2022 (4) TMI 316 - HC - Customs

Court upholds penalties & confiscation under Customs Act based on evidence of export attempt. Section 108 statements deemed valid.

The High Court upheld penalties and confiscation under the Customs Act, 1962, finding an 'attempt' to export prohibited goods based on evidence of ... Interpretation of statute - Validity and scope of confessional statement - Section 108 as well as Section 114(i) of the Customs Act, 1962 - smuggling - psychotropic substance - Alprazolam - fictitious and non-existing companies - scope of appeal u/s 130 of CA, 1962 - question of law or question of facts - HELD THAT:- Although the expression ‘substantial question of law’ has not been defined in any Act or in any of the statutes, yet the true meaning and connotation of this expression is now well-settled by various judicial pronouncements - It was observed by the Supreme Court in SIR CHUNILAL VERSUS MEHTA AND SONS, LTD. VERSUS THE CENTURY SPINNING AND MANUFACTURING CO., LTD. [1962 (3) TMI 77 - SUPREME COURT] that “a question of law would be a substantial question of law if it directly or indirectly affects the rights of parties and/or there is some doubt or difference of opinion on the issue”. But “if the question is settled by the Apex Court or the general principles to be applied in determining the question are well-settled, mere application of it to a particular set of facts would not constitute a substantial question of law.” - Where the determination of an issue depends upon the appreciation of evidence or materials resulting in ascertainment of basic facts without application of any principle of law, the issue raises a mere question of fact. In the case of AN GUHA & CO. VERSUS COLLECTOR OF CENTRAL EXCISE, BHUBANESWAR [1994 (6) TMI 113 - CEGAT, CALCUTTA], the CESTAT, West Zonal Branch, Mumbai held that it is not necessary for the department to establish a fact with mathematical precision. Once the presumption as to the existence of a fact is raised against the assessee that the input has not been transported in the vehicle mentioned in the invoices, it is reasonable to say that the inputs were not received in the factory. In VINOD SOLANKI VERSUS UNION OF INDIA & ANR. [2008 (12) TMI 31 - SUPREME COURT], the Supreme Court considered the effect of retraction of the statement in proceedings of penalty under Foreign Exchange Regulation Act, 1973. The Supreme Court held that indisputably a confession made by an accused would come within the purview of Section 24 of the Indian Evidence Act, 1872. The proceedings under the Act are quasi criminal in nature. Section 50 of the Act is penal provision. It prescribes that in the event of contravention of any of the provisions of the Act or the Rules, directions or order penalty in exceeding 5 times of the amount of value involved in any such contravention may be imposed - Sub-section (2) of Section 71 places burden of proof upon an accused or proceedee only when the foreign exchange acquired has been used for the purpose for which permission to acquire it was granted and not for mere possession thereof. The Parliament advisedly did not make any provision placing the burden of proof on the accused/ proceedee. There is no prohibition under the Evidence Act to rely upon retracted confession to prove the prosecution case so as to make the same the basis for conviction of the accused. The practice and prudence require that the Court could examine the evidence adduced by the prosecution to find out whether there were any other facts and circumstances to corroborate the retracted confession. It is not necessary that there should be corroboration from independent evidence adduced by the prosecution to corroborate each detail contained on the confessional statement. The Court is required to examine whether the confessional statement was voluntary; in other words whether it was not obtained by threat, duress or promise. If the Court is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true - However, prudence and practice require that the Court would seek assurance getting corroboration from other evidence adduced by the prosecution. What would constitute an 'attempt'? - HELD THAT:- Section 113(d) can be divided into two parts. The first part speaks about the goods attempted to be exported and the second part speaks about the goods being brought within the limits of any customs area for the purpose of being exported. In the case on hand, the second part has not come into play because indisputably, the goods, i.e. 25 kgs. of the Ketamine Hydrochloride Powder, were not brought within the limits of the customs area for the purpose of being exported, contrary to the prohibitions. If the goods have come with such an intention within the limits of the customs area, then the second part would definitely be attracted - the first part of Section 113(d) covers a larger area. Even, without being brought within the limits of the customs area, there can be an attempt to export the goods in contravention of the prohibitions. To attract the first part of Section 113(d), the process of movement of the goods for the purpose of taking them out of India must be shown to have began. Incriminating materials on record - HELD THAT:- The attempt to export ‘prohibited goods’ should be appreciated from the point of inquiries from the foreign buyers for the prohibited substance consequent upon which the respondents made arrangements for procuring the same from Aurangabad. After the arrangements were made, the goods were in fact transported from Aurangabad albeit as the ‘Benzahydrol Powder’ for onward exports via Vapi, when the same were intercepted and seized pursuant to the intelligence inputs - The overt act of physical movement of the prohibited substance was proximate to the intention of respondents to take them out of India which thus constitutes an ‘attempt’ to export as per Section 113(d) of the Customs Act, 1962. The intention of the statute is to proceed against the offender attempting to export goods contrary to the provisions of the Act. Similarly, a personal penalty is on a person who, in relation to the goods, does or omits to do any act, which act or omission of such an act, shall render the goods liable for confiscation under Section 113 or abets the doing or omission of such an act has been provided in Section 114 of the Customs Act. Section 138C of Customs Act, 1962 - HELD THAT:- The truth or the relevance of the documents has been admitted in no uncertain terms by the respondents in their statements recorded under Section 108 of the Act 1962. In such circumstances, it