Penalties upheld against active participant in prohibited goods import but set aside for others due to inadmissible statements under section 138B

CESTAT New Delhi upheld penalties under sections 112 and 114AA against one appellant who was found to be an active participant in importing prohibited goods, mis-declaration, and distribution of proceeds throughout the entire operation. However, penalties against two other appellants were set aside as they were based on inadmissible statements under section 138B without proper cross-examination procedure, and neither section 112 nor 114AA provides penalties for non-cooperation with investigation or employment relationships with overseas suppliers.

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Issues Involved:
1. Penalty imposed on Shri Sunil Aidasani u/s 112(a) & (b) and 114AA of the Customs Act, 1962.
2. Penalty imposed on Shri Sushil Aggarwal u/s 112(a) & (b) and 114AA of the Customs Act, 1962.
3. Penalty imposed on Shri Naveen Gulabani u/s 112(a) & (b) and 114AA of the Customs Act, 1962.

Summary of Judgment:

Issue 1: Penalty on Shri Sunil Aidasani
- Submissions: Aidasani contested the penalty of Rs. 1,00,00,000/- u/s 112(a) & (b) and Rs. 50,00,000/- u/s 114AA. He argued that he was the sourcing agent in China and not the owner of the goods. He claimed he did not receive summons and denied involvement based on retracted statements of co-accused without corroborative evidence, violating principles of natural justice.
- Findings: The Tribunal found that the procedure prescribed u/s 138B was not followed, making the statements against Aidasani inadmissible. It was also noted that neither section 112 nor section 114AA provide for penalties for not responding to summons or not cooperating with the investigation.
- Conclusion: Penalties imposed on Aidasani were set aside.

Issue 2: Penalty on Shri Sushil Aggarwal
- Submissions: Aggarwal contested the penalty of Rs. 2,00,00,000/- u/s 112(a) & (b) and Rs. 1,00,00,000/- u/s 114AA. He argued that he was merely an indenting agent and not the owner or beneficiary of the goods. He claimed denial of cross-examination violated natural justice.
- Findings: The Tribunal found Aggarwal was actively involved at all stages of the import process, from placing orders to distributing sale proceeds, indicating he was more than just an indenting agent.
- Conclusion: Penalties imposed on Aggarwal were upheld.

Issue 3: Penalty on Shri Naveen Gulabani
- Submissions: Gulabani contested the penalty of Rs. 20,00,000/- u/s 112(a) & (b) and Rs. 10,00,000/- u/s 114AA. He argued he was not an employee of Aidasani and had no involvement in the import of the goods. He also claimed penalties for not responding to summons were unjustified.
- Findings: The Tribunal noted that neither section 112 nor section 114AA provide for penalties for being an employee of the overseas supplier or for not responding to summons.
- Conclusion: Penalties imposed on Gulabani were set aside.

Final Order:
- Customs Appeal No. 50194 of 2020 filed by Sushil Aggarwal is dismissed, and the impugned order is upheld.
- Customs Appeal No. 50144 of 2020 filed by Sunil Aidasani is allowed, and penalties imposed on him are set aside with consequential relief.
- Customs Appeal No. 50899 of 2020 filed by Naveen Gulabani is allowed, and penalties imposed on him are set aside with consequential relief.

(Order pronounced in open court on 30/04/2024.)

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