2022 (8) TMI 661 - AT - Customs

Smuggling - Gold - reasons to believe - onus to believe - framing of charges - retraction of statements - levy of penalty u/s 112(b) of the Customs Act - HELD THAT - The Tribunal in the case of D. ANKINEEDU CHOWDRY VERSUS COMMISSIONER OF CUSTOMS, CHENNAI 2004 (8) TMI 243 - CESTAT, CHENNAI held that in any other manner dealing with used in Section 112(b) of the Customs Act has to be read ejusdem generis with the preceding expression in the clause viz. carrying, removal or depositing etc. It is held that accordingly to the above doctrine, meaning of expression in any other manner of dealing with should be understood in sense similar or comparable to how preceding words viz. carrying, removing, depositing etc. are understood. 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 appellant 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 person enumerated in Section112(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 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. Admissibility and credibility of statements made by co-accused.
3. Burden of proof and corroborative evidence.
4. Interpretation and application of Section 112(b) of the Customs Act, 1962.
5. Mens rea (knowledge or intent) as a prerequisite for penalty.

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 financing gold smuggling activities. The Tribunal examined whether the conditions for imposing such a penalty were met. Section 112(b) necessitates that the person must have acquired possession of, or dealt with, goods knowing they were liable for confiscation under Section 111. The Tribunal found that the evidence did not sufficiently prove the Appellant's involvement in the smuggling activities or that he had the requisite knowledge that the goods were liable for confiscation.

2. Admissibility and Credibility of Statements Made by Co-Accused:
The Appellant argued that the allegations were based solely on the uncorroborated statements of Ms. Divya Kishore Bhundia and Shri Jignesh Savaliya, which were retracted and not tested through cross-examination. The Tribunal noted that the statements of co-accused cannot be relied upon without independent corroborative evidence. The Tribunal cited several precedents to support this view, including "Punam Chand Bhotra v. Collector of Customs" and "Surinder Kumar Khanna v. Intelligence Officer, DRI."

3. Burden of Proof and Corroborative Evidence:
The Tribunal emphasized that the burden of proof lies with the Department, which failed to provide sufficient evidence to support the allegations. No incriminating documents or material were found during the searches of the Appellant's premises. The Appellant's denial of involvement was not effectively countered by the Department. The Tribunal held that the lack of corroborative evidence rendered the penalty unsustainable.

4. Interpretation and Application of Section 112(b) of the Customs Act, 1962:
The Tribunal analyzed the scope of Section 112(b), which penalizes those who deal with goods knowing they are liable for confiscation. The Tribunal found that the Appellant did not acquire possession of or deal with the smuggled gold. The Tribunal referenced similar provisions in the Central Excise Rules and relevant case law, including "Steel Tubes of India Ltd. v. Commissioner of Central Excise," to conclude that physical possession or direct involvement in dealing with the goods is necessary for imposing a penalty under Section 112(b).

5. Mens Rea as a Prerequisite for Penalty:
The Tribunal highlighted that mens rea, or knowledge of the illegality, is a crucial element for imposing a penalty under Section 112(b). The evidence did not establish that the Appellant had knowledge or reason to believe that the goods were liable for confiscation. The Tribunal cited the principle that mens rea is essential for penalties, as established in "R.C. Jain v. Commissioner of Central Excise and Service Tax."

Conclusion:
The Tribunal concluded that the evidence was insufficient to prove the Appellant's involvement in the smuggling activities or that he had the requisite knowledge for the goods to be liable for confiscation. The penalty imposed under Section 112(b)(i) of the Customs Act, 1962, was set aside, and the appeal was allowed with consequential relief.

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