2025 (6) TMI 778 - AT - Customs

Levy of penalty u/s 112A of the Customs Act 1964 on appellant CHA - appellant was put to show-cause on the basis of statement of importer and another CHA director without summoning the appellant for statement or seizing any documents from the appellant during investigation - bringing someone to trial stage without giving him any opportunity to defend himself at the time of investigation - violation of principle sof natural justice - HELD THAT - Though Revenue reiterated the findings of the Commissioner (Appeals) it is not agreeable to such findings as noted above for the reason that apart from principle of natural justice being violated in bringing someone to trial stage without giving him any opportunity to defend himself at the time of investigation section 114 Illustration (b) of the Indian Evidence Act clearly states that statement of accomplice /co-accused is unworthy of credit unless he is corroborated with material particulars. The impugned order passed by the Commissioner (Appeals) confirming penalty of Rupees Ten Lakhs on the Appellant CHA M/s. S A Dalal And Co is hereby set aside - appeal allowed.

Summary

The Appellate Tribunal (CESTAT Mumbai) reviewed the legality of a penalty imposed under section 112A of the Customs Act, 1962 on the appellant, a Customs House Agent (CHA). The penalty arose from a show-cause notice based solely on statements from the importer and another CHA director, without summoning the appellant for statement or seizing any documents from the appellant during investigation.The Commissioner (Appeals) had upheld the penalty, reasoning that recording the appellant's statement was not a prerequisite for imposing penalty under section 112A. However, the Tribunal disagreed, emphasizing violation of the principle of natural justice by not allowing the appellant to defend itself during investigation. The Tribunal relied on section 114 Illustration (b) of the Indian Evidence Act, which holds that "statement of accomplice /co-accused is unworthy of credit unless he is corroborated with material particulars."The appellant's counsel cited precedents-Enterprise International Ltd v. Commissioner of Customs (2010 (259) E.L.T. 629) and Warren Trading Pvt. Ltd v. Commissioner of Customs (2008 (222) E.L.T. 313)-establishing that penalties are unsustainable where no investigation or incriminating evidence involves the appellant directly.Accordingly, the Tribunal allowed the appeal, setting aside the penalty order of Rs. 10 lakhs imposed on the appellant CHA M/s. S A Dalal And Co, granting consequential relief. The Tribunal underscored the necessity of fair investigation and corroborated evidence before penalizing under section 112A.