2024 (6) TMI 1512 - AT - Customs

Seizure case finds syndicate; voluntary statement issue; s.112(a)(i) and s.114AA penalties partly upheld and reduced

CESTAT held that seizure and confiscation proceedings for illegal import of an ozone-depleting substance involved a syndicate; statements recorded on ... Confiscation - seizure - syndicate of unscrupulous persons was involved in illegal import of R-22 Gas Cylinders, an Ozone Depleting Substance - restricted item or not - rejection of retraction made by the Appellant 1 of his statements recorded as the same was made belatedly nearly after 2 years of recording the statement - penalties u/s 112 (a) (i) and Section 114AA of the Customs Act,1962 as well as consolidated penalty - HELD THAT:- From the perusal of the statements, it is found that there are no reason to hold that the statements dated 09/10.12.2014 were voluntary in nature. The said statement are typed written on all material details except for the request made by the appellants except for the request made by the appellant to take rest which has been allowed in hand by the investigating officer recording the statement. Appellant 4 has been for first time examined by the DRI on 09.12.2014 when he is shown certain statements which he accepts the next morning as reflecting his role in the entire scheme after staying overnight in the DRI office. He has not admitted anything in the potion of the statement recorded on 09.12.2014 and on the morning of 10.12.2014 he admits every statement made against him without a murmur and goes on to the extent of stating the paras of the statements made by the others, inculpating him to be arrested and produced before the ACJM. Interestingly the statement of Appellant 2 and Appellant 3 recorded on 10.12.2014 was shown to him on 09.12.2014. He retracted the statements made immediately on 10.12.2014 before the ACJM. Impugned order relies solely upon this statement to hold against him and impose the penalty under Section 112 (a) (i) of the Customs Act, 1962. Appellant 3 was examined twice by the DRI. In his statement recorded on 15.07.2014 nothing inculpatory is coming stated and in the statement recorded on 09.12.2014 he admits everything without any reference to the any other evidence. He retracted the statement on the first available opportunity before the ACJM after being arrested on 10.12.2014. It is interesting to note on 10.12.2014 he makes the statement inculpating his own employee – Appellant 4 without any question in the matter. Impugned order relies solely upon this statement to hold against him and impose the penalty under Section 112 (a) (i) of the Customs Act, 1962. Impugned order do not record any reason for holding the statements dated 09/10.12.2014 as voluntary statements made by these two appellants. As it is not found that these statements as voluntary penalty imposed on the appellant by placing reliance on these statements cannot be sustained. In case of Vinod Solanki [2008 (12) TMI 31 - SUPREME COURT] the Hon’ble Supreme Court held that 'The authorities under the Act as also the Tribunal did not arrive at a finding upon application of their mind to the retraction and rejected the same upon assigning cogent and valid reasons therefor. Whereas mere retraction of a confession may not be sufficient to make the confessional statement irrelevant for the purpose of a proceeding in a criminal case or a quasi criminal case but there cannot be any doubt whatsoever that the court is obligated to take into consideration the pros and cons of both the confession and retraction made by the accused. It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage.' Penalties imposed on Appellant 1 under Section 112 (a) (i) & 114AA are upheld but reduced to 25% of the penalty imposed by the impugned order - Consolidated Penalty on Appellant 2 imposed under Section 112 (a) (i) & 114AA is upheld but reduced to 25% of the penalty imposed by the impugned order. Penalty separately imposed under Section 114AA is set aside - Penalty imposed on Appellant 3 and Appellant 4 under Section 112 (a) (i) is set aside. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether goods (R-22 gas cylinders and cover HMS) concealed in containers are liable to confiscation under Section 111 of the Customs Act, 1962 read with Sections 116, 119 and whether seizures under Section 110 were valid. 2. Whether penalties under Section 112(a)(i) and Section 114AA of the Customs Act, 1962 rightly attach to the importers who mis-declared and imported restricted Ozone Depleting Substances in contravention of ODS Rules, Gas Cylinders Rules and Legal Metrology Act requirements. 