2016 (3) TMI 657 - AT - Customs

Sustainability of penalty imposed - Under Section 114(iii) of the Customs Act, 1962 - Alleged abetment in the case of fraudulent, overvalued and mis-declared exports by SLN - Held that - not only there is absolute lack of any material tangible evidence against the Appellant, but whatever documentary evidence are collected by the department, they do not conclusively link the appellant with the alleged offence. Confessions of the two co-accused, which we have carefully seen, cannot be taken as sufficient evidence to sustain the charge as levelled against the appellant. The email recovered shows involvement of a shipping agent in Dubai as observed in earlier paragraphs, however, the said shipping agent has not been made an accused. The invocation of penal provisions can not be uphold only on the basis of such uncorroborated confessions of the co-accused. No link were established of the appellant to the entities who either received the exported goods and/or paid for them and also has not been found any involvement in procurement, export or any other activity connected with the exports of SLN. Whether or not the appellant is a cousin brother of Feroze Khan is wholly immaterial in absence of any tangible material against the appellant and also there is no tangible evidence of any compensatory payment either by SLN or by Feroze Khan, to the appellant. Therefore as the department has failed to prove that the appellant is not innocent, the charge against the appellant is baseless and the penalty imposed on the appellant is not sustainable. - Decided in favour of appellant with consequential relief

Issues Involved:
1. Sustainability of the penalty imposed on the appellant.
2. Compliance with principles of natural justice.
3. Territorial jurisdiction of the Customs Act, 1962.
4. Reliance on confessions of co-accused without corroborative evidence.

Detailed Analysis:

1. Sustainability of the Penalty Imposed on the Appellant:
The main issue is whether the penalty of Rs. 2 crores imposed on the appellant under Section 114(iii) of the Customs Act, 1962, for abetting in smuggling and fraudulent export by SLN Overseas is sustainable. The Tribunal found that the penalty was imposed based on uncorroborated confessions of co-accused Shri Suresh Prabhu and Shri Feroze Khan. The Tribunal noted a lack of independent evidence linking the appellant to the fraudulent activities. The appellant was neither a partner nor shareholder in the entities involved in the remittances or the exports. The Tribunal emphasized that the confessions of co-accused cannot be the sole basis for imposing a penalty without corroborative evidence, referencing the Supreme Court's rulings in Haricharan Kurmi v. State of Bihar and Vinod Solanki vs Union of India.

2. Compliance with Principles of Natural Justice:
The appellant argued that the impugned order was passed without adhering to the principles of natural justice. The Tribunal observed that the appellant's requests for cross-examination of witnesses were denied, which was a violation of Section 138B of the Customs Act, 1962. The Tribunal highlighted that the adjudicating authority erroneously relied on a previously set-aside order and failed to provide the appellant a reasonable opportunity to defend himself.

3. Territorial Jurisdiction of the Customs Act, 1962:
The appellant contended that the Customs Act, 1962, does not apply to him as he was based in Dubai during the period of the alleged exports. The Tribunal agreed, referencing Section 1(2) of the Customs Act, which states that the Act extends only to the whole of India. The Tribunal cited the case of C.K. Kunhammed Vs. CCE, which held that actions committed outside India do not fall under the jurisdiction of the Customs Act. The Tribunal found that no act of omission or commission was committed by the appellant within India, thus supporting the appellant's argument of lack of territorial jurisdiction.

4. Reliance on Confessions of Co-Accused Without Corroborative Evidence:
The Tribunal scrutinized the reliance on the confessions of co-accused Shri Suresh Prabhu and Shri Feroze Khan. It was noted that these confessions were retracted and lacked corroborative evidence. The Tribunal reiterated the principle that confessions of co-accused cannot be treated as substantive evidence unless supported by independent evidence. The Tribunal found no documentary evidence or independent material linking the appellant to the alleged fraudulent exports or remittances, thus rendering the reliance on confessions insufficient to sustain the penalty.

Conclusion:
The Tribunal concluded that the penalty imposed on the appellant was not sustainable due to the lack of corroborative evidence, non-compliance with principles of natural justice, and lack of territorial jurisdiction. The appeal was allowed, and the penalty was set aside with consequential reliefs.

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