2025 (5) TMI 1539 - HC - Customs

Seeking permission to cross-examine of Statements of importer and CHA - principles of natural justice - Smuggling - mis-declaration of imported goods - Petitioner admittedly was a friend of both the parties - consignment of Areca Nuts mis-declared as Ammonium Sulphate - absolute confiscation of the goods - requirement of pre-deposit - imposition of penalty under Section 114AA of the Customs Act 1962 - HELD THAT - On the conjoint reading of the statements and the reply filed by the Petitioner it cannot be said that the Petitioner did not have any role at all in the import of the consignment. The statements recorded reveal that the Petitioner did have an active role and as held in the impugned order could have been the master mind. The document which connects the Petitioner to the import is the reply which has been filed on record apart from the oral statements. In the present case the request to cross-examine certain witness statements was rejected on the grounds that the statements in question were only corroborative of undisputed documentary evidence already on record and thus did not warrant cross-examination. A perusal of the decision of Supreme Court in Telestar Travels 2013 (2) TMI 396 - SUPREME COURT reveals that while cross-examination would be required in certain cases it need not be given as a matter of right in all cases. The provision of the opportunity to cross-examine depends on the facts and circumstances of each case and is warranted only when the party seeking such an opportunity is able to demonstrate that prejudice would be caused in the absence thereof. The Petitioner is well aware of the CHA and the importer. The impugned order is an appealable order. The question as to what role was played by the Petitioner would have to be adjudicated in an appeal on the basis of facts as the same would not merely be a legal issue. The penalty appears to be slightly disproportionate considering the penalty imposed of Rs. 2 crores on the importer. In view thereof the Petitioner is permitted to file an appeal challenging the impugned order before the Customs Excise and Service Tax Appellate Tribunal along with a pre-deposit of 7.5 % of Rs. 2 Crores. If however the penalty of Rs. 5 crores is upheld in appeal then the pre-deposit amount in full would have to be deposited by the Petitioner. The petition is disposed of in the above terms.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the Petitioner's role in the alleged smuggling and mis-declaration of imported goods was sufficiently identified and established by the impugned order;

(b) Whether the imposition of penalty of Rs. 5 Crores on the Petitioner under Section 114AA of the Customs Act, 1962 is justified, particularly when no penalty was imposed on him under Section 112(a)(i) of the Customs Act;

(c) Whether the Petitioner was entitled to an opportunity to cross-examine the importer and Customs House Agent (CHA) whose statements formed the basis for the penalty;

(d) Whether the penalty imposed on the Petitioner is proportionate in comparison to the penalty imposed on the importer;

(e) Whether the Petitioner's contention regarding non-recording of statement of a relevant witness (Deepak Kumar) and absence of cross-examination affects the legality of the penalty imposed;

(f) The procedural question regarding the requirement of pre-deposit for challenging the penalty order under Section 129 of the Customs Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Establishment of Petitioner's Role in the Smuggling and Mis-declaration

Relevant legal framework and precedents: The Customs Act, 1962, particularly Section 114AA, penalizes knowingly or intentionally making or using false or incorrect declarations in import documents. The Court also relied on the procedural provisions under Section 108 for recording statements and the evidentiary standards applicable.

Court's interpretation and reasoning: The Court examined the statements recorded under Section 108 from the importer (M/s Shayam Corporation), the CHA (M/s Caspro Logistics), and the Petitioner himself. The statements reveal that the Petitioner was actively involved in the import process, including advising the importer on purchase, sale, banking transactions, and handling of import documents. The importer admitted that the Petitioner handled the entire import procedure, including obtaining registrations and managing banking transactions, and that the Petitioner was in possession of his ATM card, cheque books, and other documents.

Key evidence and findings: The CHA's statement confirmed that the Petitioner orchestrated the import and was the link between the importer and the CHA. The importer's statement admitted that the Petitioner managed the import and was aware of the mis-declaration. The Petitioner's own statement admitted advisory and operational roles and possession of critical documents of the importer.

Application of law to facts: The Court found that the Petitioner knowingly caused the filing of a false declaration regarding the imported goods, satisfying the requirements of Section 114AA of the Customs Act.

Treatment of competing arguments: The Petitioner argued that his role was not established and relied solely on statements of others. The Court rejected this, holding that the statements were corroborative and supported by documentary evidence, including the Petitioner's own admissions.

Conclusions: The Petitioner's role as the mastermind behind the mis-declaration was sufficiently established.

Issue (b): Justification for Penalty under Section 114AA in Absence of Penalty under Section 112(a)(i)

Relevant legal framework: Section 112(a)(i) penalizes importers for contraventions, while Section 114AA penalizes persons knowingly making false declarations. The relationship between these provisions was examined.

