2022 (11) TMI 61 - AT - Customs

Tribunal overturns penalty and confiscation in Customs Act case due to lack of evidence.

The Tribunal set aside the penalty imposed on the appellant under Section 112(b)(i) of the Customs Act, as mens rea was not established. Additionally, the ... Penalty of Rs. 40 lakhs under Section 112(b)(i) of the Customs Act - Smuggling - foreign origin gold - retraction of statements - cross-examination of witnesses - HELD THAT:- Appellant is engaged in selling of gold as a consignment agent/ broker, wherein the owner of the gold either himself brings or through his trusted persons/ employee. This appellant after retaining his brokerage returns the sale proceeds and unsold gold, if any, to the consignor, normally on the same day. This fact is evident on the face of the record, as on the day of search and seizure, this appellant has stated that he has received gold for sale from Sh. Amit Goel through his employee Sh. Pankaj Kumar Singh who has come to his shop alongwith Sh. Santosh Kumar. Further, this appellant stated in presence of Sh. Pankaj Kumar Singh that he has received the gold from Sh. Amit Goel through Sh. Pankaj Kumar Singh, and this statement was not disputed rather affirmed by Sh. Pankaj Kumar Singh in his statement recorded on the same day or simultaneously. It is further evident from the facts on record that the seized gold 20.643 kgs. has been found in the cloth bag brought by Sh. Pankaj Kumar Singh. Thus, it is held that the gold was actually in possession of Sh. Pankaj Kumar Singh who was present in the shop. Thus, although this appellant was facilitating the sale of gold, the gold was in defacto and de-jure possession of Sh. Pankaj Kumar Singh on behalf of his master Sh. Amit Goel. The subsequent change of statement of Sh. Pankaj Kumar Singh does not inspire confidence, has evidently been made in order to save his employer - Sh. Amit Goel from penal consequences. Further, the panch witness Sh. Yogesh - President of Bullion Association has also supported the contention of this appellant, that he is a broker dealing in bullion on consignment basis for brokerage. These facts are also corroborated with the Income Tax record of this appellant wherein he has declared annual income during the financial year 2014-15 to 2017-18 in the range of Rs. 3.9 to Rs. 9 lakhs. Admittedly, Sh. Amit Goel is a wealthy person of substantial means, which also support the contention of this appellant. The submission of ld. Counsel for the appellant that investigation does not adduce any evidence to arrive at a definite conclusion, if the gold was smuggled or not. Penalty under Section 112(b) requires mens rea to be established i.e. conscious knowledge of the appellant that he was dealing in smuggled gold. This fact is not coming out from the evidence on record. Admittedly, it is a case of town seizure and not a seizure (or near) in customs area or in the vicinity of international border. Thus, the suspicion of Revenue that the gold is smuggled does not lead to inevitable evidence that the gold is smuggled. Admittedly, the seized gold was of 99.5% purity, whereas normally the smuggled gold is of 99.9% purity. The confiscation of gold under the facts and circumstances is bad in absence of condition precedent, as provided under Section 111(d), (o) and (p) of the Customs Act - the appellant has not violated any of the provisions of Section 111 as alleged - appellant is not involved in acquiring possession of or is any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knew or has reason to believe are liable to confiscation under Section 111. Thus, no penalty is imposable on the appellant in the facts and circumstances under Section 112(b)(i). Accordingly, penalty imposed on this appellant is set aside. Appeal allowed. Issues Involved:1. Imposition of penalty under Section 112(b)(i) of the Customs Act.2. Legality of the confiscation of gold and Indian currency under Sections 111(d), 111(o), 111(p), and 121 of the Customs Act.3. Validity of evidence and statements recorded under Section 108 of the Customs Act.4. Determination of the appellant's knowledge and involvement in dealing with smuggled gold.Issue-wise Detailed Analysis:1. Imposition of penalty under Section 112(b)(i) of the Customs Act:The appellant contested the imposition of a Rs. 40 lakh penalty under Section 112(b)(i) of the Customs Act. The Tribunal found that the appellant was engaged in selling gold as a consignment agent/broker, where the gold was brought by the owner or their employees. The gold was found in the possession of Sh. Pankaj Kumar Singh, an employee of Sh. Amit Goel, and the appellant did not have conscious knowledge that the gold was smuggled. The Tribunal held that the penalty under Section 112(b)(i) requires mens rea, which was not established in this case. Thus, the penalty imposed on the appellant was set aside.2. Legality of the confiscation of gold and Indian currency under Sections 111(d), 111(o), 111(p), and 121 of the Customs Act:The Tribunal examined the confiscation of 20.643 kgs of gold and Rs. 6.44 crores in Indian currency. The Tribunal noted that the gold was seized from the cloth bag brought by Sh. Pankaj Kumar Singh, an employee of Sh. Amit Goel, and not directly from the appellant. The Tribunal found no evidence to prove that the gold was smuggled, as the seized gold had a purity of 99.5%, whereas smuggled gold typically has a purity of 99.9%. The Tribunal concluded that the confiscation of gold and currency was not justified under Sections 111(d), 111(o), 111(p), and 121 of the Customs Act.3. Validity of evidence and statements recorded under Section 108 of the Customs Act:The Tribunal reviewed the statements recorded under Section 108 of the Customs Act, including those of the appellant, Sh. Pankaj Kumar Singh, and Sh. Amit Goel. The appellant and Sh. Pankaj Kumar Singh had retracted their statements, and the Tribunal found inconsistencies in the statements of Sh. Pankaj Kumar Singh. The Tribunal held that the subsequent change of statement by Sh. Pankaj Kumar Singh was made to save his employer, Sh. Amit Goel, from penal consequences. The Tribunal also noted that the statements of the appellant's employees and the call detail records supported the appellant's contention.4. Determination of the appellant's knowledge and involvement in dealing with smuggled gold:The Tribunal assessed whether the appellant had knowledge or involvement in dealing with smuggled gold. The Tribunal found that the appellant acted as a broker and did not have reason to believe that the gold was smuggled. The Tribunal emphasized that the suspicion of the Revenue that the gold was smuggled did not lead to inevitable evidence. The Tribunal cited previous judgments, including Nand Kishore Modi vs. CC (Prev.), West Bengal and Sanjiv Kumar & Others vs. CCE, Lucknow, which held that mere foreign marking on gold without corroborative evidence is not sufficient to prove smuggling.Conclusion:The Tribunal concluded that the confiscation of gold and currency was not justified, and the penalty imposed on the appellant was set aside. The appeal was allowed with consequential benefits.