2022 (8) TMI 617 - AT - Customs

Levy of penalty u/s 112(b)(i) of the Customs Act 1962 - smuggling of Gold activity - reliability of statements - request for cross examination rejected - HELD THAT - The role of the Appellant in the whole episode has been derived only from the statement of Ms. DivyaKishorBhundia only Statement of said person remained uncorroborated during the investigation. As per the department Shri Rutugna being the mastermind of the smuggling racket, however during the investigation Shri Rutugna has nowhere stated the name of Appellant as connected to his alleged activity of smuggling of gold - Upon perusal of the statements, it is nowhere found that the Appellant had knowledge about the said alleged smuggling of gold activity. The department except the statement of Ms.Divya Kishore Bhundia nowhere produce any evidences to show that Appellant was involved in smuggling gold activity. The Department has not taken any steps to confirm with Shri Rutugna whether the Appellant also involved with him. The evidence on record is not sufficient to hold that the appellant was involved in alleged activity of smuggling of gold - It is well settled law that the statements of the co-noticee cannot be adopted as a legal evidence to penalize the accused unless the same are corroborated in material particulars by independent evidence. The statement of co-accused cannot be relied upon, particularly when appellant has denied his involvement in respect of the goods in question. There is absolutely no evidence on record connecting the appellant with the commission of any offence in relation to the alleged gold smuggling activity. Merely because the Appellant is engaged in the business of Gold and Silver, that would not ipso facto make the appellant in any way privy to the commission of any offence with reference to the alleged gold smuggling activity - there is absolutely no evidence on record connecting the appellant with the commission of any offence in relation to the alleged gold smuggling activity. Merely because the Appellant is engaged in the business of Gold and Silver, that would not ipso facto make the appellant in any way privy to the commission of any offence with reference to the alleged gold smuggling activity. The appellant cannot come within the ambit of Section 112(b) because appellants had never acquired possession or in any way concerned in any of the activities mentioned in the Section or any measure dealing with any goods which the appellants knew or had reason to believe are liable to confiscation. In the absence of the department having proved the knowledge of the appellant in the activities relating to the smuggled gold, there were no grounds for imposition of penalty on him - It is now well established that mensrea is an important ingredient for imposing a penalty on the persons enumerated in Section 112(b) of the Customs Act. The evidence brought out by the department nowhere suggests that the appellant was aware that the goods in question were smuggled into the India. The penalty imposed on Appellant, therefore, cannot be sustained. The appellant is not liable for imposition of penalty under Section 112(b) of the Customs Act, 1962 - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Legality of the penalty imposed under Section 112(b)(i) of the Customs Act, 1962.
2. Appellant's alleged involvement in smuggling activities.
3. Admissibility and reliability of statements and evidence.
4. Compliance with procedural requirements for cross-examination under Section 138B of the Customs Act, 1962.

Detailed Analysis:

1. Legality of the Penalty Imposed under Section 112(b)(i) of the Customs Act, 1962:
The Appellant was penalized Rs. 50,00,000/- under Section 112(b)(i) for allegedly being involved in smuggling gold. Section 112(b) stipulates that a penalty can be imposed on any person who acquires possession of or is involved in dealing with goods liable for confiscation under Section 111, provided they know or have reason to believe the goods are liable for confiscation. The Tribunal examined the conditions under Section 112(b) and concluded that the Appellant did not meet these criteria. The Tribunal found no evidence proving that the Appellant had knowledge of the smuggled nature of the gold or that he was involved in any manner with the smuggling activities.

2. Appellant's Alleged Involvement in Smuggling Activities:
The Tribunal noted that the Appellant's involvement was derived solely from the uncorroborated statement of Ms. Divya Kishore Bhundia. Other key individuals involved in the smuggling racket, including Shri Rutugna Trivedi, did not mention the Appellant's involvement in their statements. The Appellant's statements consistently denied any knowledge or involvement in the smuggling activities. The Tribunal emphasized that the Appellant's business dealings with M/s Akhandjyot Jewels LLP were legitimate and did not indicate any involvement in smuggling.

3. Admissibility and Reliability of Statements and Evidence:
The Tribunal highlighted that the penalty was based primarily on the statement of Ms. Divya Kishore Bhundia, a co-noticee, without any corroborative evidence. The Tribunal referenced multiple judgments establishing that statements of co-noticees cannot be solely relied upon to impose penalties unless corroborated by independent evidence. The Tribunal found no corroborative evidence linking the Appellant to the smuggling activities. Additionally, the Tribunal noted that the Appellant's request for cross-examination of Ms. Divya Kishore Bhundia was denied, undermining the reliability of her statement.

4. Compliance with Procedural Requirements for Cross-Examination under Section 138B of the Customs Act, 1962:
The Tribunal found that the procedural requirements for cross-examination under Section 138B were not followed. Section 138B mandates that if an authority wants to rely on a statement made during an inquiry, the person must be examined as a witness and offered for cross-examination. The Tribunal held that since Ms. Divya Kishore Bhundia was not examined and offered for cross-examination, her statement was inadmissible as evidence. The Tribunal concluded that the denial of cross-examination further weakened the case against the Appellant.

Conclusion:
The Tribunal concluded that the evidence on record was insufficient to establish the Appellant's knowledge or involvement in the smuggling activities. The Tribunal emphasized the importance of corroborative evidence and procedural compliance for cross-examination. Consequently, the Tribunal set aside the penalty imposed on the Appellant under Section 112(b)(i) of the Customs Act, 1962, and allowed the appeal with consequential relief.

Pronouncement:
The judgment was pronounced in the open court on 12.08.2022.

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