2022 (9) TMI 916 - AT - Customs

Levy of penalty u/s 112(b)(i) of the Customs Act 1962 - smuggling of Gold activity - incriminating documents against the Appellant to show prima facie that the Appellant financed money for smuggling of gold into India, present or not - malafide intent or not/mens rea - third party evidences - corroborative evidences or not - HELD THAT - The role of the Appellant in the whole episode has been derived only from the printout sheet retrieved from the pen-drive seized from the residential premise of Ms. Nita Chunilal and statements of persons. Statements of said persons remained uncorroborated during the investigation. Of course, no offence should be established merely based on the statement of third party and without corroborative evidence and without granting cross examination of person whose statement alone is relied upon. 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. He nowhere stated that Appellant has funded the amount for smuggling of gold. On going through the statements of Shri Mehul Bhimani and Shri Jitendra Rokad recorded on 28.06.2019 and 29.06.2019 in impugned matter, it is nowhere found that the Appellant had knowledge about the use of fund in smuggling of gold. The Appellant himself has not financed the fund to Mehul Bhimani but on his garuntee it was financed by Shri Nilesh Dhakan. Except this the department nowhere produce any evidences to show that Appellant was involved in smuggling of gold activity. From the evidence available on record and statement of Appellant it is clear that he was in normal course lending the fund. However, the activity of financing of fund has been turned by the Ld. Commissioner into direct participation in the conspiracy to smuggle gold. For imposition of penalty under Section 112(b) of the Customs Act, 1962 the knowledge on the part of the person has to be established. In the present matter department failed to do so - The Appellant had nowhere stated that this fund used by persons for import of smuggling of gold. During the investigation officers did not find any documents/ piece of paper or any other evidence against the Appellant to show that the Appellant financed money for smuggling of gold into India. Clearly, the Appellant did not have knowledge of use of fund financed on his pretext, if any. 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 not 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 mens rea 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 appellants were 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. Imposition of penalty under Section 112(b)(i) of the Customs Act, 1962.
2. Validity and reliability of statements and documentary evidence.
3. Knowledge and involvement of the Appellant in the smuggling activity.

Issue-wise Analysis:

1. Imposition of Penalty under Section 112(b)(i) of the Customs Act, 1962:
The primary issue is whether the Appellant is liable for a penalty under Section 112(b)(i) of the Customs Act, 1962. This section imposes a penalty on any person who acquires possession of or is in any way concerned with dealing with goods liable for confiscation under Section 111, provided they know or have reason to believe that the goods are liable for confiscation. The Tribunal examined whether the conditions for imposing such a penalty were met, specifically focusing on the Appellant's knowledge and involvement in the smuggling activities.

2. Validity and Reliability of Statements and Documentary Evidence:
The Appellant argued that the statements of Shri Mehul Bhimani and Shri Jitendra Rokad, which implicated him, were retracted and recorded under coercion. The Tribunal noted that these statements were retracted before the Jail Authority and emphasized that statements recorded under coercion cannot be relied upon unless corroborated by independent evidence, as per Section 138B of the Customs Act. Furthermore, the Tribunal found that the statements remained uncorroborated during the investigation, and no incriminating documents were found against the Appellant during searches.

3. Knowledge and Involvement of the Appellant in the Smuggling Activity:
The Tribunal scrutinized the evidence to determine if the Appellant had knowledge or reason to believe that the funds he provided were used for smuggling gold. The Appellant's statement clarified that he financed Rs. 1 crore to Shri Mehul Bhimani, his brother-in-law, as a loan with interest, without knowledge of its use in smuggling. The Tribunal found no evidence suggesting that the Appellant was aware of the smuggling activities or that he intended to finance such activities. The Tribunal also noted that the Appellant's name appearing in a printout sheet retrieved from a pen drive seized from Ms. Nita Parmar's residence did not, by itself, implicate him in the smuggling activities.

Conclusion:
The Tribunal concluded that the Department failed to establish the Appellant's knowledge or involvement in the smuggling activities. The evidence on record did not support the imposition of a penalty under Section 112(b) of the Customs Act, 1962. The Tribunal emphasized that penal consequences cannot be fastened on an individual based on uncorroborated statements and documents retrieved from third parties. Consequently, the penalty imposed on the Appellant was set aside, and the appeal was allowed with consequential relief.

Pronouncement:
The judgment was pronounced in the open Court on 19.09.2022, setting aside the penalty imposed on the Appellant and allowing the appeal.

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