2025 (7) TMI 1086 - AT - Customs

Red Sanders smuggling penalties overturned due to inadmissible evidence and procedural violations under Sections 114(i) and 114AA

CESTAT Kolkata set aside penalties imposed under Sections 114(i) and 114AA of the Customs Act, 1962 in a Red Sanders smuggling case. The tribunal held ... Levy of penalties u/s 114(i) and 114AA of the Customs Act, 1962 - smuggling of 'Red Sanders' - contents of the DVD seized from the premises of M/s. Spak Enterprise Pvt. Ltd. can be treated as admissible evidence to implicate the appellant in the alleged offence or not - absence of a certificate as required under Section 138C of the Customs Act, 1962 - statements recorded in this case without complying with the provisions contained in Section 138B of the Customs Act, 1962, which is in pari materia with Section 9D of the Central Excise Act, 1944 - statements recorded from co-accused can be relied upon to implicate the appellant in this case or not - CDR analysis can be treated as admissible evidence for penalizing the appellant - allegation of receipt of pecuniary benefits by the appellant is substantiated with evidence or not. Whether the contents of the DVD seized from the premises of M/s. Spak Enterprise Pvt. Ltd. can be treated as admissible evidence to implicate the appellant in the alleged offence? - HELD THAT:- From a perusal of the records, it is observed that the DRI has seized the DVD on 29.07.2016, which is much before the issuance of the Show Cause Notice dated 26.08.2016. However, it is pertinent to note that the evidence available in the said DVD was not incorporated in the Notice dated 26.08.2016. Subsequently, searches were conducted and statements were recorded from various persons, after recovery of the DVD in question, which is said to contain 45 files in its master folder (DOC). A forensic copy of the said DVD has been prepared by the DRI on 18.01.2017, under Panchanama dated 18.01.2017. As already observed above, it is on record that the original DVD is not available. There is no evidence brought on record to show as to how the said DVD was destroyed or tampered with. Since the original DVD seized from the premises of M/s. Spak Enterprise Pvt. Ltd. is unavailable, which is the main source of information based on which the Supplementary Show Cause Notice has been issued, it is opined that without verifying the original DVD, the information available in the re-constructed DVD cannot be relied upon to implicate the appellant in the alleged offence - the DVD and the documents contained therein cannot be relied upon as admissible evidence in this proceedings - the issue is answered in negative. In the absence of a certificate as required under Section 138C of the Customs Act, 1962, whether the documents contained in the DVD can be considered as admissible evidence? - HELD THAT:- From the Section 138 C, it is observed that computer print outs can be relied upon as evidence in any proceedings only when the Certificate as mentioned in subsection (4) of Section 135C is obtained. Admittedly, no such Certificate has been obtained in this case. Hence, the contents of the said DVD cannot be relied upon in this proceedings - the provisions of Section 138C have not been complied with in this case and accordingly, the information available in the said DVD cannot be relied upon as evidence against the appellant in the impugned proceedings - the issue is answered in negative, Whether the statements recorded in this case without complying with the provisions contained in Section 138B of the Customs Act, 1962, which is in pari materia with Section 9D of the Central Excise Act, 1944, can be relied upon against the appellant to implicate the appellant in this case? - HELD THAT:- As per Section 138B, it is mandatory for the adjudicating authority to follow the procedure set out therein for the purpose of relying upon statements in proceedings - It is well settled that statements of witnesses cannot be relied upon for imposition of penalty upon any person unless such witness is produced for cross-examination. Since cross-examination of witnesses has never happened in the present case, as such, the statements thereof cannot be used against the appellant herein for any penal action, as has been held by the Hon'ble High Court, Calcutta in case of Ajay Saraogi v. Union of India [2023 (9) TMI 733 - CALCUTTA HIGH COURT] - the statements relied upon by the ld. adjudicating authority in the impugned order are not admissible evidences in the current proceedings against the appellant, in view of non-compliance of the provisions as mandated under Section 138B of the Customs Act, 1962, which is in pari materia with Section 9D of the Central Excise Act, 1944 - the issue is answered in negative. Whether statements recorded from co-accused can be relied upon to implicate the appellant in this case? - HELD THAT:- The statements of Shri Sudhir Jha and retracted statements of Shri Jyoti Biswas, both co-accused, and evidence from another