such statements are intended to facilitate investigation into alleged evasion of customs duty and are admissible in evidence for prosecution under Section 135 of the Customs Act, 1962. The court referred to several judgments, including K.I. Pavunny v. Asstt. Collector (HQ), Central Excise Collectorate, which held that statements recorded under Section 108 could be the basis for conviction if not obtained under coercion or threat.

3. Allegations of Coercion and Threat:
The petitioners alleged that the statements were obtained under coercion and threat, citing the Supreme Court's guidelines in DK Basu v. State of West Bengal. However, the court found no material evidence on record to substantiate these claims. Neither the petitioners nor the respondents filed copies of the statements or letters of retraction. The court concluded that the guidelines in DK Basu were not violated, as there were no records to substantiate the allegations of threat or coercion.

4. Adjudication Process and Reliance on Independent Evidence:
The court emphasized that adjudication proceedings under the Customs Act, 1962, cannot solely rely on inculpatory statements of witnesses and noticees. Such statements can only be used to corroborate independent evidence. The 1st respondent was directed to decide whether to rely solely on the statements recorded under Section 108 or on independent evidence gathered during the investigation. If the former, the individuals whose statements were recorded must be produced for cross-examination. If the latter, cross-examination was deemed unnecessary.

Conclusion:
The court dismissed the writ petition, directing the 1st respondent to complete the adjudication proceedings within nine months and decide on the reliance on statements versus independent evidence. The petitioners were granted the opportunity to file their final reply and written representation after the personal hearing.

Observations:
1. The 1st respondent must complete adjudication within nine months.
2. If relying solely on statements, the 1st respondent must produce individuals for cross-examination.
3. If relying on independent evidence, cross-examination is not required.
4. The 1st respondent is governed by preponderance of probability and Customs Valuation Rules, 2007, read with Section 14 of the Customs Act, 1962.
5. The petitioners must be given an opportunity to file their final reply and written representation.

The petition was dismissed with the above observations, and the connected miscellaneous petition was closed with no cost.

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