Penalties under sections 112(a)(i), 112(b)(i) and 114AA set aside due to lack of evidence

CESTAT Kolkata set aside penalties imposed on appellant under sections 112(a)(i), 112(b)(i) and 114AA of Customs Act, 1962. Department alleged appellant operated as syndicate facilitating clearance of mis-declared/undervalued goods and allowed another party to use office premises and computer. Tribunal found no evidence substantiating allegations that appellant facilitated clearance of mis-declared goods, owned or imported goods, or was connected with subject goods. Allowing usage of office premises and computer cannot constitute connivance in alleged offence. Investigation failed to establish conditions for invoking penalty provisions. Adjudicating authority made speculative findings without evidence. Appeal allowed, penalties set aside.

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The core legal questions considered in this appeal are:

1. Whether the appellant is liable to penalty under Section 112(a)(i) of the Customs Act, 1962 for doing or omitting any act that renders the goods liable to confiscation.

2. Whether the appellant is liable to penalty under Section 112(b)(i) of the Customs Act, 1962 for acquiring possession of or being concerned in dealing with goods liable to confiscation.

3. Whether the appellant is liable to penalty under Section 114AA of the Customs Act, 1962 for knowingly or intentionally making, signing, or using false or incorrect declarations or documents in relation to the import transaction.

4. Whether the evidence on record substantiates the allegations that the appellant facilitated clearance of misdeclared and contraband goods in connivance with other persons.

5. Whether the penalty imposition under the above sections is sustainable in light of the facts and legal precedents.

Issue-wise Detailed Analysis:

Issue 1 & 2: Liability under Sections 112(a)(i) and 112(b)(i) of the Customs Act, 1962

The legal framework under Section 112(a)(i) imposes penalty on any person who does or omits to do any act that renders goods liable to confiscation under Section 111. Section 112(b)(i) penalizes any person who acquires possession of, or is concerned in carrying, removing, depositing, harboring, keeping, concealing, selling, purchasing or dealing with such goods.

The court examined the facts that the consignment declared as "Gents Chappal" was actually found to contain large quantities of cigarettes and plastic slippers, with a value significantly higher than declared. The goods were seized and penalties imposed on the appellant for allegedly facilitating clearance of these misdeclared goods.

However, the Tribunal found no evidence on record to substantiate that the appellant performed any act or omission that rendered the goods liable to confiscation. The appellant did not file the Bill of Entry, was not the importer, and had no role in documentation, examination, or clearance of the goods. The allegation that the appellant allowed use of office premises and computer to a third party was held insufficient to establish connivance or active participation in the offence.

The Tribunal also noted that the appellant was implicated based on statements recorded under Section 108 of the Customs Act, which were not corroborated by independent evidence and were not tested by cross-examination or under Section 138B, thereby limiting their evidentiary value. The Tribunal relied on a precedent affirming that such statements cannot be solely relied upon for penalty imposition.

Thus, the Tribunal concluded that the penalties under Sections 112(a)(i) and 112(b)(i) could not be sustained due to lack of evidence fulfilling the statutory conditions.

Issue 3: Liability under Section 114AA of the Customs Act, 1962

Section 114AA penalizes knowingly or intentionally making, signing, or using false or incorrect declarations or documents in any transaction for the purposes of the Act.

The allegations against the appellant included knowingly using or causing to be made fake or forged documents related to the import. However, the Tribunal found no material evidence to establish that the appellant was involved in the importation, filing of Bills of Entry, or documentation related to the impugned consignments. The appellant's role was not connected to the preparation or use of any false documents.

Accordingly, the penalty under Section 114AA was also held unsustainable due to absence of evidence demonstrating the appellant's knowledge or intentional involvement in making false declarations.

Issue 4: Nexus and Facilitation Allegations

The Revenue alleged that the appellant had a nexus with certain Customs Brokers, their employees, and a Deputy Commissioner, forming a syndicate facilitating clearance of misdeclared goods. It was further alleged that the appellant introduced a person named Nasiruddin to importers/brokers to assist in clearance of misdeclared consignments and allowed use of office machinery to facilitate this.

The Tribunal scrutinized these allegations and found them to be based on assumptions, presumptions, and selective reading of statements without independent corroboration. The Tribunal observed that even if the appellant introduced some brokers to the Deputy Commissioner, it did not automatically imply connivance in smuggling or misdeclaration. The payment of Rs. 5,00,000/- by the importer to a firm related to the appellant was also found to be unrelated, as the firm was owned by the appellant's brother and had no connection with the appellant's business or the subject imports.

Thus, the Tribunal rejected the Revenue's contention of a syndicate or nexus involving the appellant, emphasizing the absence of evidentiary basis for such findings.

Issue 5: Sustainability of Penalties and Reliance on Precedent

The Tribunal noted that in a prior case involving the appellant with identical facts and similar penalty impositions under Sections 112(a), 112(b), and 114AA, the Division Bench of the Tribunal had set aside the penalties. The prior order emphasized lack of evidence, inadmissibility of uncorroborated statements under Section 108, and absence of any act or omission by the appellant satisfying the statutory requirements for penalty.

The Tribunal relied heavily on this precedent, reproducing its detailed reasoning to support the present decision. This reinforced the conclusion that penalties imposed on the appellant in the present case were not sustainable.

Significant Holdings:

"The appellant has not filed the Bills of Entry for importation of the goods. We also find that the appellant had no role in the importation, filing of Bills of Entry, documentation, examination of the goods or any work whatsoever related to the import and clearance of any of the consignments of the importers. Thus, we hold that the appellant has not fulfilled any of the conditions required for imposition of penalty under Section 112(a)(i) of the Customs Act, 1962 and hence, we hold that penalty imposed on the appellant under section 112(a)(i) is not sustainable and hence we set aside the same."

"There is no material evidence available on record to establish that the appellant is concerned with any of the acts mentioned in Section 112(b) which make the imported goods liable to confiscation under Section 111 of the Act. The penalty under this section cannot be imposed on the basis of assumptions and presumptions. Accordingly, we hold that the appellant has not fulfilled any of the conditions required for imposition of penalty under Section 112(b) of the Customs Act, 1962 and hence, we hold that penalty imposed on the appellant under section 112(b) is not sustainable and hence we set aside the same."

"We find that the appellant had no role in the importation, filing of Bills of Entry, documentation, examination of the goods or any work whatsoever related to the import and clearance of any of the consignments. We observe that there is no material evidence available on record to establish that the appellant is concerned with any of the acts mentioned in Section 114AA. The penalty under this section cannot be imposed on the basis of assumptions and presumptions. Accordingly, we hold that the appellant has not fulfilled any of the conditions required for imposition of penalty under Section 114AA of the Customs Act, 1962 and hence, we hold that penalty imposed on the appellant under section 114AA is not sustainable and hence we set aside the same."

"The findings in the impugned order by the learned adjudicating authority are only on the basis of assumptions and presumptions without any evidence to support it."

"Statements recorded under Section 108 of the Customs Act, which have not been examined under Section 138B and are not corroborated by independent evidence, cannot be relied upon for penalty imposition."

Final determinations:

The penalties imposed on the appellant under Sections 112(a)(i), 112(b)(i), and 114AA of the Customs Act, 1962 are set aside due to absence of evidence fulfilling the statutory conditions for penalty. The appellant was not involved in importation, clearance, or documentation of the misdeclared goods, nor is there evidence of knowledge or intentional involvement in the offence. Allegations based on uncorroborated statements and assumptions are insufficient to sustain penalty. The appeal is allowed with consequential relief as per law.

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