case of duty drawback, cannot be the sole basis of imposition of any penalty under the Customs Act, 1962. It is observed that there has been no corroboration of statements of Shri Sudhir Jha, Shri Jyoti Biswas, Shri Rudra Prasad Mondal or Shri Dibakar Dey through independent evidence such as call detail records or financial transactions, etc., which, on the contrary, have been claimed by the appellant to be contradictory to the call detail records - the statements of the co-accused cannot be construed as reliable evidence against the appellant in this case - the issue is answered in negative. Whether the statement recorded from Shri Sudhir Jha can be relied upon to implicate the appellant in this case or not? - HELD THAT:- It is found that Shri Sudhir Jha claiming the appellant to be a key person in the smuggling syndicate is an afterthought, which was only done by his statements recorded subsequent to recovery of the DVD. Hence, there is no merit in the statement of Shri Sudhir Jha implicating the appellant in the alleged offence - it is observed that all these documents, which had been filed in the name of M/s. Srijita Export and other earlier exports have been fabricated. Most of the statements recorded during the course of investigation indicate Shri Sudhir Jha as the person who has handled all the documents related to the alleged exports involving Red sanders. The name of the appellant was not indicated by any of the persons associated with the export of the current consignment or any of the past consignments. In view of the foregoing, the statement of Shri Sudhir Jha cannot be treated as admissible evidence in the current proceedings against the appellant. Accordingly, the issue is answered in the negative. Whether the retracted statement of Shri Jyoti Biswas can be relied upon to implicate the appellant in this case? - HELD THAT:- The investigation failed to corroborate the retracted statement(s) of Jyoti Biswas with independent documentary evidences. In this regard the fact is noted that during the course of appellant’s posting as Intelligence Officer at DRI, Kolkata during the period 11.01.2012 to 29.02.2016, he was investigating officer of a case mentioned in Paragraph 9.2.1 of said Supplementary SCN, wherein, said Jyoti Biswas was the prime accused and the appellant was instrumental in issuance of 10 SCNs to said Jyoti Biswas proposing penalty and other penal actions under Customs Act, 1962. It is also observed that the statements of Shri. Jyoti Biswas were recorded in line with the documents derived from a DVD. We have also observed that the said DVD itself has been treated as inadmissible by the ld. adjudicating authority, as could be seen from paragraphs 5.6.1 to 5.6.6 of the impugned order. It is also found that Shri. Jyoti Biswas has later retracted his statements. Thus, there are merit in the submission of the appellant that the statements of Jyoti Biswas relied upon in the instant case are motivated statements given by him with a view to implicate the appellant as a retaliatory action - the Statement recorded from Shri Jyoti Biswas, which has been retracted before a court of law, cannot be relied in the instant proceedings against the appellant - the issue is answered in negative. Whether the CDR analysis can be treated as admissible evidence for penalizing the appellant in this case? - HELD THAT:- The analysis of CDR in this case does not establish that the phone numbers had been used by the appellant or that the appellant had made calls to the other persons accused in the notice in regard to the alleged offence - the issue is answered in negative. Whether the allegation of receipt of pecuniary benefits by the appellant is substantiated with evidence? - HELD THAT:- It is evident that the involvement of the appellant in past illegal exports, has been sought to be substantiated only through the said DVD and statements as mentioned above. As already observed by us, the DVD in question and the statements do not qualify as valid evidence in this matter being non-compliant with the mandatory provisions laid down under Sections 138C and 138B of the Customs Act respectively. There is no other corroborative evidence available on record to justify the allegations against the appellant. Hence, the allegations to implicate the appellant in the past offence are unsubstantiated and uncorroborated. Section 114AA envisages that a person who knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, shall be penalized under the said Section. In the present case, the evidences available on record do not indicate that the elements required for imposition of penalty under Section 114(i) of the Act are available. Hence, the imposition of penalty under Section 114(i) of the Customs Act on the appellant is unwarranted and the same is hereby dropped - Further, Section 114AA mandates penalization of a person for “use of false and incorrect material. - If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business”. It is found