2025 (10) TMI 1089 - HC - Customs

Appeal dismissed; Rs.10 lakh penalty upheld as ex parte proceedings and co-noticee statement found permissible and valid

HC dismissed the appeal and upheld the Rs.10 lakh penalty. The Tribunal rightly proceeded ex parte despite the appellant's incarceration (1993-2006) ... Right to decide the appeal of the appellant ex-parte when the appellant was in jail from 1993 to 2006 - Tribunal failed to consider the fact that the present appellant is in jail since November, 1993 in connection with the very case - reliance placed on the statement of co-noticee which was recorded by the D.R.I. before issuance of SCN under the provisions of the Customs Act, 1962 - levy of penalty by relying on the statement of co-noticee which was recorded by the DRI before issuance of SCN under the provisions of The Customs Act, 1962. Tribunal is just and right to decide the appeal of the appellant ex-parte when the appellant was in jail from 1993 to 2006 or not - HELD THAT:- Considering the facts of the case and concurrent findings of facts recorded by the Tribunal, it is opined that the Tribunal was right in deciding the Appeal in absence of the appellant, though he was in jail, as the appellant was able to persuade the criminal prosecution before the Court, then the appellant ought to have acted before the Adjudicating Authority as well as the Tribunal. Tribunal did not consider the fact that the present appellant is in jail since November, 1993 in connection with the very case till 5.9.2006 till the Hon'ble the Supreme Court of India acquitted the present appellant and confirming the order of penalty of Rs.10 lacs imposed on the appellant in violation of the principles of natural justice - HELD THAT:- The Hon’ble Supreme Court has upheld the conviction and has reduced the sentence to the time of undergone by the appellant and therefore, there is no acquittal of the appellant and therefore, no interference is called for in confirming the levy of penalty of Rs.10 Lakhs imposed upon the appellant as there is no violation of principles of natural justice. Question is therefore answered in favour of the Revenue and against the appellant. Levy of penalty by relying on the statement of co-noticee which was recorded by the DRI before issuance of SCN under the provisions of The Customs Act, 1962 - HELD THAT:- It appears that after considering the facts of the case as recorded by the Adjudicating Authority, the Tribunal has passed the impugned order relying upon the statement of co-noticee recorded by the DRI which is required to be considered by the Customs Authority under the provisions of the Customs Act as the investigation was carried out by DRI and in view of the decision of the Hon’ble Apex Court in case of Commissioner of Customs Versus M/s. Canon India Pvt. Ltd. [2024 (11) TMI 391 - SUPREME COURT (LB)], now the issues regarding the difference of investigation carried out by DRI and issuance of notice are no more res-integra - the question is also answered in favor of the Revenue and against the appellant. The Appeal therefore, being devoid of any merit, is accordingly, dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal was justified in deciding the appeal ex parte when the appellant was in jail from 1993 to 2006. 2. Whether the Tribunal/Adjudicating Authority violated principles of natural justice by confirming a penalty despite the appellant being in continuous custody (1993-2006) in respect of the same matter. 3. Whether the penalty imposed could be sustained in view of the criminal conviction and the appellate outcomes in connected criminal proceedings. 4. Whether the Tribunal was entitled to rely on statements of a co-noticee recorded by the Directorate of Revenue Intelligence (DRI) prior to issuance of the show-cause notice, when such statements formed part of the Revenue's case. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of ex parte adjudication while appellant was in jail Legal framework: Adjudicatory powers of Customs appellate forum to decide appeals; requirement of opportunity to be heard. Precedent treatment: The Tribunal's practice of deciding appeals where a party absents is recognized where the absenting party had opportunity to participate but failed to act; concurrent findings of fact by adjudicating bodies are accorded weight. Interpretation and reasoning: The Court observed that the appellant, although incarcerated, had been contesting criminal proceedings through the Courts and thus had the ability (and duty) to engage the statutory adjudicatory process before the Adjudicating Authority and the Tribunal. The Tribunal's exercise of its function in the appellant's absence was therefore appropriate where the appellant did not take steps to participate in the appellate adjudication, and there was no demonstration that incarceration rendered participation impossible or that the absence was for reasons beyond control. Ratio vs. Obiter: Ratio - An appellate customs tribunal may proceed ex parte where the appellant, though incarcerated, could have pursued available remedies or otherwise engaged in the proceedings but failed to do so; absence alone, without proof of inability to participate, does not vitiate adjudication. Conclusion: Issue answered in favour of the Revenue; the Tribunal was right to decide the appeal ex parte. Issue 2 - Alleged violation of principles of natural justice due to