2025 (6) TMI 543 - AT - Customs

Levy of penalty u/s 112(a) of the Customs Act 1962 - Allegations of involvement or abetment in the offence - smuggling of ozone depleting substance i e Refrigerant Gas (HCFC-22) - HELD THAT - The forensic examination of the phone of Rupinder Singh Chaddha was in his presence on the same date on 13.06.2013 when it was seized and only the printouts of the data was taken and no data was taken in the soft form. The forensic examination was conducted again on 30.07.2013 when the impugned audio file stored in the same was discovered and since the backup was taken on 30.07.2013 it cannot be said that the recording was made on 30.07.2013 as it is merely the date of taking the back up. Hence there are no merit in the submission of the learned Counsel in this regard. In so far as voice sample of the appellant which was taken on 05.08.2013 the same was not accepted by CFSL Chandigarh for the simple reason that the specimen voice was not in the same text of the question voice sample and thereafter when Rupinder Singh Chaddha was summoned for recording his voice sample in the text of questioned voice sample he refrained from appearing. Lastly we may take note of the call detail records recovered which clearly showed that the appellant was regularly interacting with Shri Manish Jalhotra. The Adjudicating Authority has rightly concluded that the statements and the text of the audio recording clearly establishes the involvement of the appellant and hence is liable for penal action under Section 112 of the Act. In so far as the extent of proof is concerned it is a settled principle of law that in judicial proceedings that involve evasion of tax laws or evasion of customs duty lower threshold of proof i.e. preponderance of probability is to be followed and it is not required to insist upon proving the case beyond reasonable doubt - the Revenue has established clear nexus between the four people who deliberately assembled at McDonald on 12.04.2013 with the sole purpose of seeking clearance of the containers. The chronology of events as referred above from 11th April to 20 April 2013 points to the time proximity of the meeting which is an important factor reinforcing the objective of clearance of the smuggled goods. The entire controversy is centred around the meeting held at McDonald restaurant on 12.04.2013 where four people who were known to each other through the common factor of Manish Jalhotra. One thing is clear from the records and the investigations made that the meeting was not incidental but was preplanned where all the four parties had gathered for a specific purpose. In the ordinary course had the goods been imported as per the declaration made there was no need for assimilating several people to draw up the strategy for clearance of the goods. This denotes that all the four persons who met there had knowledge that the consignment which has to be cleared contained restricted/prohibited goods which is not permissible to be imported. Moreover the appellants namely Manish Jalhotra Rupinder Singh Chaddha and Sandeep Kumar Moria admitted their presence however variant descriptions have been given to somehow circumvent the true nature of the transaction. The identity of Vikas was misconceived and misrepresented as determined by the Department it was none else but Shri Manish Jalhotra the mastermind and the actual importer of R 22 Rrefrigeratrant Gas. In the circumstances the impugned order has rightly imposed proportionate penalty considering the respective role and involvement of the appellants who were party to the transaction of clearance of the containers under the provisions of Section 112 of the Act. Conclusion - The confiscation of the restricted goods and the declared goods used for concealment is lawful and justified. The penalties imposed under Section 112(a) on the appellants are upheld as warranted by their active participation and conspiracy to smuggle restricted goods. There are no good reason to interfere with the impugned order imposing penalties on the appellants under the provisions of Section 112 of the Act. The appeals are accordingly dismissed.

Summary

The core legal questions considered by the Tribunal in these appeals are:

1. Whether the confiscation of the seized goods, namely the restricted refrigerant gas cylinders (R-22) and the declared photocopier paper used for concealment, was justified under the Customs Act, 1962 and related regulations.

2. Whether the penalty imposed under Section 112(a) of the Customs Act, 1962 on the appellants, namely Shri Dinesh Kumar Badopalia, Shri Prahlad Singh (CHA), Shri Rupinder Singh Chaddha, and Shri Sandeep Kumar Moria, was justified based on their involvement in the smuggling and clearance of the restricted goods.

3. The extent of involvement and nexus of each appellant in the smuggling operation and clearance of the undeclared restricted goods.

4. The evidentiary sufficiency and reliability of the statements recorded under Section 108, call detail records, CCTV footage, and audio recordings relied upon by the Department.

5. Whether the appellants were denied a fair opportunity of cross-examination, and the applicability of precedent regarding the need for cross-examination of witnesses in such cases.

Issue-wise Detailed Analysis

1. Justification for Confiscation of Goods

The relevant legal framework includes Sections 111(d), (f), (l), and (m) of the Customs Act, 1962, the Ozone Depleting Substances (Regulation) Rules, 2000, Gas Cylinder Rules, 2004, and the Foreign Trade (Development & Regulation) Act, 1992. Refrigerant R-22 gas cylinders are a restricted item under the EXIM policy requiring a valid license from DGFT and compliance with the Montreal Protocol. The import of cylinders filled with compressed gas is regulated and requires a license under the Gas Cylinder Rules.

