Derivative liability under Customs law requires prosecution of the firm first; Section 108 statements remained admissible.

Liability under Section 140 of the Customs Act, 1962 is derivative: a person in charge of a firm can be proceeded against only when the firm itself, as the offending entity, is also prosecuted. On the facts, conviction could not stand because the firm was not charged, so the statutory basis for fastening liability on the partner in charge failed. Statements recorded under Section 108 were held admissible because a Customs Officer is not a police officer for Section 25 of the Evidence Act, and the record showed that the statements were explained, signed, and supported by officer testimony; no prejudice from the form of endorsement was established.

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Issues: (i) whether, in a prosecution founded on Section 140 of the Customs Act, 1962, the person in charge of a firm could be proceeded against without prosecuting the firm itself; (ii) whether statements recorded under Section 108 of the Customs Act, 1962 were inadmissible or caused prejudice because the endorsement of explanation and acceptance was not recorded in a particular form.

Issue (i): whether, in a prosecution founded on Section 140 of the Customs Act, 1962, the person in charge of a firm could be proceeded against without prosecuting the firm itself.

Analysis: Section 140 creates liability of the person in charge only when the offence is committed by the company or firm, the term "company" including a firm or association of individuals. The liability of the person in charge is therefore derivative and depends upon prosecution of the entity whose business is being conducted. On the facts, the respondent was proceeded against in his capacity as partner in charge, and not as an independent individual offender.

Conclusion: The prosecution of the firm was a condition precedent, and the respondent could not be convicted in the absence of a charge against the firm. This issue was decided in favour of the respondent.

Issue (ii): whether statements recorded under Section 108 of the Customs Act, 1962 were inadmissible or caused prejudice because the endorsement of explanation and acceptance was not recorded in a particular form.

Analysis: Statements recorded by Customs Officers are not hit by Section 25 of the Evidence Act because a Customs Officer is not a police officer for that purpose. The record showed that the statements were explained to the accused, signed by him, and supported by evidence of the officers who recorded them. No effective cross-examination established any prejudice from the form of the endorsement.

Conclusion: The statements were admissible and no prejudice was shown. This issue was decided against the respondent.

Final Conclusion: The conviction could not be sustained because the statutory basis for fastening liability on the partner in charge was not established in the absence of prosecution of the firm, and the challenge to the statements recorded under customs law also failed.

Ratio Decidendi: Where liability is sought to be fastened on a person in charge under Section 140 of the Customs Act, 1962, the firm or company whose business is involved must also be proceeded against, because the person in charge is liable only derivatively.

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