2022 (4) TMI 375 - AT - Customs

Levy of penalty u/s 112 of Customs Act, 1962 - undervalued imports - appellant is a beneficiary out of the offence of undervaluation or not - cross-examination of witnesses - violation of principles of natural justice - HELD THAT - There is no dispute that there is no admission by the appellant as regards the allegation made in the show-cause notice. This has been admitted by the adjudicating authority. It is clear that Shri Rajesh Jain has not made any implicatory admission in his statement and the adjudicating authority has solely relied upon the statements given by Shri K.V. Venugopal and Shri R. Jayachandran - the adjudicating authority has even not referred the request of the appellant for cross examination of the witnesses in his order. In the facts of the present case, the appellant has not given any inculpatory statement and not admitted the allegation made against him - For imposition of penalty against the appellant, the sole reliance was made on the statements of 3rd parties. In such a situation, it is incumbent on the adjudicating to allow the cross examination of the witnesses as mandated under Section 135 of Customs Act, 1962. We find that the adjudicating authority surprisingly neither allowed the cross examination nor even whisper in the impugned order to reject the request for cross examination made by the appellant. Therefore, the order of the adjudicating authority is in clear violation of principles of natural justice. The entire case needs to be reconsidered only after conducting cross examination of the witnesses whose statements were used against the appellant for imposition of penalty - appeal allowed by way of remand.

Summary

Issues:
- Imposition of penalty under Section 112 of Customs Act, 1962 based on undervaluation in imports made by another entity.
- Appellant's contention of being a mere buyer and lack of involvement in import or valuation.
- Request for cross-examination of witnesses whose statements were relied upon.
- Violation of principles of natural justice by not allowing cross-examination.

Imposition of Penalty:
The appeal challenged the penalty of ?50 lakhs imposed on the appellant under Section 112 of the Customs Act, 1962, based on undervaluation in imports made by another entity. The Department alleged that since the appellant purchased the goods imported by the other entity, he benefitted from the undervaluation. The appellant contended that he had no role in the import or valuation of the goods, being merely a buyer, and thus, no penalty should be imposed.

Appellant's Lack of Involvement:
The appellant's counsel argued that the allegations were based on statements of third parties implicating the appellant, without any admission by him. The appellant requested cross-examination of the witnesses who made statements against him, which was not considered by the adjudicating authority. The counsel cited various judgments to support the argument that without inculpatory statements or admissions, penalty imposition is unjustified.

Request for Cross-Examination:
The appellant specifically requested cross-examination of the witnesses implicating him, as they were the basis for the penalty imposition. The failure of the adjudicating authority to allow cross-examination and the lack of reference to this request in the order were highlighted as violations of natural justice. The Tribunal emphasized the importance of cross-examination under Section 135 of the Customs Act, 1962, and deemed the absence of this opportunity as a clear violation of principles of natural justice.

Violation of Natural Justice:
The Tribunal found that the adjudicating authority's reliance solely on third-party statements without allowing cross-examination was a violation of natural justice. The order was set aside, and the matter was remanded for a fresh decision, emphasizing the need for cross-examination to be conducted. The appellant was granted the opportunity for a personal hearing and to present their defense adequately. The appeal was allowed by way of remand to ensure a fair reconsideration of the case.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both sides, and the Tribunal's decision emphasizing the importance of natural justice and the right to cross-examination in such cases.