The Court noted that the importer declared 3000 cartons of photocopier paper but concealed 1504 cylinders of R-22 gas behind 472 cartons of paper. No valid license or documents were produced for legal importation of the refrigerant gas or cylinders. The goods were seized under Section 110 of the Customs Act.

The Tribunal found no error in the Adjudicating Authority's conclusion that the goods were liable to confiscation under the cited provisions, including the confiscation of declared goods used for concealment under Sections 111(m) and 118.

2. Justification for Penalty under Section 112(a) on the Appellants

The penalty under Section 112(a) is imposable once confiscation is established, on the importer and other persons involved in the offence. The Department alleged a conspiracy among Shri Manish Jalhotra, Shri Rupinder Singh Chaddha, Shri Dinesh Kumar Badopalia, and Shri Sandeep Kumar Moria to smuggle R-22 gas cylinders concealed behind photocopier paper imported under a dummy IEC holder, M/s AMP Enterprises.

The Tribunal analyzed the nexus and role of each appellant based on statements recorded under Section 108, call detail records (CDRs), CCTV footage, and audio recordings from mobile phones. The statements revealed a meeting on 12.04.2013 at McDonald's, Kamla Nagar, involving the appellants and others to discuss clearance of the consignment. The presence of the appellants at this meeting was corroborated by CCTV footage and their own admissions.

Shri Dinesh Kumar Badopalia filed the bill of entry and was involved in clearance despite lacking a valid G-Card. Shri Prahlad Singh, CHA, allowed Dinesh Kumar to use his office and computer and failed to verify the G-Card or take KYC documents from the importer. Shri Rupinder Singh Chaddha, a licensed CHA, was found to have actively facilitated clearance and conspired with Manish Jalhotra, as evidenced by call records and incriminating audio conversations. Shri Sandeep Kumar Moria's involvement was established by his presence at the meeting and circumstantial evidence pointing to his participation in the smuggling network.

The Tribunal rejected the appellants' contentions challenging the audio recordings and forensic evidence, noting that the backup date of recordings does not imply creation date and that refusal to provide voice samples for comparison undermined their defense. The CDRs demonstrated frequent communication among the appellants, reinforcing their nexus.

3. Treatment of Competing Arguments and Evidentiary Issues

The appellants contended that they were unaware of the concealment, that the audio recordings were tampered with, and that they were denied cross-examination of witnesses. The Tribunal distinguished the present facts from precedent relied upon by appellants where cross-examination was critical due to lack of corroborative evidence. Here, the Department's case was supported by multiple independent pieces of evidence: statements under Section 108, CCTV footage, CDRs, and audio recordings.

The Tribunal emphasized the settled principle that in customs evasion cases, the standard of proof is preponderance of probabilities, not proof beyond reasonable doubt. It relied on judicial precedents affirming the use of circumstantial evidence and the inference of knowledge and intent from surrounding circumstances, conduct, and communication patterns among accused persons.

The Tribunal also noted that the appellants' contradictory statements regarding the meeting at McDonald's and the deliberate concealment of the identity of the mastermind importer (Manish Jalhotra masquerading as "Vikas") demonstrated an attempt to evade responsibility.

4. Conclusions on Penalty and Liability

The Tribunal concluded that the appellants were knowingly involved in the conspiracy to smuggle restricted goods and facilitated the clearance of the consignment through coordinated efforts. The penalties imposed under Section 112(a) of the Customs Act were found to be proportionate and justified based on their respective roles and involvement.

The Tribunal dismissed the appeals, upholding the penalty orders and confirming the confiscation of the goods.

Significant Holdings and Core Principles

"The facts of the present case being distinguishable, the decision of the Apex Court [on denial of cross-examination] is not really applicable."

"In judicial proceedings that involve evasion of tax laws or evasion of customs duty, lower threshold of proof, i.e., preponderance of probability is to be followed and it is not required to insist upon proving the case beyond reasonable doubt."

"The principle that it is a matter of inference to be drawn from the surrounding circumstances and the conduct of the party concerned, is squarely applicable in the circumstances of the present case."

"If the circumstances surrounding such telephonic exchange are suggestive of possible connivance and the frequency and timing of the calls further enhances such a suspicion, then it does give rise to the possibility of existence of an unholy nexus."

"The appellants were implicated for their complicity not only on the basis of the statements recorded under Section 108 but also on other substantive material, like CCTV footage, Phone Call records and audio clippings."

The Tribunal's final determination was that the confiscation of the restricted goods and the declared goods used for concealment was lawful and justified. The penalties imposed under Section 112(a) on the appellants were upheld as warranted by their active participation and conspiracy to smuggle restricted goods. The evidence, including statements, call records, CCTV footage, and audio recordings, collectively established the appellants' involvement beyond reasonable doubt on the preponderance of probabilities standard applicable in customs evasion cases.