incarceration Legal framework: Principles of natural justice require opportunity to be heard before imposition of penalty; adjudicating authority must consider circumstances preventing participation. Precedent treatment: Concurrent criminal findings and appellate decisions bear on the correctness of the adjudication and on whether natural justice was offended. Interpretation and reasoning: The Court relied on the fact that criminal conviction was ultimately upheld by the Supreme Court (with reduction of sentence to time served) and that concurrent findings of fact supported the Revenue's case. Given that the appellant pursued and was able to litigate criminal appeals, the Court concluded the appellant had no valid ground to claim inability to participate in the customs adjudication; therefore, confirmation of penalty did not constitute a breach of natural justice. Ratio vs. Obiter: Ratio - Mere incarceration does not automatically vitiate an adjudicatory process or amount to violation of natural justice where the person has had realistic means to secure participation and where factual findings support the penalty. Conclusion: Issue answered in favour of the Revenue; no violation of principles of natural justice in confirming the penalty. Issue 3 - Sustainment of penalty in light of criminal conviction and appellate outcomes Legal framework: Adjudicating authority may impose penalty under Customs Act based on findings from investigation, criminal confessions/statements and forensic/material evidence; criminal conviction in connected proceedings is a relevant matter of fact for civil/penal adjudication under customs law. Precedent treatment: Concurrent findings by adjudicating authorities and tribunals are accorded weight where supported by evidence; appellate criminal rulings that uphold conviction reinforce the factual basis for civil/penal liability. Interpretation and reasoning: The Court noted that the Adjudicating Authority's findings on involvement in illicit manufacture/export of psychotropic substances were corroborated by statements of accused/co-accused, seizure results, laboratory confirmations and subsequent criminal convictions. The Supreme Court upheld convictions (while reducing sentence to time served), reinforcing the factual matrix. Given these concurrent findings and criminal outcomes, the Court found no reason to interfere with the penalty imposed by the Adjudicating Authority and confirmed by the Tribunal. Ratio vs. Obiter: Ratio - A penalty under customs legislation can be sustained where the adjudicatory record, corroborated by criminal conviction and material evidence (seizures, forensic reports), establishes culpability; appellate reduction of sentence does not negate the underlying conviction as a basis for upholding regulatory penalty. Conclusion: Issue answered in favour of the Revenue; the penalty stands. Issue 4 - Reliance on statements of co-noticee recorded by DRI before issuance of show-cause notice Legal framework: Investigation by specialized agencies (here, DRI) may generate admissible statements and evidence; the Customs authority and Tribunal may consider such statements when DRI conducted the investigation and the statements form part of the case record. Precedent treatment: The Court treated the issue as settled by higher authority (relying on a recent Supreme Court decision cited in the judgment), holding that statements recorded during investigation by DRI are admissible and may be considered by Customs authorities even if recorded before issuance of show-cause notice. Interpretation and reasoning: The Tribunal relied on co-noticee statements recorded by DRI in reaching its conclusions. The Court observed that, given the settled position (as articulated by the Supreme Court in the cited authority), differences arising from investigation by DRI and timing of issuance of notice do not render reliance on such statements impermissible. The investigative origin of the statements and their corroborative value (with seizures, laboratory results and admissions) justified their consideration in adjudication. Ratio vs. Obiter: Ratio - Statements of co-noticees recorded during DRI investigation prior to show-cause notice can be validly relied upon by Customs authorities and appellate tribunals when the investigation was by DRI and the statements form part of the evidence; timing of recording vis-à-vis issuance of notice is not fatal where the law permits consideration of such investigative material. Conclusion: Issue answered in favour of the Revenue; reliance on co-noticee statements recorded by DRI was proper. Interrelationship and overall conclusion Cross-reference: Issues 1 and 2 are interlinked - absence from adjudicatory proceedings due to incarceration was held insufficient to impugn fairness where the appellant had engaged in criminal appeals; Issues 3 and 4 are closely related - evidentiary reliance on DRI statements and forensic/seizure material underpinned both adjudicatory and criminal conclusions. Final determination: Taking the concurrent factual findings, forensic evidence, co-noticee statements recorded by DRI, and the subsequent upholding of criminal convictions by higher courts into account, the Court concluded that the Tribunal and Adjudicating Authority acted correctly on all the considered legal questions; all issues were answered in favour of the Revenue and against the appellant.