2025 (5) TMI 663 - AT - Customs

CESTAT sets aside Rs.10 lakh penalty under Section 112(a) and 112(b) for gold smuggling due to unreliable witness testimony

Suresh Maruti Patil Versus Commissioner of Customs (Preventive) Kolkata

CESTAT Kolkata set aside Rs.10,00,000 penalty imposed under Section 112(a) and 112(b) of Customs Act, 1962 for alleged gold smuggling. Two 1000-gram gold ... Levy of penalty u/s 112(a) and 112(b) of the Customs Act, 1962 - Smuggling of foreign origin gold bars - appellant submitted that in the present case, neither was the gold recovered from his possession nor had he claimed ownership of the said gold - admissible and reliable statemnet or not - HELD THAT:- In this case, two (02) gold bars, each weighing 1000 grams, were seized from Shri Rajesh Bhagat on 06.04.2018. In his statement dated 06.04.2018, Shri Ashish Lakhotia had inter alia informed that the gold was supposed to be sold to the appellant. However, it is observed that during the course of cross examination, the said Shri Ashish Lakhotia has informed that his statement was not voluntary. Accordingly, the said statement cannot be relied upon against the appellant. It is also found that other than the said statement, there is no other corroborative evidence available on record to implicate the appellant in the alleged offence of smuggling gold bars of foreign origin into the country. It is observed that there is no evidence against the appellant to indicate that he was the intended purchaser of the gold bars in question. Under these circumstances, no penalty is imposable on the appellant. Same view has been expressed by this Tribunal in the case of Gagan Karel v. Commissioner of Customs (Preventive), Kolkata, [2025 (1) TMI 1104 - CESTAT KOLKATA] where, under similar facts and circumstances, this Tribunal has set aside the penalty - the penalty of Rs.10,00,000/- imposed on the appellant under Section 112(a) and 112(b) of the Customs Act, 1962 is not sustainable and accordingly, the penalty imposed on the appellant is set aside. Conclusion - The statement cannot be relied upon against the appellant. There is no other corroborative evidence available on record to implicate the appellant in the alleged offence of smuggling gold bars of foreign origin into the country. The penalty imposed on the Appellant by invoking the provisions of Section 112(a) and (b) of the Act is not sustainable. Appeal allowed. 1. ISSUES PRESENTED and CONSIDERED- Whether the appellant can be held liable for penalty under Section 112(a) and 112(b) of the Customs Act, 1962 for alleged involvement in smuggling of foreign origin gold bars.- Whether the statement of Shri Ashish Lakhotia, implicating the appellant as the intended purchaser of the smuggled gold bars, is admissible and reliable evidence.- Whether there exists any corroborative evidence beyond the statement of Shri Ashish Lakhotia to implicate the appellant in the smuggling offence.- Whether the penalty imposed on the appellant by the adjudicating authority and upheld by the Commissioner (Appeals) is sustainable in law.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Liability of the appellant under Section 112(a) and 112(b) of the Customs Act, 1962The relevant legal framework comprises Section 112 of the Customs Act, 1962, which prescribes penalties for improper importation of goods. Specifically, Section 112(a) penalizes any person who does or omits to do any act rendering goods liable to confiscation under Section 111, or abets such act. Section 112(b) penalizes any person who acquires possession of or is concerned in dealing with goods liable to confiscation.The Court examined whether the appellant committed any act or omission or was involved in dealing with the smuggled gold bars. The gold bars weighing 1000 grams each were seized from Shri Rajesh Bhagat, and the appellant was alleged to be the intended purchaser.However, the Court found no direct evidence that the appellant possessed or dealt with the seized gold bars, nor that he committed any act rendering the goods liable to confiscation. The appellant denied ownership or possession, and no other incriminating evidence was found against him.Therefore, the Court held that the essential elements to invoke Section 112(a) and 112(b) were not established against the appellant.Issue 2: Admissibility and reliability of the statement of Shri Ashish LakhotiaThe statement of Shri Ashish Lakhotia was the primary evidence implicating the appellant as the intended purchaser of the smuggled gold bars. Initially, Lakhotia stated that the gold bars were meant for delivery to the appellant.However, during cross-examination before the adjudicating authority, Lakhotia retracted his statement, declaring it involuntary and thereby losing its evidentiary value. The Court emphasized that such a retraction undermines the reliability of the statement.Given the retraction and absence of other corroborative evidence, the Court held that Lakhotia's statement could not be relied upon to implicate the appellant.Issue 3: Existence of corroborative evidence against the appellantBesides the statement of Shri Ashish Lakhotia, the investigation and records contained no other evidence linking the appellant to the smuggled gold bars. The appellant was not found in possession of the gold, nor was there documentary or material evidence to indicate his involvement.The Court noted that a previous smuggling case involving the appellant was not relevant to the instant penalty proceedings. The absence of corroborative evidence was a critical factor in the Court's decision.Issue 4: Sustainability of the penalty imposed on the appellantThe adjudicating authority imposed a penalty of Rs.10,00,000/- under Section 112(a) and 112(b) of the Customs Act, 1962, which was upheld by the Commissioner (Appeals). The appellant challenged the penalty on grounds of lack of evidence and unreliability of the key statement against him.The Court referred to a precedent decision of the Tribunal in a similar matter, where penalties were set aside due to reliance solely on statements of co-accused without adequate opportunity for cross-examination and absence of corroborative evidence. The relevant excerpts were reproduced to emphasize the settled legal position:'It is a settled position of law that in such circumstances, when statements recorded from the co-accused are the only evidence to implicate another person in that offence, the said statements cannot be relied upon against the person ... without giving an opportunity for cross-examining the persons who have given the statements implicating the appellant.'The Court observed that in the present case, the appellant was not afforded adequate opportunity to test the veracity of the statement, and the statement itself was retracted. Consequently, the penalty imposed was not sustainable.3. SIGNIFICANT HOLDINGS- 'We find that the said statement cannot be relied upon against the appellant.'- 'There is no other corroborative evidence available on record to implicate the appellant in the alleged offence of smuggling gold bars of foreign origin into the country.'- 'Penalty can be imposed under this section only when a person commits an act which renders the goods liable for confiscation. In the present case ... the elements as mentioned in Section 112 of the Act are not available to impose penalty on the appellant.'- 'The penalty imposed on the Appellant by invoking the provisions of Section 112(a) and (b) of the Act is not sustainable and hence we set aside the same.'- The Court reaffirmed the principle that statements of co-accused or co-noticees, when uncorroborated and not subjected to cross-examination, cannot form the sole basis for penalty imposition.- Final determination: The penalty of Rs.10,00,000/- imposed under Section 112(a) and 112(b) of the Customs Act, 1962 on the appellant is set aside, and the appeal is allowed.