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2025 (3) TMI 1358 - AT - CustomsLevy of penalties u/s 112(a) of the Customs Act 1962 on appellant - undervaluation of imported goods - denial of cross-examination and the non-supply of crucial documents - violation of principles of natural justice - satatement of co-accused - HELD THAT - There is not an iota of evidence to establish that the appellant was in effect the kingpin in the racket of undervalued imports of said goods. The fact that the appellant was a financer who enabled the payment of differential duty through the importers /the custom broker cannot ipso facto be held to conclude the appellant as the importer and who had knowledge about the undervalued imports or intentionally involved in such malpractice of goods and subjected to penal proceedings under Section 112(a). It is an undisputed fact that the department neither provided cross-examination of the co-accused as sought for by the appellant nor provided the basic import documents to the appellant for furtherance of his defence and while rightly going about redetermination of the transaction values in accordance with law failed to establish nexus of the appellant with the improper imports effected. The admitted role of the appellant being that of a financer of subject imports having voluntarily made good the differential duty of Rs.30 lakh cannot lead to conclude that the appellant had knowledge and intentionally indulged in such imports when there is nothing on record to establish the connection of the appellant to of having done an act rendering the offending goods liable for confiscation - There is nothing on record to bring out any specific knowledge on the part of the appellant herein or having played a role in under-valued imports. Moreover as stated earlier the appellant has been denied a total recourse to Natural Justice in the present matter in as much as even the Bill of Entry and the import invoice not supplied to him and there s no reason for such a course of action. Conclusion - The statement tendered by the co-accused lacks evidentiary value unless it is examined and an opportunity of cross examination provided to the accused. Nothing therefore comes out on record to substantiate the penal liabilities imposed on the appellant in the instant matter. As held in a series of cases non-supply of Relied upon/Non-Relied upon documents as also not affording cross-examination are a serious flaw and violation of natural justice. The impugned order is set aside - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were:
ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The relevant legal provision is Section 112(a) of the Customs Act, 1962, which pertains to penalties for acts or omissions rendering goods liable to confiscation. The principles of natural justice, particularly the right to cross-examination and access to relevant documents, are also central to this case. Court's interpretation and reasoning: The Tribunal emphasized that the appellant's role as a financer does not automatically imply involvement in the undervaluation scheme. The Tribunal highlighted the lack of evidence directly linking the appellant to the intentional undervaluation of goods. The judgment underscored the importance of adhering to natural justice principles, noting that the denial of cross-examination and non-supply of essential documents significantly undermined the adjudicative process. Key evidence and findings: The appellant admitted to being a financer but contested any knowledge or involvement in the undervaluation. The Tribunal found that the adjudicating authority failed to provide necessary documents such as the Bill of Entry and Import Invoices, and did not allow cross-examination of key witnesses, particularly the co-accused Jitin Arora. Application of law to facts: The Tribunal applied the principles of natural justice and the legal requirements under Section 112(a) to determine that the appellant's role as a financer did not constitute an actionable offense under the Customs Act. The lack of evidence and procedural flaws led to the conclusion that the appellant's penalty was unjustified. Treatment of competing arguments: The Tribunal considered the Department's argument that the appellant's payment of differential duties indicated culpability. However, it rejected this argument due to the absence of evidence showing the appellant's involvement in the undervaluation scheme and the procedural deficiencies in the adjudication process. Conclusions: The Tribunal concluded that the appellant was not liable under Section 112(a) due to the lack of evidence and the violation of natural justice principles. It set aside the penalty imposed by the adjudicating authority. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Tribunal stated, "The Hon'ble Apex Court in the case of M/s Andaman Timber Industries Vs. Commissioner of Central Excise, Kolkata-II(2015) 324 ELT 641 SC had held the denial of cross-examination was a serious flaw by the Adjudicating Authority and merely fastening of legal liabilities on the strength of two witnesses (as also in this case on the basis of a solitary statement of the co-accused) was not held to be sustainable." Core principles established:
Final determinations on each issue: The Tribunal determined that the appellant was not liable for penalties under Section 112(a) due to the lack of evidence and procedural violations. The appeal was allowed, and the penalty imposed was set aside.
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