3. Whether imposition of two penalties under Section 114AA for the same offence amounts to double jeopardy and is unsustainable. 4. Whether penalty under Section 112(a)(i) can be sustained against freight forwarder/CHA proprietor and an employee where allegations rely primarily on statements of co-accused and statements subsequently retracted. 5. Whether statements obtained during investigation (typed statements, statements signed after detention/overnight custody) are voluntary and admissible for penal adjudication; and what evidentiary weight a retracted confession bears in quasi-criminal/adjudicatory proceedings under Customs law. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Confiscation of seized goods Legal framework: Confiscation provisions of Section 111 of the Customs Act, 1962; seizure under Sections 110 and 119; redemption option under Section 125(1); related regulatory controls under Ozone Depleting Substances (Regulation & Control) Rules, 2000 (as amended), Gas Cylinders Rules, 2004, and Legal Metrology Act, 2009. Interpretation and reasoning: The authority examined containers and found R-22 gas cylinders concealed behind HMS using a false temporary partition; declarations in Bills of Lading and Bills of Entry declared only HMS while restricted ODS (HCFC-22) were omitted; statutory licensing/authorization for import of ODS was not held by importers; statutory labelling/packaging requirements under Legal Metrology absent. Precedent treatment: Not specifically invoked to displace statutory confiscation; analysis is statutory fact-based. Ratio vs. Obiter: Ratio - concealment by false partition, mis-declaration and lack of licences rendered goods liable to confiscation under Section 111; imposition of redemption option under Section 125(1) is a discretionary remedial measure. Obiter - none material. Conclusion: Confiscation of R-22 gas cylinders upheld; confiscation (with redemption option) of HMS and other seized items sustained where cover goods were used to conceal prohibited imports and statutory breaches of ODS and Legal Metrology rules were established. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Penalties on importers under Sections 112(a)(i) and 114AA Legal framework: Penal provisions of Section 112(a)(i) (penalty where goods liable to confiscation) and Section 114AA (penalty for false declaration) of the Customs Act, 1962; relevant regulatory offences under ODS Rules and Gas Cylinders Rules. Interpretation and reasoning: Adjudicating authority relied on confessional statements of the importers admitting deliberate non-declaration to avoid licensing requirement, admissions of monetary consideration and strategy to conceal; importers did not dispute factual findings of concealment; penalties were considered appropriate but quantification amenable to mitigation based on financial capacity and losses suffered. Precedent treatment: No case law cited to negate liability; principles of penalty reduction for mitigation invoked by the appellate body on grounds of proportionality. Ratio vs. Obiter: Ratio - where statutory mis-declaration and deliberate concealment of restricted goods are proved, penalties under Sections 112(a)(i) and 114AA are sustainable; Obiter - appellate reduction of quantum to 25% reflects discretionary mitigation, not a principle to nullify liability. Conclusion: Liability under Sections 112(a)(i) and 114AA against the importers is upheld; quantum of penalties reduced to 25% of original amounts in exercise of appellate discretion. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Double penalisation under Section 114AA Legal framework: Constitutional protection against double jeopardy (Article 20(2)) and statutory requirements that penal measures not impose multiple penalties for same offence in same proceeding. Interpretation and reasoning: Appellate scrutiny found two impositions of penalty under Section 114AA in the adjudicating order for the same misconduct; such duplication operates as double punishment for the same offence and is impermissible. Precedent treatment: Constitutional safeguard and principle against double punishment applied as a matter of law; appellate authority set aside the duplicated penalty. Ratio vs. Obiter: Ratio - imposition of the same penal provision twice in the same proceedings constitutes double jeopardy and must be set aside. Conclusion: Duplicate penalty under Section 114AA set aside; consolidated penalty (Section 112(a)(i) and Section 114AA) retained but reduced as per Issue 2. