2025 (8) TMI 418 - AT - Customs

Penalties under Customs Act Sections 112 and 114AA Set Aside Due to Improper Evidence and Procedure

Mahendrakumar Amritlal Jain Versus Principal Commissioner of Customs, (Import), New Customs House, Near IGI Airport, New Delhi

The CESTAT New Delhi held that penalties under sections 112 and 114AA of the Customs Act, 1962, could not be imposed on the appellant for alleged ... Levy of penalty u/s 112 and 114AA of the Customs Act, 1962 - violation of export bound gold jewellery to the domestic area - violation of the conditions contained in the N/N. 57/2000-Cus dated 08.05.2000 - statements made u/s 108 of the Customs Act could not have been considered as relevant for the purpose of imposing penalty under section 112 of the Customs Act - procedure contemplated under section 138B of the Customs Act not followed - HELD THAT:- In M/s. Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [2025 (4) TMI 441 - CESTAT NEW DELHI], the Tribunal examined the provisions of sections 108 and 138B of the Customs Act as also the provisions of sections 14 and 9D of the Central Excise Act, 1944 and observed 'a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain.' In view of the aforesaid decision of the Tribunal, it has to be held that the statements made under section 108 of the Customs Act, on which reliance has been placed by the Principal Commissioner, could not have been considered as relevant for the purpose of imposing penalty under section 112 of the Customs Act - penalty under section 112 of the Customs Act could not have been imposed upon the appellant. Levy of penalty u/s 114AA of the Customs Act - HELD THAT:- This section provides for penalty for use of false and incorrect material. Not only is the finding based on the statements made by persons under section 108 of the Customs Act, but even otherwise it has not been pointed out which statement was made by the appellant knowingly or intentionally or the appellant had made any declaration or statement which was found to be incorrect in any material particular. The appellant was not involved in any documentation required for import or export of the goods nor the appellant had signed any document for clearance of the goods nor did the appellant made anyone else sign any document. Penalty, therefore, could not have been imposed upon the appellant under section 114AA of the Customs Act. The penalties imposed upon the appellant under sections 112 and 114AA of the Customs Act cannot be sustained. The impugned order dated 09.01.2020 passed by the Principal Commissioner to the extent it imposes penalties upon the appellant under sections 112 and 114AA of the Customs Act is, accordingly, set aside - Appeal allowed. ISSUES: Whether penalty under section 112 of the Customs Act, 1962 can be imposed for diversion of export bound gold jewellery to the domestic market when the second proviso to Notification No. 57/2000-Cus dated 08.05.2000 had been omitted.Whether statements recorded under section 108 of the Customs Act, 1962 can be relied upon for imposing penalty under section 112 without compliance with the procedure under section 138B of the Customs Act.Whether penalty under section 114AA of the Customs Act, 1962 can be imposed for knowingly or intentionally making false or incorrect declarations when the appellant neither signed nor caused to be signed any relevant documents. RULINGS / HOLDINGS: Penalty under section 112 of the Customs Act cannot be imposed based on the failure to fulfill conditions of the Notification as the second proviso requiring execution of a bond was omitted by Notification No. 33/2015-Cus dated 15.05.2015, and thus the condition was not in existence.Statements recorded under section 108 of the Customs Act are not relevant or admissible for imposing penalty under section 112 unless the procedure under section 138B is followed, which requires examination of the declarant as a witness before the adjudicating authority and forming an opinion to admit the statement in evidence, followed by an opportunity for cross-examination.Penalty under section 114AA cannot be imposed in absence of evidence that the appellant knowingly or intentionally made, signed or caused to be signed any false or incorrect declaration or document; mere involvement without documentation or signing is insufficient. RATIONALE: The legal framework involves Notification No. 57/2000-Cus and its amendment by Notification No. 33/2015-Cus, which omitted the second proviso imposing bond execution requirements, thereby removing the condition that the appellant allegedly violated.The Court applied statutory provisions of the Customs Act, specifically sections 112, 114AA, 108, and 138B, along with judicial precedents interpreting the mandatory procedural safeguards under section 138B for admitting statements recorded during inquiry or investigation.Reliance on statements under section 108 without compliance with section 138B was held impermissible, referencing Tribunal decisions emphasizing the mandatory nature of examination and cross-examination before admitting such statements as evidence.The Court rejected imposition of penalty under section 114AA in absence of direct involvement in documentation or false declarations by the appellant, underscoring the requirement of 'knowingly or intentionally' making false statements for penalty applicability.