Court's interpretation: The Petitioner contended that penalty under Section 114AA could not be imposed without penalty under Section 112(a)(i). The Court did not accept this contention as a legal bar, noting that Section 114AA targets persons who knowingly make false declarations, which can include persons other than the importer.

Application of law to facts: Since the Petitioner was found to have knowingly caused the false declaration, penalty under Section 114AA was justified independent of penalty under Section 112(a)(i) on the importer.

Conclusions: Penalty under Section 114AA can be imposed on the Petitioner notwithstanding the absence of penalty under Section 112(a)(i) against him.

Issue (c): Right to Cross-Examination of Statements of Importer and CHA

Relevant legal framework and precedents: The Court referred to settled principles that cross-examination is not an unfettered right in adjudicatory proceedings. The Court cited recent decisions affirming that cross-examination is warranted only when prejudice is demonstrated and the statements are not merely corroborative of documentary evidence.

Court's interpretation and reasoning: The statements of the importer and CHA were corroborative of documentary evidence on record. The Petitioner did not demonstrate any prejudice caused by denial of cross-examination. Additionally, the Petitioner did not seek permission to cross-examine the witness Deepak Kumar.

Application of law to facts: The Court held that the denial of cross-examination did not violate principles of natural justice given the nature of the evidence and the facts of the case.

Conclusions: The Petitioner was not entitled to cross-examination as a matter of right, and the procedural fairness was observed.

Issue (d): Proportionality of Penalty Imposed on Petitioner

Court's reasoning: The Court observed that the penalty of Rs. 5 Crores on the Petitioner was disproportionate compared to Rs. 2 Crores imposed on the importer. The Court noted the need for proportionality in penalty imposition.

Conclusions and directions: The Court allowed the Petitioner to challenge the penalty before the Customs, Excise and Service Tax Appellate Tribunal with a pre-deposit of 7.5% of Rs. 2 Crores (i.e., Rs. 15 Lakhs). If the penalty of Rs. 5 Crores is upheld on appeal, the Petitioner would then be required to deposit the full amount.

Issue (e): Non-recording of Statement of Deepak Kumar and Its Impact

Court's reasoning: The Petitioner raised that Deepak Kumar's statement was not recorded and he was not cross-examined. The Court noted that the Petitioner never sought permission to cross-examine Deepak Kumar and that the statements of other witnesses and documentary evidence were sufficient to establish the Petitioner's role.

Conclusions: The non-recording of Deepak Kumar's statement did not vitiate the proceedings or penalty imposed.

Issue (f): Requirement of Pre-Deposit for Challenging the Penalty Order

Legal framework: Section 129 of the Customs Act requires pre-deposit for filing appeals against penalty orders.

Court's interpretation: The Court confirmed that the impugned order is appealable under Section 129 and directed the Petitioner to make a pre-deposit of 7.5% of Rs. 2 Crores to maintain the appeal. The Court clarified that if the higher penalty is upheld, the full amount would be payable.

3. SIGNIFICANT HOLDINGS

"I find that the penalty under Section 114AA is imposed on a person who knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular."

"From the above it is clear that Sh. Satish Sharma has pivotal role in the import of Areca Nut and he along with the proprietor orchestrated a plan for smuggling of Areca Nut into India by mis-declaring the same knowingly and intentionally by way of suppression of facts and willful mis-declaration."

"While cross-examination can be granted in certain proceedings, if it is deemed appropriate, the right to cross-examine cannot be an unfettered right."

"The refusal of the adjudicating authority to permit cross-examination of the witnesses producing the documents cannot even on the principles of the Evidence Act be found fault with."

"The production of the documents duly confronted to the appellants was in the nature of production in terms of Section 139 of the Evidence Act, where the witness producing the documents is not subjected to cross-examination."

Core principles established include:

- The liability under Section 114AA of the Customs Act attaches to persons who knowingly cause false declarations, regardless of whether they are the importer or not.

- Statements recorded under Section 108 of the Customs Act, when corroborated by documentary evidence, can form the basis for penalty without mandatory cross-examination.

- Cross-examination is not an absolute right but is subject to the facts and circumstances and the requirement of demonstrating prejudice.

- Penalties imposed must be proportionate, and appellate remedies must be accessible with reasonable pre-deposit conditions.

Final determinations:

- The Petitioner's role in the mis-declaration and smuggling was established and penalty under Section 114AA was rightly imposed.

- The Petitioner was not entitled to cross-examine the importer and CHA as a matter of right.

- The penalty imposed on the Petitioner was disproportionate and was accordingly moderated to require a pre-deposit of 7.5% of the penalty imposed on the importer for the purpose of appeal.

- The procedural requirements under the Customs Act regarding appeal and pre-deposit were upheld.