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Issues: (i) Whether penalty under section 114(iii) of the Customs Act, 1962 was sustainable on the basis of the material relied upon, including the statements of co-accused, and (ii) whether the Customs Act, 1962 could be invoked against the appellant in the absence of any alleged act of omission or commission within India.
Issue (i): Whether penalty under section 114(iii) of the Customs Act, 1962 was sustainable on the basis of the material relied upon, including the statements of co-accused.
Analysis: The only material connecting the appellant with the alleged fraudulent exports was the confessional statements of co-accused persons. The documentary material did not establish any direct or indirect link between the appellant and the exporters, the foreign buyers, or the remittances received. The Court held that a co-accused confession cannot constitute substantive proof by itself and must receive corroboration from independent evidence. On the facts, no such corroboration existed.
Conclusion: The penalty was not sustainable on merits and the finding was in favour of the assessee.
Issue (ii): Whether the Customs Act, 1962 could be invoked against the appellant in the absence of any alleged act of omission or commission within India.
Analysis: The appellant was residing in the UAE during the relevant period, and no act attributable to him within India was shown. The Court applied the principle that the Customs Act extends to the whole of India and cannot be invoked for acts wholly outside India in the absence of territorial nexus. The earlier Tribunal view on extra-territorial conduct was treated as applicable to the facts of the case.
Conclusion: The invocation of the Customs Act against the appellant was beyond territorial jurisdiction and the finding was in favour of the assessee.
Final Conclusion: The penalty was unsustainable both for want of legally admissible and corroborated evidence and for want of territorial jurisdiction, so the appeal succeeded with consequential relief.
Ratio Decidendi: Penalty under the Customs Act cannot be sustained on uncorroborated confessions of co-accused alone, and the Act cannot be applied to penalize conduct not shown to have any territorial nexus with India.
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