2022 (9) TMI 957 - AT - Customs

Levy of penalty - allegation for abatement in smuggling of Gold - the activity of facilitating the financing of fund - evidence whatsoever was found to substantiate the finding of the Ld. Commissioner, present or not - existence of mens rea or not - HELD THAT - For imposition of penalty on a person under Section 112(b), the following conditions must be satisfied. (i) The person must have acquired possession of or must be in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which are liable for confiscation under Section 111 of Customs Act, 1962. (ii) The person must have knowledge or have reason to believe that the goods acquired by him or dealt with by him in the manner as mentioned above, are liable for confiscation under Section 111 i.e. he has knowledge or has reason to believe that any one or more of the contraventions mentioned in Clause (a) to (p) of Section 111 have been committed in respect of the imported goods acquired or dealt with by him. For imposition of penalty under Section 112(b) of Customs Act, 1962, it is also necessary to prove that the person had knowledge or had reason to believe that the goods acquired or dealt with by him are liable for confiscation under Section 111. 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. 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. From the evidence available on record and statement of Appellant it is clear that he was in normal course arranged the lending of fund that to Shri Mehul Bhimani, however, the activity of facilitating the financing of fund has been turned by the Ld. Commissioner into participation in the conspiracy to smuggle gold which in our view is based on assumption. For imposition of penalty under Section 112(b) of the Customs Act, 1962 the knowledge with regard to the offence on the part of the person has to be established. In the present matter department failed to do so - 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 appellant 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 appellant was aware that the goods in question were smuggled into the India. Penalty imposed on appellant cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legality of the penalty imposed under Section 112(b)(i) of the Customs Act, 1962.
2. Evaluation of evidence and statements presented by the department.
3. Determination of the appellant's knowledge or involvement in the smuggling of gold.

Issue-wise Detailed Analysis:

1. Legality of the Penalty Imposed under Section 112(b)(i) of the Customs Act, 1962:

The appellant challenged the penalty of Rs. 1,00,00,000/- imposed under Section 112(b)(i) of the Customs Act, 1962, which penalizes any person who acquires possession of or is in any way concerned with goods liable to confiscation under Section 111. The tribunal emphasized that for the imposition of such a penalty, it must be proven that the person had knowledge or reason to believe that the goods were liable for confiscation. The tribunal found that the appellant's role was derived only from printouts retrieved from a pen drive seized from a third party and uncorroborated statements. The tribunal concluded that the evidence did not establish the appellant's knowledge or involvement in the smuggling activity, thus invalidating the penalty.

2. Evaluation of Evidence and Statements Presented by the Department:

The department's case relied heavily on documents and statements from various individuals involved in the smuggling operation. The tribunal noted that the statements of key individuals, such as Shri Mehul Bhimani and Shri Jitendra Rokad, did not implicate the appellant in the smuggling activities. The appellant's statement clarified that he had only arranged for funds on behalf of his cousin, Shri Mehul Bhimani, without any knowledge that these funds would be used for smuggling. The tribunal emphasized that the department failed to produce any direct evidence linking the appellant to the smuggling activity, and the statements remained uncorroborated.

3. Determination of the Appellant's Knowledge or Involvement in the Smuggling of Gold:

The tribunal scrutinized the appellant's involvement and found that the appellant had merely facilitated a financial transaction for his cousin without any knowledge of its use in smuggling. The appellant's statement and the lack of corroborating evidence from the department led the tribunal to conclude that the appellant did not have the requisite knowledge or involvement in the smuggling operation. The tribunal highlighted that for a penalty under Section 112(b), the knowledge of the person regarding the smuggling activity must be established, which was not done in this case.

Conclusion:

The tribunal set aside the penalty imposed on the appellant, stating that the evidence on record was insufficient to establish the appellant's knowledge or involvement in the smuggling of gold. The appeal was allowed with consequential relief, emphasizing the necessity of proving knowledge or involvement for imposing penalties under Section 112(b) of the Customs Act, 1962.