Penalty upheld for smuggling Red Sanders Wood disguised as Jute Hessian Cloth under Sections 114(i) and 114AA

CESTAT Kolkata upheld penalty under Sections 114(i) and 114AA of Customs Act, 1962 for smuggling Red Sanders Wood disguised as Jute Hessian Cloth. Appellant's involvement established through fake export documents, prior smuggling history, and credible witness testimony linking appellant to the operation. Despite appellant's role being proven, CESTAT reduced penalty from Rs.10,00,000 to Rs.5,00,000 considering nature of offense and appellant's specific role. Appeal allowed in part.

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The core legal questions considered by the Tribunal in this appeal are:

(i) Whether the appellant is liable for confiscation of the illegally exported Red Sanders Wood and the associated concealing material under the relevant provisions of the Customs Act, 1962;

(ii) Whether the appellant is liable for penalty under Sections 114(i) and 114AA of the Customs Act, 1962 for acts of omission and commission and/or abetting the illegal export of Red Sanders Wood;

(iii) Whether the evidence, including statements of various persons involved, sufficiently establishes the appellant's involvement in the offence, and whether the penalty imposed on the appellant is sustainable.

Issue-wise Detailed Analysis

1. Liability for Confiscation of Goods

The relevant legal framework includes Sections 113(d), 113(h), 114(i), 114AA, and 119 of the Customs Act, 1962, which govern confiscation of goods and imposition of penalties for illegal export, misdeclaration, and use of goods as concealing material.

The Tribunal noted that the Directorate of Revenue Intelligence (DRI) investigation revealed that consignments under Shipping Bills Nos. 3200774 and 3200776 contained Red Sanders Wood concealed under the guise of Jute Hessian Cloth. The exporter's documents and those filed by the Customs House Agent (CHA) were found to be forged and fake, indicating deliberate misdeclaration and concealment.

The Court observed that the illegal export of Red Sanders Wood, a prohibited item, was established through examination of the consignments and corroborated by statements from various persons involved in the export chain, including the exporter's executive, CHA representatives, and intermediaries.

The Tribunal upheld the confiscation of the seized goods under the relevant provisions of the Customs Act, emphasizing that the misdeclaration and concealment rendered the goods liable to confiscation.

2. Appellant's Involvement and Liability for Penalty

The appellant's liability for penalty under Sections 114(i) and 114AA was examined in detail. Section 114(i) pertains to penalties for knowingly aiding or abetting illegal export, while Section 114AA deals with penalties for failure to comply with customs regulations and facilitating smuggling activities.

The primary evidence implicating the appellant was the statement of Shri M.N. Laha, who admitted that the appellant had provided him the job related to the illegal export and had supplied him with a mobile number and SIM card used in the operation. The appellant admitted knowing Shri Laha for eight years and having engaged him for clearance jobs since 2005 but denied involvement in the illegal export and contended that his name was wrongly implicated.

The appellant argued that he was denied the opportunity to cross-examine Shri Laha during personal hearing, and that the statement of Shri Laha was uncorroborated by other evidence. He further contended that no other personnel involved in the export chain implicated him.

The Revenue countered by highlighting the appellant's prior history of involvement in Red Sanders smuggling cases, including arrests, and the corroborative nature of Shri Laha's statement regarding the appellant's role and provision of communication facilities for the offence.

The Tribunal found the statement of Shri Laha credible, noting the appellant's prior involvement in similar offences and the fact that the appellant did not deny giving jobs to Shri Laha. The adjudicating authority's detailed findings, reproduced in the order, emphasized that the appellant and Shri Laha played "shadowy roles" in the illegal export, facilitating misdeclaration and helping the syndicate evade detection.

The Tribunal rejected the appellant's plea for cross-examination of Shri Laha on the ground of procedural expediency and the need to avoid further delay.

3. Assessment of Penalty Imposed

The penalty of Rs. 10,00,000/- imposed under Sections 114(i) and 114AA was challenged by the appellant as excessive and unsustainable.

The Tribunal acknowledged the appellant's role in the offence but considered the nature and extent of his involvement. While upholding the appellant's liability for penalty, the Tribunal exercised discretion to reduce the penalty amount from Rs. 10,00,000/- to Rs. 5,00,000/-, taking into account the facts and circumstances of the case and the appellant's role.

Significant Holdings

The Tribunal's key legal reasoning includes the following verbatim excerpt from paragraph 59 of the impugned order, which was relied upon and reproduced in the judgment:

"59. Role of Shri Ritesh Jha (noticee No: 4) has been summed up at para 35 (viii) of the show cause notice. In terms of the statement of Shri M.N. Laha (noticee No: 1), Shri Ritesh Jha had engaged him in the subject export. Further Shri Jha also admitted that he knew Shri Laha for the last eight years and that Shri Jha engaged Shri Laha for some clearing job in 2005. Further it has also been found that Shri Jha was previously found involved in red sanders smuggling cases booked by DRI, Kolkata in 2007 and 2009 and he was even arrested in one of the said two cases. Shri Jha in his belated reply dated 17.06.13 filed on the date of personal hearing held on 17.06.13, has denied and disputed all the charges made out in the show cause notice and asked for cross examination of Shri M.N. Laha (noticee No:1). As already observed, such plea can not be considered, as it would further delay the decision of the case. From the sequence of events it follows that Shri Jha alongwith Shri Laha played shadowy roles in the subject export of Red Sanders, without having identifiable existence They have never been able to prove their locus standi in the export of the goods or any relation to the exporter, but still played a stellar role in the subject illegal export. By their stealthy/ mischievous acts, they have not only caused the blatant misdeclaration in the subject export to happen, but also helped the members of the syndicate remain out of glare. It appears that they had formed a chain with the real players behind the scene and snapped it when the case was detected. For such blatant violation, Shri Ritesh Jha (noticee No: 4) is liable for penal action under section 114(i) and 114AA of the Customs Act, 1962, as proposed in the show cause notice."

The Tribunal established the principle that involvement in illegal export through indirect roles such as providing jobs, facilitating communication, and enabling misdeclaration can attract penalty under Sections 114(i) and 114AA, even if the person does not have direct ownership or identifiable locus standi in the export transaction.

Final determinations include:

- The appellant is liable for penalty under Sections 114(i) and 114AA of the Customs Act, 1962 for his role in the illegal export of Red Sanders Wood.

- The penalty originally imposed at Rs. 10,00,000/- is reduced to Rs. 5,00,000/- considering the circumstances and the appellant's role.

- Confiscation of the illegally exported goods and concealing material is upheld as per the Customs Act provisions.

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