is too much for the respondents to say that the electronic evidence could not have been taken into consideration. In fact, the electronic evidence on record fortifies what has been stated by the respondents in their statements recorded under Section 108 of the Act. The Appellate Tribunal in its impugned order had held that the misdeclaration of the customs value in respect of the past clearances made under 32 Bills of Entry was established in view of the recovery of certain invoices/commercial invoices pertaining to the goods imported from laptop and mobile phones during the course of the search indicating procurement of goods from the foreign supplier at significantly higher prices than the amount declared to the department at the time of filing the Bills of Entry. These facts and the payment of money through extra banking channels were admitted during the investigations - the Adjudicating Authority rightly rejected the transaction value of the goods in terms of rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Thus, it can be summarised as follows:- The statement made before the customs officials is not a statement recorded under Section 161 of the Code of Criminal Procedure, 1973 and, therefore, it can be said to be a material piece of evidence collected by the customs officials under Section 108 of the Customs Act. If a statement recorded under Section 108 of the Customs Act incriminates the accused, inculpating him in the contravention of the provisions of the Customs Act, it can be considered as a substantive evidence to connect the accused/individual with the contravention of the provisions of the Customs Act. In the case on hand, the statements recorded of various individuals including the respondents under Section 108 of the Customs Act were rightly relied upon by the Commissioner (Customs) as substantive evidence connecting the respondents herein with the contravention of the provisions of Section 113(d) of the Act. The Tribunal, in the case on hand, has not examined the Order in Original passed by the Commissioner (Customs) in the manner required of it and also failed to look into the cogent, convincing and thumping evidence on record to find out if the crucial findings of the Commissioner (Customs) were justified - It is true that the order of the Tribunal cannot be said to give rise to a substantial question of law merely because the High Court is of the view that it would have come to a different conclusion on the same evidence; however, where the appreciation of the evidence is wholly unsatisfactory and the crucial aspects of the evidence have been missed, it is case of finding or conclusion which no person properly instructed on the facts and the legal position would have reached. That is what has happened in the present case. The Tribunal committed an error in disturbing the order passed by the adjudicating Commissioner - substantial question of law as framed by this Court is answered in favour of the Revenue and against the respondents-assessees - Appeal allowed. Issues Involved:1. Interpretation and application of Section 108 and Section 114(i) of the Customs Act, 1962.2. Evidence of attempt to export prohibited goods.3. Admissibility of electronic evidence under Section 138C of the Customs Act, 1962.4. Validity and reliability of statements recorded under Section 108 of the Customs Act, 1962.5. Distinction between preparation and attempt in the context of exportation.Detailed Analysis:1. Interpretation and Application of Section 108 and Section 114(i) of the Customs Act, 1962:The Tribunal was challenged on its interpretation and application of Section 108 and Section 114(i) of the Customs Act, 1962. The High Court clarified that statements recorded under Section 108 are substantive evidence and can be relied upon to connect individuals with contraventions of the Customs Act. The Court emphasized that the burden of proof in quasi-criminal proceedings does not require mathematical precision but a degree of probability that a prudent person would believe in the existence of the fact in issue.2. Evidence of Attempt to Export Prohibited Goods:The High Court concluded that the respondents had made arrangements for procuring Ketamine Hydrochloride from Aurangabad for onward export, and the physical movement of the prohibited substance was proximate to the intention of taking them out of India. This constituted an 'attempt' to export under Section 113(d) of the Customs Act. The Court noted that the goods were transported under false declarations and were intercepted based on intelligence inputs, indicating a clear attempt to export prohibited goods.3. Admissibility of Electronic Evidence under Section 138C of the Customs Act, 1962:The respondents argued that the electronic evidence (emails) should not be considered without a certificate under Section 138C. The High Court dismissed this argument, noting that the truth and relevance of the documents were admitted in the respondents' statements under Section 108. The Court cited precedents where electronic evidence was admitted based on the substantive corroboration from the statements of the accused.4. Validity and Reliability of Statements Recorded under Section 108 of the Customs Act, 1962:The High Court upheld the validity of the statements recorded under Section 108, noting that they were made voluntarily and were corroborated by other evidence. The Court emphasized that a delayed retraction of such statements does not diminish their evidentiary value. The statements detailed the modus operandi of the illegal export, including the roles of various individuals and the logistics involved.5. Distinction Between Preparation and Attempt in the Context of Exportation:The Court elaborated on the legal distinction between preparation and attempt, noting that an attempt begins where preparation ends. The respondents' actions, such as arranging for the transport of Ketamine Hydrochloride and authorizing its delivery for rebooking, were considered acts towards the commission of the offense. These acts were proximate to the intended illegal export, thus constituting an attempt under Section 113(d).Final Conclusion:The High Court found that the Tribunal's findings were perverse and disregarded the cogent evidence on record. The Tribunal's decision to set aside the penalties was quashed, and the High Court reinstated the penalties imposed by the Commissioner (Customs). The substantial question of law was answered in favor of the Revenue, affirming the penalties under Section 114(i) and the confiscation under Section 113(d) of the Customs Act, 1962.