Section 112 of the Customs Act, 1962 (‘Act’ for short) provides that any person, who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation, or abets the doing or omission of such an act, or who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation, shall be liable, -

1. in the case of goods in respect of which any prohibition is in force under the Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or Rs.5,000/-, whichever is the greater;
2. in the case of dutiable goods, other than prohibited goods, subject to the provisions of section 114A, to a penalty not exceeding 10% of the duty sought to be evaded or Rs.5,000/-, whichever is higher.  Where such duty as determined section 28(8)  and the interest payable thereon under section 28AA is paid within 30 days from the date of communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be 25% of the penalty so determined;
3. in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the declaration made under section 77 is higher than the value thereof, to a penalty not exceeding the difference between the declared value and the value thereof or Rs.5,000/-, whichever is the greater;
4.  in the case of goods falling both under clauses (i) and (iii), to a penalty not exceeding the value of the goods or the difference between the declared value and the value thereof or Rs.5,000/-, whichever is the highest;
5. in the case of goods falling both under clauses (ii) and (iii), to a penalty not exceeding the duty sought to be evaded on such goods or the difference between the declared value and the value thereof or Rs.5,000/-, whichever is the highest.

In M/S. BIRENDRA KUMAR GUPTA VERSUS COMMISSIONER OF CUSTOMS (PREV.) , KOLKATA - 2025 (1) TMI 959 - CESTAT KOLKATA  the Senior Intelligence Officer, DRI issued a show cause notice to Birendra Kumar Gupta in connection to seizure case.  He was directed to appear before the Authority.  The statement of Birendra Kumar was obtained.  During the course of investigation, Birendra Kumar was informed about the seizure case wherein allegedly one kg gold was recovered from Shri Krishna Kumar Gupta on 24.5.18 by DRI officers.  The said Gupta named Birendra Kumar in connection with the seized gold.  Birendra Kumar stated that he knew Krishna Kumar Gupta since both of them are involved in Chhat Puja Committee of Jaigaon but he has neither any knowledge or involvement with respect to the alleged seizure case.

DRI, after completion of investigation issued a show cause notice to Birendra Kumar Gupta on 15.11.2018 alleging that the recovered seized gold is smuggled in nature and thus, liable for confiscation under the Act and Birendra  Kumar was liable for penalty under Section 112(a) and/or 112(b) of the Act.  It was further alleged in the show cause notice that the Birendra Kumar appeared to be the most important person involved in this smuggling of the impugned gold bar of foreign origin and had actively colluded with other members of the syndicate and tried to mislead the investigating agency.  The Adjudicating Authority relied on the statement of Krisna Kumar Gupta and a telephone call of 14 seconds between them, just half an hour before interception of Krishna Kumar Gupta.   The Adjudicating Authority also relied on the past two cases in which Birendra Kumar was imposed penalty under the Act.  In adjudication the Adjudicating Authority imposed a penalty of Rs.7,00,000/- on Birendra Kumar under Section 112(a) & 112(b) of the Act.  Birendra Kumar filed an appeal before the Commissioner (Appeals) who confirmed the penalty.  Against the said order Birendra Kumar filed the present appeal before CESTAT.

The appellant submitted the following before CESTAT-

• The Adjudicating Authority had categorically stated that the entire case against him is based upon the statement dated 24.05.18 of Krishna Kumar Gupta.
• In the cross-examination of Krishna Kumar Gupta had vehemently denied his alleged statement dated 24.5.18 as improper and untrue.
• Gupta had denied any recovery of gold from his possession and he had also denied the alleged confessional statements recorded from him earlier.
• If the outcome of the cross-examination is taken into account, there cannot be any imposition of penalty upon the appellant in the present case.

 Accordingly, he prayed for setting aside the impugned order.

The DRI contended that the appellant was a habitual offender and implicated in smuggling cases earlier and therefore the penalty has been rightly imposed on him.

The CESTAT considered the arguments of the appellant and the Revenue.  The CESTAT observed that-

•  the entire case has been built against the appellant on the basis of the statement dated 24.05.18 of Krishna Kumar Gupta;
• one kg of gold was recovered from Shri Krishna Kumar Gupta on 24.5.18 by DRI officers and Shri Krishna Kumar Gupta has stated that the appellant as the important person connected with the smuggling of gold in that case;
• apart from the statement of Shri Krishna Kumar Gupta there was no other evidence to implicate the appellant;
• the appellant had categorically stated that he was known to said Shri Krishna Kumar Gupta since both of them were working together at Chhat Puja Committee at Phuentshelling. Shri Krishna Kumar Gupta had also corroborated such fact during the course of cross-examination;
• no adverse conclusion can be arrived at against the appellant on the basis of the sole confessional statement of the co-accused which had been retracted and also denied to be voluntary during cross-examination;
• a telephone call between the appellant and Krishna Kumar Gupta  cannot be the basis for the assumption that the appellant was involved in the alleged act of smuggling of gold;
• on the basis of such telephonic call, it cannot be assumed that the appellant was involved in any act of smuggling;
• imposition of penalty on earlier occasions, which is pending before the Tribunal cannot be a reason to conclude that the appellant is a habitual offender and is involved in the smuggling activity in this case;
• there is no circumstance in the present case where the provision of Section 112 ibid can be applied against the appellant;
•  clause (a) & clause (b) of section 112 provides for imposition of penalty under completely different circumstances and both the provisions cannot be applied together;
•  the appellant had not dealt with the goods under seizure with a prior knowledge or reason to believe that the goods are liable for confiscation.

The CESTAT held that the penalty is not imposable on the appellant and set aside the same.  The CESTAT allowed the appeal.