that the above ingredients which are essential for inviting penalty under Section 114AA of the Act are absent in the case - there are no justification for imposition of penalty under Section 114AA of the Customs Act on the appellant and accordingly, set aside the penalties under the said Section. The penalties imposed on the appellant in the impugned order, under Sections 114(i) and 114AA of the Customs Act, 1962 are set aside - appeal allowed. ISSUES: Whether the contents of the DVD seized from the premises of M/s Spak Enterprise Pvt. Ltd. can be treated as admissible evidence to implicate the appellant in the alleged offence'In the absence of a certificate as required under Section 138C of the Customs Act, 1962, whether the documents contained in the DVD can be considered as admissible evidence'Whether the statements recorded in this case without complying with the provisions contained in Section 138B of the Customs Act, 1962, can be relied upon against the appellant to implicate him'Whether statements recorded from co-accused can be relied upon to implicate the appellant in this case'Whether the statement recorded from Shri Sudhir Jha can be relied upon to implicate the appellant in this case'Whether the retracted statement of Shri Jyoti Biswas can be relied upon to implicate the appellant in this case'Whether the Call Detail Record (CDR) analysis can be treated as admissible evidence for penalizing the appellant in this case'Whether the allegation of receipt of pecuniary benefits by the appellant is substantiated with evidence? RULINGS / HOLDINGS: The DVD and the documents contained therein cannot be relied upon as admissible evidence against the appellant due to multiple infirmities including destruction of the original DVD in custody and inconsistencies in forensic copies.In the absence of a certificate under Section 138C of the Customs Act, 1962 read with Section 65B of the Indian Evidence Act, 1872, computer printouts or electronic records derived from the DVD are inadmissible as evidence.Statements recorded without compliance with Section 138B of the Customs Act, 1962, which mandates examination and cross-examination of the declarant, cannot be relied upon against the appellant.Statements of co-accused alone, without corroborative evidence, cannot be the sole basis for imposition of penalty on the appellant.The statement of Shri Sudhir Jha is contradictory, self-serving, and not corroborated by independent evidence; hence, it cannot be relied upon to implicate the appellant.The retracted statements of Shri Jyoti Biswas lack evidentiary value and cannot be relied upon in the absence of corroborative evidence.CDR analysis does not establish that the appellant used the alleged mobile numbers or had relevant communications with co-accused; thus, it cannot be used as reliable evidence.The allegation of receipt of pecuniary benefits by the appellant is unsubstantiated, as purchase documents and bank statements provided by the appellant were not rebutted and statements relied upon were recorded in unrelated proceedings.Penalties imposed under Sections 114(i) and 114AA of the Customs Act, 1962 on the appellant are unwarranted and are set aside. RATIONALE: The Court applied the statutory framework of the Customs Act, 1962, particularly Sections 114(i), 114AA, 138B, and 138C, and the Indian Evidence Act, 1872 (Section 65B) regarding admissibility of electronic evidence.The Court noted that the original DVD evidence was destroyed or altered while in custody, and the forensic copy lacked proper certification as required under Section 138C, rendering electronic evidence inadmissible.Reliance on statements recorded during investigation must comply with Section 138B, requiring examination and cross-examination of witnesses; failure to do so renders such statements inadmissible.The Court emphasized the settled legal principle that statements of co-accused or retracted confessions require independent corroboration before being used as evidence.CDR evidence was found inconsistent and unreliable due to registration of mobile numbers in names of different persons and lack of calls during relevant periods, negating the prosecution's claims.The Court referred to authoritative precedents including the Supreme Court's ruling on electronic evidence admissibility and various High Court and Tribunal decisions regarding procedural safeguards in reliance on statements and electronic records.The Court observed that the appellant was an Intelligence Officer who had previously investigated co-accused, indicating possible bias in statements against him.There was no direct evidence linking the appellant to acts rendering goods liable to confiscation or use of false documents, negating the essential ingredients for penalties under Sections 114(i) and 114AA.The Court's decision reflects a doctrinal adherence to procedural fairness, evidentiary rules for electronic evidence, and the requirement of corroboration for statements implicating accused persons.