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Penal liability of freight forwarder/CHA proprietor and employee where prosecution relies on co-accused statements Legal framework: Section 112(a)(i) of the Customs Act (penalty for persons by whose act omission or commission goods become liable to confiscation); evidentiary rules governing confessions/statements and requirement of corroboration in quasi-criminal/adjudicatory proceedings; jurisprudence on voluntariness and reliance on co-accused statements. Precedent treatment: Reliance on high court and Supreme Court authorities (e.g., Vinod Solanki and subsequent decisions) recognizing that retracted confessional statements are weak and cannot, without independent corroboration, sustain conviction or penal sanctions where voluntariness is suspect. Interpretation and reasoning: Statements of freight forwarder proprietor and employee were recorded in typed form, with indicia of coercion/overnight detention and later retraction before magistrate at first opportunity. Appellate analysis found no reason recorded in adjudicating order to treat those statements as voluntary and observed that adjudication relied solely upon those retracted/coerced statements and on statements of co-accused without independent corroboration. Procedural rights such as opportunity for cross-examination and examination of investigating officers were not addressed sufficiently in the impugned order. Ratio vs. Obiter: Ratio - penalty cannot be sustained where it is founded solely on retracted/confessed statements lacking independent corroboration and where voluntariness is not established; Obiter - procedural deficiencies (failure to address retraction, failure to record reasons for voluntariness) are material and vitiate reliance on such statements. Conclusion: Penalties imposed on the freight forwarder proprietor and employee under Section 112(a)(i) are set aside for lack of reliable, corroborated evidence and because statements relied upon were retracted and not shown to be voluntary. ISSUE-WISE DETAILED ANALYSIS - Issue 5: Admissibility and weight of retracted confessions/statements in Customs adjudication Legal framework: Principles from Indian Evidence jurisprudence and administrative/quasi-criminal adjudication: confessions induced by threat/inducement are irrelevant (Section 24, Evidence Act principles applied by analogy), burden on prosecution to prove voluntariness of retracted confession when relied upon; quasi-criminal nature of Customs penalty proceedings requires careful scrutiny of voluntariness. Interpretation and reasoning: Appellate authority applied established tests - timing and circumstances of retraction, manner of recording, indicia of coercion (signed typed statements after overnight detention), failure of investigating officers to testify to voluntariness - and concluded that retracted statements could not be the sole basis for penalty unless corroborated. The authorities emphasized that retraction shifts burden to prosecution to prove voluntariness, and mere existence of confession without such proof is insufficient. Precedent treatment: Decisions cited in the impugned record (e.g., Vinod Solanki and subsequent High Court and Tribunal decisions) were followed to articulate standards for reliance on retracted confessions in quasi-criminal customs proceedings. Ratio vs. Obiter: Ratio - retracted/confessional statements recorded under suspicious circumstances cannot support penal sanctions absent independent corroboration and proof of voluntariness; Obiter - procedural protections (opportunity for cross-examination of co-accused whose statements are relied upon) are necessary in adjudication. Conclusion: Appellate determination that reliance solely on retracted/coerced statements is impermissible is upheld; such statements must be corroborated and voluntariness established before they can sustain penalties under Customs law. OVERALL CONCLUSIONS 1. Confiscation of illegally imported restricted goods and cover goods used for concealment sustained where statutory breaches and deliberate mis-declaration are proved. 2. Penalties under Sections 112(a)(i) and 114AA sustainable against importers but quantification subject to appellate mitigation (reduced to 25% of imposed amounts here); duplicated penalty under Section 114AA set aside as double jeopardy. 3. Penalties imposed on freight forwarder proprietor and employee set aside where adjudication rested on retracted/coerced statements and lacked independent corroboration and reasoned findings of voluntariness. 4. Adjudicating authorities must record and apply principled reasons when treating confessional or retracted statements as voluntary and must seek corroboration before imposing penal consequences in quasi-criminal Customs proceedings; failure to do so renders penalty unsustainable.