2020 (9) TMI 606 - AT - Customs

Validity of SCN - Penalty under Section 114 of the Customs Act - abetting in Smuggling - export of red sanders - prohibited goods - case against appellant is that he procured red sanders and also stores the same in his godown at Delhi - demand based on statements of persons, which were later retracted - HELD THAT - Learned Authorised Representative points out from para 34.3 of the show cause notice, it is mentioned that this appellant knowingly engaged in negotiation and illegal supply of red sanders for fraudulent exports and actively associated himself in smuggling of red sanders to Shri Lin of China with the help of other members of the syndicate. Thus for the said act of omissions and commissions, is liable to penalty under Section 114 of the Customs Act, 1962. However, in para 35 of the show cause notice wherein the party put to notice are required to finally show cause as to why goods, currency etc. not be confiscated under Section 113 read with Section 121 of the Custom Act for violation of Section 11 of the Customs Act read with Appendix-II of CITES. Thus for the error of not mentioning the proposal to impose penalty again in para 35, does not render imposition of penalty bad, as the show cause notice is required to be read as a whole. Single para cannot be read in isolation for drawing a conclusion. Thus the allegation made in para 34.3 to impose penalty is sufficient. Evidently this appellant was an active member of the smuggling syndicate of red sanders. He further states that in the course of search of residential premises of this appellant, some documents in connection with export were found. This appellant also accepted in the course of statement recorded under Section 108 of his involvement in the smuggling. However, subsequently retracted his statement. Under such circumstances retracted statement is good evidence in view of the corroborative statement of the other persons. Further call detail records indicate that this appellant was in direct contact with the other members of the syndicate. Thus, there is no evidence to show that the goods were allegedly kept with intention to export or were attempted to be exported, no case of confiscation is made out - It was also observed by the Division Bench that so far the seizure of red sanders at Mundra CFS is concerned, there is a separate show cause notice, not concerned with the seizure at Delhi. Division Bench also held that the entire case of Revenue is made out mainly based on the retracted statements, which have held no evidentiary value - It was also held that Revenue could not establish the case of attempt to export of prohibited goods and accordingly, held that the confiscation of red sanders and cash is not sustainable and consequential penalty imposed was also set aside. No case is made out against this appellant also as the confiscation itself have been set aside - no case of abetment is made out against this appellant in the facts and circumstances - the penalty imposed under Section 114 is set aside - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Involvement in illegal storage and export of red sanders.
2. Legality of penalty imposed under Section 114 of the Customs Act.
3. Jurisdiction of Single Member Bench to hear the appeal.
4. Validity of evidence based on retracted statements.
5. Allegation of abetment in smuggling activities.

Detailed Analysis:

1. Involvement in Illegal Storage and Export of Red Sanders:
The case revolves around the illegal storage and export of red sanders, a prohibited item. The intelligence received indicated that a syndicate was involved in procuring red sanders from South India, storing them in Delhi, and exporting them illegally. The appellant, a Chinese interpreter, was alleged to be part of this syndicate. Several searches and recoveries were conducted, including the seizure of 14.25 MTs of red sanders from Mundra CFS and additional quantities from various locations linked to the syndicate.

2. Legality of Penalty Imposed under Section 114 of the Customs Act:
The appellant was penalized ?5 lakhs under Section 114 of the Customs Act. The penalty was challenged on the grounds that the show cause notice did not explicitly propose the penalty in its final paragraph, although it was mentioned elsewhere in the notice. The Tribunal held that the show cause notice must be read as a whole and the omission in the final paragraph does not invalidate the penalty.

3. Jurisdiction of Single Member Bench to Hear the Appeal:
A preliminary objection was raised regarding the jurisdiction of the Single Member Bench, given that the value of the confiscated goods exceeded ?50 lakhs. However, since the appellant was only challenging the penalty of ?5 lakhs, the Tribunal held that the Single Member Bench had jurisdiction to hear the appeal, relying on precedents where similar jurisdictional issues were resolved in favor of the Single Member Bench.

4. Validity of Evidence Based on Retracted Statements:
The case relied heavily on statements recorded under Section 108 of the Customs Act, which were later retracted by the appellant and other involved parties. The Tribunal noted that the statements were retracted promptly, and without cross-examination, they lacked evidentiary value. The Tribunal emphasized that the entire case was based on these retracted statements, which could not substantiate the allegations without corroborative evidence.

5. Allegation of Abetment in Smuggling Activities:
The appellant was accused of abetting the smuggling activities by negotiating and supplying red sanders for fraudulent exports. However, the Tribunal found no concrete evidence of the appellant receiving any remuneration or having disproportionate assets that would indicate involvement in smuggling. The appellant's role as an interpreter and his travel for job-related purposes were not sufficient to establish abetment.

Conclusion:
The Tribunal, relying on the findings of a Division Bench in a related case, concluded that there was no evidence to show an attempt to export the red sanders. The confiscation of goods and cash was deemed unsustainable, and consequently, the penalty imposed on the appellant was set aside. The appeal was allowed, and the penalty under Section 114 was annulled.

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