2022 (9) TMI 1224 - AT - Customs

Penalty u/s 112(b)(i) of the Customs Act 1962 - smuggling - Gold Bars - reliability of statements of persons recorded in impugned matter - HELD THAT - Upon perusal of these statements nowhere it has been found that the Appellant had knowledge about the use of fund in smuggling of gold. It is admitted fact that Appellant has financed the fund against the security of blank cheques and amount financed in June 2014 was also adjusted by the Appellant against the purchase of one plot in Akshar Industrial Estate, Ahmedabad from Shri Rutugna Trivedi. Detail of the said transaction alongwith ledger also submitted by the Appellant to the investigation authority during the investigation. From the evidence available on record and statement of Appellant it is clear that he was engaged in normal course of his business of lending the fund. The business 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. From the above statement of Appellant it is also clear that he had not confessed in his statement that he had knowledge about use of the funds provided to Shri Rutugna for alleged smuggling of gold activity. 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 with material particulars by independent evidence. The statement of co-accused cannot be used against the appellant, particularly when appellant has denied his involvement in respect of the goods in question - 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. 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 knowledge or involvement in the smuggling of gold.
3. Adequacy of evidence against the appellant.
4. Interpretation and application of Section 112(b) of the Customs Act, 1962.

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. 50,00,000/- imposed under Section 112(b)(i) of the Customs Act, 1962. The Tribunal examined the provision, which states that a penalty can be imposed on any person who acquires possession of or is in any way concerned in dealing with goods liable for confiscation under Section 111, provided the person knows or has reason to believe that the goods are liable for confiscation. The Tribunal emphasized that for the penalty to be valid, the person must have knowledge or reason to believe that the goods are liable for confiscation.

2. Appellant's knowledge or involvement in the smuggling of gold:
The Tribunal scrutinized the appellant's role and found that the appellant had financed funds to Shri Rutugna Trivedi against the security of blank cheques without knowledge that the funds were used for smuggling gold. The appellant's statement recorded on 15.10.2019 did not confess to having knowledge about the use of funds for smuggling gold. The Tribunal noted that the appellant's financing activities were part of his regular business and there was no evidence to suggest that he had knowledge of the smuggling activities.

3. Adequacy of evidence against the appellant:
The Tribunal found that the evidence against the appellant was insufficient. The appellant's name appeared in printouts retrieved from a pen drive seized from Ms. Nita Parmar's residence, but this alone was not enough to implicate him. The Tribunal noted that the statements of Shri Rutugna Trivedi and Ms. Nita Parmar did not implicate the appellant in the smuggling activities. The Tribunal also highlighted that the department did not find any incriminating documents against the appellant during the investigation.

4. Interpretation and application of Section 112(b) of the Customs Act, 1962:
The Tribunal referred to various judgments to interpret Section 112(b). It emphasized that penalties under this section can only be imposed if the individual has knowledge or reason to believe that the goods are liable for confiscation. The Tribunal cited several cases, including *Punam Chand Bhotra v. Collector of Customs* and *Surinder Kumar Khanna v. Intelligence Officer, DRI*, to support its view that mere appearance of a name in documents is not sufficient to establish knowledge or involvement in smuggling activities. The Tribunal concluded that the appellant did not have the requisite knowledge, and thus, the penalty under Section 112(b) was not justified.

Conclusion:
The Tribunal set aside the penalty imposed on the appellant under Section 112(b) of the Customs Act, 1962, and allowed the appeal with consequential relief, as the evidence did not establish that the appellant had knowledge or reason to believe that the funds he provided were used for smuggling gold. The decision was pronounced in the open court on 19.09.2022.

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