2021 (7) TMI 1199 - AT - Customs

Imposition of penalty - section 112(b) of Customs Act - smuggling - diamonds - existence of mens rea or not - reasons to believe - HELD THAT - Perusal of the said provisions clearly reveals that the penalty under the said provisions can be imposed wherever there is an element of mensrea or conscious knowledge, which is a sine qua non for imposition of penalty. This is evident from a plain reading of Sections 112(b) of Customs Act, 1962 which uses the expressions which he knows or has reason to believe are liable to confiscation under Section 111 . The facts of the case in hand do not reveal any such element of mensrea or conscious knowledge qua these appellants. The active role of these Appellant, do not justify imposition of heavy penalty under Section 112(b) of Customs Act 1962 - The DRI investigation has not brought any such evidence except retracted confessional statements to show that Appellants have smuggled rough diamonds into India in the night of 12/13-04-2011. The quantum of penalty is reduced - appeal allowed in part.

Issues Involved:
1. Confiscation of Rough Diamonds.
2. Imposition of Penalty under Section 112(b) of Customs Act, 1962.
3. Role of the Appellants in the smuggling of Rough Diamonds.
4. Validity of inculpatory statements and their retraction.
5. Quantum of Penalty.

Detailed Analysis:

Confiscation of Rough Diamonds:
The case revolves around the seizure of 48,637.525 carats of rough diamonds of Zimbabwe origin valued at ?10,16,68,077/-. The diamonds were seized because the appellants did not possess the required Kimberley Process Certificates (KPCs). The Principal Commissioner of Customs, Ahmedabad, ordered absolute confiscation of the diamonds under Sections 111(d), 111(l), and 111(m) of the Customs Act, 1962. The appellants did not dispute the re-determined value of ?1,70,13,125/- and the order of absolute confiscation attained finality.

Imposition of Penalty under Section 112(b) of Customs Act, 1962:
The appellants were initially penalized ?1,00,00,000/- each, which was later re-quantified to ?17,01,313/- each by the Principal Commissioner of Customs. The appellants contested this penalty, arguing it was not commensurate with their role. The Tribunal had earlier directed to re-quantify the penalty based on the revaluation of the diamonds and the role of the appellants. The Tribunal found that the maximum penalty under Section 112(b) requires mens rea, which was not evident in this case. Consequently, the penalty was reduced to ?1,00,000/- each.

Role of the Appellants in the Smuggling of Rough Diamonds:
The appellants argued that they did not smuggle the diamonds into India and had no connection with the confiscated diamonds. The Tribunal noted that the DRI officers did not follow standard procedures such as drawing a "Running Panchnama" at the interception spot, which created a benefit of doubt for the appellants. The cross-examination of witnesses did not provide conclusive evidence linking the appellants to the smuggling of the diamonds.

Validity of Inculpatory Statements and Their Retraction:
The appellants retracted their inculpatory statements on 23-04-2011, claiming they were made under duress. The Tribunal cited the Supreme Court's decision in Vinod Solanki v/s UOI, which states that retracted confessions must be corroborated by independent evidence. The Tribunal found no independent corroborative evidence linking the appellants to the smuggling of the diamonds, apart from their retracted statements.

Quantum of Penalty:
The Tribunal considered the lack of conclusive evidence and the retraction of statements, along with the revocation of COFEPOSA orders against the appellants. The Tribunal found the initial penalties excessive and reduced them to ?1,00,000/- each, considering the appellants' role and the need for justice.

Conclusion:
The Tribunal upheld the absolute confiscation of the seized rough diamonds but reduced the penalty on each appellant to ?1,00,000/- under Section 112(b) of the Customs Act, 1962. The appeals were partially allowed, providing consequential reliefs in accordance with the law.

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