2022 (8) TMI 184 - AT - Customs

Levy of penalty u/s 112(a) and u/s 114AA of the Customs Act, 1962 - alleged involvement in forged /fake VKGUY /DEPPB license and imports there under - cross-examination of witnesses not allowed, upon which the whole case is based on - HELD THAT - The entire case of the Revenue against the Appellant is based upon the statements of Shri Kalpesh Daftary co-noticee without there being any further evidence. In the impugned order for confirmation of penalty against the Appellant Ld. Commissioner relied upon the statements of Shri Kalpesh Daftary. In fact in this case when Appellant asked for cross-examination of Shri Kalpesh Daftary and other persons, whose statement was relied upon to implicate the appellant, the request of the appellant was denied by the Ld. Commissioner, therefore, the said statements cannot be admitted as piece of evidence as per Section138B of the Customs Act, 1962 - In fact of the present case, when the statements of Shri Kalpesh Daftary were heavily relied upon to penalise the appellant, the said statements being third party evidence and when the appellant seriously disputed the same, it was bounden duty on the part of the Ld. Commissioner to cross examine the witnesses and only thereafter such statements could have been relied as a piece of evidence, which Ld. Commissioner has gravely failed to do his duty. In this circumstances the statements lost it s evidentiary value. Therefore due to non compliance of Section 138B of the Customs Act, 1962 on the part of Ld. Commissiomer, the statements of Shri Kalpesh Daftary relied upon to fasten the penalties upon the appellant are not admissible as evidence. In the facts of the present case, it is on record that Ld. Commissioner has disallowed the request of cross-examination of persons and relied upon such statements as evidence. The impugned order-in-original does not record a finding that, any of the conditions specified under Sections 138B(1) of the Act of 1962 stands satisfied thereby such statements without cross-examination of such witness became absolutely irrelevant. In such circumstances, the adjudication proceedings conducted by the adjudicating authority and resultant the impugned order-in-original stands vitiated by breach of principles of natural justice. The impugned order imposing penalties on appellant is unsustainable and liable to be set aside - Appeal allowed.

Issues Involved:
1. Denial of Cross-Examination
2. Awareness of Forgery
3. Police Complaint and Civil Suit
4. Comparison with Other Individuals Involved
5. Basis for Penalty Imposition
6. Application of Section 112 and Section 114AA of the Customs Act, 1962
7. Reliance on Co-Accused's Statements
8. Bona Fide Actions and Victim of Fraud

Issue-Wise Detailed Analysis:

1. Denial of Cross-Examination:
The appellant argued that the Commissioner erred by not allowing cross-examination of key witnesses, Shri Kalpesh Daftary and Shri Sachin Koradia, whose statements formed the basis of the case against him. The appellant cited Section 138B(1)(b) of the Customs Act, 1962, which mandates that if cross-examination is denied, the statements cannot be relied upon. The tribunal agreed, noting that the Commissioner failed to fulfill the duty of allowing cross-examination, making the statements inadmissible as evidence.

2. Awareness of Forgery:
The appellant contended that there was no credible evidence indicating that he or his company was aware of the forgery of the 93 licenses sold to M/s Hindalco. The investigation revealed that the forgery was executed by Shri Kalpesh Daftary and his associates, with no indication that the appellant was aware of the fraudulent nature of the documents. The tribunal found no independent evidence proving the appellant's knowledge of the forgery.

3. Police Complaint and Civil Suit:
After discovering the fraud, the appellant filed a police complaint and a civil suit against Shri Kalpesh Daftary and others. This action demonstrated that the appellant was also a victim of the fraud. The tribunal noted that the appellant's proactive measures to address the fraud further supported his lack of involvement in the forgery.

4. Comparison with Other Individuals Involved:
The appellant highlighted that other individuals involved in the transactions, such as employees of M/s Hindalco and other brokers, were not penalized despite their involvement. The tribunal agreed, noting that the appellant's case was similar to these individuals, who were not aware of the forgery and were not penalized.

5. Basis for Penalty Imposition:
The appellant argued that the penalties were imposed based on the baseless statement of Shri Kalpesh Daftary, a co-accused. The tribunal concurred, stating that penalties cannot be imposed solely on the basis of a co-accused's statement without corroborating evidence. The tribunal referenced several judicial decisions supporting this view.

6. Application of Section 112 and Section 114AA of the Customs Act, 1962:
The appellant contended that Section 112, which provides for penalties for improper importation of goods, was not applicable as he was neither the importer nor had he abetted in the utilization of the forged licenses. The tribunal agreed, noting that the transactions related to the licenses occurred before the importation and clearance of the goods, making the imposition of penalties under this section unlawful.

7. Reliance on Co-Accused's Statements:
The tribunal emphasized that the entire case against the appellant was based on the statements of Shri Kalpesh Daftary, a co-accused. The tribunal cited judicial precedents stating that the statements of a co-accused cannot be used as substantive evidence against another accused unless corroborated by independent evidence. The tribunal found no such corroborating evidence in this case.

8. Bona Fide Actions and Victim of Fraud:
The tribunal recognized that the appellant acted in a bona fide manner, assuming the licenses were genuine. The appellant's company had purchased and sold numerous licenses without any irregularities, except for the 93 disputed licenses. The tribunal concluded that the appellant was a bona fide purchaser and seller of the forged licenses and was also a victim of the fraud, similar to M/s Hindalco.

Conclusion:
The tribunal set aside the impugned order imposing penalties on the appellant, citing the lack of evidence proving the appellant's knowledge of the forgery, the inadmissibility of co-accused statements without cross-examination, and the appellant's bona fide actions. The appeal was allowed with consequential relief.

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