2025 (8) TMI 269 - HC - Customs

HC rules moneychanger not guilty of abetment in smuggling due to lack of evidence under relevant law sections

The HC directed the Tribunal to send the Statement of the Case concerning substantial questions of law related to abetment in smuggling and confiscation ... Direction to Tribunal to send the Statement of the Case to this Court regarding the substantial questions of law that were formulated in this order - allegation of abetment in Smuggling - confiscation of sale proceeds when sale proceeds of smuggled goods have changed form and lost its character - HELD THAT:- Admittedly, the Respondent is only a moneychanger, and the allegation was about abetment. Apart from alleging perversity, appellant, was, however, unable to point out any material, either (Show Cause Notice or O.I.O.), based upon which he could demonstrate that the findings exonerating the Respondent, who are only money changers, from the charge of abetment were vitiated by perversity. Clear findings have been recorded to the effect that there was no material on record to sustain the charge of abetment by the money changer – Respondent. This reference is mainly concerned with questions of law. The findings of fact are ordinarily not interfered with unless a clear case of perversity is made out. No such case is made out in this case. This is an additional ground for answering this reference against the revenue - because this Court has reversed the decision of the Full Bench in Weizmann Limited [2005 (8) TMI 141 - CESTAT, MUMBAI] which was the base for entertaining this reference and furthermore because findings of fact recorded by the CESTAT are not demonstrated to be vitiated by any perversity, we answer the questions against the Applicant (Customs Department) and in favour of the Respondent – Assessee. Reference disposed off. ISSUES: Whether the Tribunal was justified in holding that confiscation of sale proceeds of smuggled goods cannot be ordered if such proceeds have changed form and lost their character, despite evidence showing the cash amounts were deposited in fictitious bank accounts and intercepted before credit to FFMC accounts, satisfying the ingredient of section 121 of the Customs Act.Whether the penalty imposed on Foreign Exchange Money Changers (FFMCs) under sections 112 and 114 of the Customs Act, 1962 is sustainable where evidence indicates FFMCs consciously dealt in and released foreign exchange to fictitious entities, thereby abetting smuggling.Whether the Customs, Excise and Gold Appellate Tribunal (CEGAT) was correct in law in setting aside confiscation and deleting penalties without appreciating the clinching evidence and material on record.Whether the findings of CEGAT are perverse and unreasonable for failing to consider clinching evidence and material available on record. RULINGS / HOLDINGS: The Court held that the decision of the Full Bench of the Tribunal in Weizmann Ltd. (which was the basis for entertaining the reference) was reversed by a Coordinate Bench of the High Court, thus providing a strong ground to return the reference unanswered or to answer the substantial questions of law against the Customs Department.The Tribunal's factual findings exonerating the FFMCs from abetment of smuggling were not vitiated by perversity; there was no evidence to show conscious abetment or attempt to smuggle foreign exchange by the FFMCs, and the penalty under sections 112 and 114 of the Customs Act was unsustainable.The CEGAT's decision to set aside confiscation and delete penalties was upheld as it was based on absence of evidence showing deliberate involvement or knowledge by the FFMCs in smuggling activities.The Court found no perversity or unreasonableness in the CEGAT's findings, as the material on record did not support imposition of penalties or confiscation against the FFMCs. RATIONALE: The Court applied the statutory framework under the Customs Act, 1962, specifically sections 112, 113, 114, and 121, relating to confiscation and penalties for smuggling and abetment thereof.The Court relied on the principle that findings of fact are not to be interfered with unless a clear case of perversity is demonstrated, and found no such perversity in the Tribunal's exoneration of the FFMCs.The Court noted the importance of the reversal of the Larger Bench decision of the Tribunal by the High Court in Weizmann Ltd., which undermined the legal basis for entertaining the reference in favor of the Customs Department.The Court emphasized that negligence or shortcomings by FFMCs or banks, without evidence of conscious abetment or knowledge of smuggling, do not attract penalties under the Customs Act.The Tribunal's and CEGAT's approach distinguished between possible negligence and knowing involvement, requiring evidence of the latter for penalties under sections 112 and 114.