2025 (5) TMI 418 - AT - Customs

Levy of penalty u/s 114 (i) of the Customs Act 1962 - alleged involvement in the attempted export of prohibited goods namely peacock feathers of Indian origin - role of appellant in securing the consignment or shipment or preparation of export documents misrepresenting the nature of goods as carpets instead of peacock feathers - HELD THAT - The impugned order dated 13.05.2012 has been passed without taking into consideration the facts of the case the role of the appellant in the alleged attempt of Shri Gambhir to export the prohibited items i.e. Peacock Feathers from India. The Hon ble Punjab Haryana High Court in the case of Jindal Drugs (Infra) 2016 (6) TMI 956 - PUNJAB HARYANA HIGH COURT wherein the Hon ble High Court laid down a detailed procedure inter alia providing for cross-examination of the witness of the Revenue by the Adjudicating Authority and thereafter if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than the Adjudicating Authority is obligated to offer such witnesses for cross-examination by the other side/assessee. Such view has also been affirmed by the Hon ble Supreme Court in the case of Andaman Timber (Infra) 2015 (10) TMI 442 - SUPREME COURT . The learned Commissioner has wrongly relied upon the statement of the co-accused and the appellant recorded under Section 108 of the Customs Act 1962 and has wrongly come to the conclusion that appellant by act of omission and commission rendered the ceased goods liable for confiscation under relevant provisions of Customs Act and rendered himself liable to penalty under Section 114(i) of Customs Act 1962. In adjudication the adjudicating authority is required to first examine the witness in chief and also to form an opinion that having regard to the facts and circumstances of the case the statements of the witness are admissible in evidence. Thereafter the witness is offered to be cross-examined then only the statement of the witness can be relied upon for fastening the liability upon him for omission and commission. The impugned order passed by learned Commissioner imposing penalty of Rs. 3, 00, 000/- on the appellant Samir Ahmed Mansuri under Section 114(i) of the Customs Act 1962 is not sustainable and is liable to be set-aside - appeal allowed. Conclusion - The adjudicating authority erred in relying solely on the appellant s statement under Section 108 and on statements of co-accused that did not implicate the appellant directly. The appellant s presence at the premises with the principal accused was insufficient to establish active involvement or conspiracy. Penalty cannot be imposed on appellant. Appeal allowed.

Summary

The core legal questions considered in this appeal revolve around the imposition of penalty under Section 114(i) of the Customs Act, 1962 on the appellant for alleged involvement in the attempted export of prohibited goods, namely peacock feathers of Indian origin. The principal issues are: (1) Whether the appellant had any role in the booking, shipment, or preparation of export documents misrepresenting the goods; (2) Whether the appellant knowingly conspired or was involved in the attempt to export prohibited goods; (3) The admissibility and evidentiary value of statements recorded under Section 108 of the Customs Act, 1962; and (4) Whether the penalty under Section 114(i) was rightly imposed on the appellant given the facts and evidence.

Regarding the appellant's role and knowledge about the export consignment, the legal framework includes the Customs Act, 1962, specifically Sections 11, 108, 113, and 114(i), and the Foreign Trade (Development and Regulation) Act, 1992. Section 11 prohibits export of certain goods, including peacock feathers, and Section 114(i) empowers imposition of penalty for contravention of provisions. The Foreign Trade Act and related rules regulate export-import policy and prohibit export of specified items.

The Court examined the factual matrix where intelligence led to interception of nine packages declared as 'carpets' but actually containing 1,303,575 pieces of peacock feathers, a prohibited item. The appellant was alleged to have conspired with others in this attempt. However, the Court noted that the appellant neither booked the consignment nor prepared any shipping documents and was not aware initially that the goods were prohibited. The appellant's counsel argued that the appellant merely warned the principal accused about the danger of the transaction and had no active role in the export attempt.

On evidentiary issues, the Court scrutinized the reliance placed by the adjudicating authority on statements recorded under Section 108 of the Customs Act. Section 108 empowers customs officers to summon persons to give evidence or produce documents during inquiries but does not authorize recording of confessional statements. The Court highlighted that confessional statements must comply with the procedure under Section 164 of the Criminal Procedure Code, including administration of caution and recording by a magistrate. The Court emphasized that statements under Section 108 cannot be treated as confessions and cannot be solely relied upon to impose penalty.

The Court further referred to precedents, including rulings by the Punjab & Haryana High Court and the Supreme Court, which mandate that statements used as evidence must be subject to examination-in-chief and cross-examination to ensure fairness and reliability. The Court cited the principle that the adjudicating authority must first be satisfied of the admissibility of statements and must allow cross-examination before relying on such statements to fasten liability.

Applying these principles to the facts, the Court found that the adjudicating authority erred in relying solely on the appellant's statement under Section 108 and on statements of co-accused that did not implicate the appellant directly. The appellant's presence at the premises with the principal accused was insufficient to establish active involvement or conspiracy. The attempt to export was frustrated before actual export, negating any completed offence. The appellant's warning to the primary accused about the danger of the transaction indicated absence of mens rea or intent to violate the law.

The Court rejected the department's contention that the appellant confessed to assisting in the export attempt, noting the procedural safeguards required for such confessions were not observed. The Court also underscored that the appellant was not involved in booking, invoicing, or shipping documentation, nor did he procure the goods. The mere acquaintance or presence with accused persons does not constitute culpability under the Customs Act.

Regarding the penalty under Section 114(i), the Court observed that the statutory conditions for imposing penalty were not met because the appellant's acts did not render the goods liable for confiscation nor did he commit any prohibited act knowingly. The Court found the penalty imposed was unjustified and illegal.

In conclusion, the Court held that the order imposing penalty of Rs. 3,00,000/- on the appellant under Section 114(i) of the Customs Act was unsustainable. The Court set aside the penalty order and allowed the appeal. The judgment establishes the principle that penalty under Customs law must be based on clear, admissible evidence of active involvement or conspiracy, and that procedural safeguards in recording statements are mandatory. Mere presence or acquaintance with accused persons without participation in the prohibited act does not attract penalty. The judgment also clarifies the limited scope of Section 108 statements and the necessity of adherence to procedural due process in customs adjudications.