2022 (12) TMI 1341 - HC - Customs

Levy of penalty u/s 114 of Customs Act - Garments made of inferior quality fabric but, declared to be made of Corduroy/Denim/Viscose fabric to fraudulently avail duty free import credit - whether there are corroborative evidences like statements of the co-noticees, recovering of large sum of money by the Enforcement Directorate from the premises of co-noticee, who is close associate of the respondent and recorded perverse findings? HELD THAT - In ROMESH CHANDRA MEHTA VERSUS STATE OF WEST BENGAL 1968 (10) TMI 50 - SUPREME COURT , it is held that a Customs Officer under the Act is not a police officer within the meaning of Section 25 of the Evidence Act and the statements made before him by a person who is arrested or against whom an inquiry is made are not covered by Section 25 of the Indian Evidence Act. It is further held that a statement under Section 108 of the Act is not a statement made by a person accused of an offence, and the person who gives the statement does not stand in the character of an accused person - it is clear that the statements of a person made under Section 108 of the Act 1962 should not and cannot be construed as a statement of a co-accused, for when a Customs Officer records a statement under that sections of the Act, he does not act as a Police Officer, but he merely acts as a Revenue Officer, whose duty is to find out whether or not there is an evasion of customs duty in a particular transaction. The statements made by Suresh Prabhu should be considered not as a confessional statement of a co-accused, but as an independent piece of evidence. It is thus evident from his statements that the respondent was involved in the offence. Hence the contention of Shri Phanindra that other independent evidence is required, is untenable and liable to be rejected. Whether the Tribunal was justified in dropping the penalty? - HELD THAT - The findings of the DRI and statement made by the co-noticees, it is clear that the respondent had received and made payments for the illegal exports. Without his involvement, the chain of circumstances leading to the commission offence would be incomplete. In our view, respondent has aided in making remittance from Dubai which amounts to abetment. Thus, Respondent has played a major role in the commission of the offence - the abetment by the respondent, adjudicating Authority vide order No.01029/2014 was justified in imposing a penalty under Section 114 of the Act and the view taken by the CESTAT and dropping the penalty is perverse. Applicability of the Customs Act, 1962 - HELD THAT - In the instant case, as per the statements of Suresh Prabhu, payments were sent to India by respondent and excess payment was also collected by him through people known to him. The illegal goods were detained in the Mangalore port. A major part of the offence has taken place in India. Therefore, in our view, the provisions of Customs Act are applicable.

Summary

Issues Involved:
1. Whether the CESTAT was correct in concluding that charges against the respondent were baseless despite corroborative evidence.
2. Whether the Tribunal was justified in dropping the penalty on the respondent under Section 114 of the Customs Act, 1962.
3. Whether the CESTAT was correct in holding that no penalty is to be levied under Section 114 of the Customs Act, 1962.

Issue-wise Detailed Analysis:

Re: Question No: 1

The primary contention was whether the charges against the respondent were baseless, despite corroborative evidence such as statements from co-noticees. The court examined Section 108 of the Customs Act, 1962, which empowers customs officers to summon individuals to give evidence and produce documents. It was noted that statements made under Section 108 are admissible in evidence and are not considered statements made by an accused person, as per the Supreme Court's ruling in Romesh Chandra Mehta Vs. State of West Bengal.

The court emphasized that statements made under Section 108 should be considered independent evidence and not as confessions of co-accused. The court cited the case of Assistant Collector of Central Excise, Rajamundry Vs. Duncan Agro Industries Ltd., which upheld the admissibility of such statements. The court also referred to Naresh J. Sukhwani Vs. Union of India, which stated that statements before customs officials are substantive evidence.

The court reviewed Suresh Prabhu's statement, which implicated the respondent in making full payments through banks and recovering excess payments through non-banking channels. The court concluded that the statements were independent evidence proving the respondent's involvement in the offence. Thus, the contention that independent evidence was required was rejected.

Re: Question No. 2

The issue was whether the Tribunal was justified in dropping the penalty on the respondent under Section 114 of the Customs Act, 1962. Section 114 imposes penalties for attempts to improperly export goods. The court noted that the term "abet" is not defined in the Customs Act but referred to Section 107 of the Indian Penal Code for its meaning, which includes instigating, engaging in conspiracy, or intentionally aiding the commission of an act.

The court cited Vishnu Kumar Vs. Commissioner of Customs, New Delhi, which held that the standard of proof in penalty proceedings under the Customs Act is based on the preponderance of probabilities rather than beyond a reasonable doubt. The court found that the respondent's actions amounted to abetment as he facilitated illegal remittances from Dubai to India, which was corroborated by statements from co-noticees.

The court concluded that the adjudicating authority was justified in imposing a penalty under Section 114, and the Tribunal's decision to drop the penalty was perverse.

Re: Question No. 3

The question was whether the Customs Act, 1962, was applicable to the respondent, who argued that he was not present in India. The court referred to Section 1(2) of the Customs Act, which extends the Act to the whole of India. The court cited M/s Haridas Exports Vs. All India Glass Floats Manufacturers, which held that actions outside India that result in restrictive trade practices in India fall within the jurisdiction of Indian law.

The court also referred to Ajay Aggarwal Vs. Union of India, which held that conspiracy is a continuing offence, and actions taken abroad that affect India fall within Indian jurisdiction. The court noted that the respondent's actions had significant effects in India, such as illegal remittances and overvalued exports.

The court concluded that the provisions of the Customs Act were applicable to the respondent, even if he was not physically present in India, as his actions had a substantial impact on India's economy.

Order:

1. The appeal is allowed.
2. The substantial questions of law are answered in favor of the Revenue and against the respondent.
3. No costs.