2025 (11) TMI 1284 - AT - Customs

Wilful misdeclaration, collusion proven; SCN under s.28(4) r/w s.124 upheld, penalties under s.114A/114AA sustained against importer and officers

CESTAT held that the SCN issued under s.28(4) r/w s.124 of the Customs Act was valid, as investigations established wilful misdeclaration of description, ... Valid issuance of SCN u/s 28 (4) of the Customs Act, or not - Mis-declaration of contraband goods as household goods and goods of daily necessities - re-determination of transaction value - sufficient admissible/corroborative evidence to establish collusion or not - denial of cross-examination - violation of principles of natural justice - quantum of penalties imposed. HELD THAT:- The basis of the charge in respect of the past consignment is by way of a report received from the Director General of Hong Kong (Customs). It is also not the appellants case that the said report of Hong Kong Customs, was not made over to them. The declarations tendered both before overseas Customs officers and/or at Kolkata are a matter of record and open for everyone to take note of the variations within the two set of declarations. As are clearly discernible on the face of it the variations are obvious and quite glaring. The importer has certified and signed as to the accuracy and truthfulness of the import declaration. This argument of the Learned Advocate therefore is unsustainable and dismissed at outset only. It is also not agreed with the submissions of the Learned Advocate that no corroborative evidence was gathered during investigations and no specific role of the appellants could be ascertained. In fact the role played as narrated in paras above clearly brings out the active involvement of the appellants. It has been amply demonstrated that the orders for manual clearances were initiated at the behest of the Deputy Commissioner, even though Navneet Kumar may have denied so. The examination was conducted only in respect of the consignments/boxes as specifically pointed out and particularly identified and communicated to the officers including and by the Deputy Commissioner. The out of charge was given manually, clearances speeded up to prevent detection by Counter Intelligence Agencies. The specific evidence by way of call data record and the innumerable times the contact is established with other prime accused (also co-accused), is the clinching and defining piece of evidence, nailing the entire trail of the menacing manipulation in the matter. All this clearly reveals a deep seated nexus in effecting irregular and improper imports. Moreover, the handwriting expert has also accorded his confirmation in the matter leaving no room for a doubt. Issuance of SCN u/s 28 (4) of the Customs Act - HELD THAT:- It is an outcome of the investigations undertaken that have established that there has been sizeable revenue loss to the government by the act of misdeclaration of goods in quantity, nomenclature and value thereof. The Revenue has issued the SCN as “issued under Section 28 (4) read with Section 124 of the Customs Act, 1962”. There are no substance in this plea raised by the appellants. There is a mandatory requirement of either (a) collusion; or (b) any wilful mis-statement; or (c) suppression of facts by the importer, where there is short levy of duty for invocation of Section 28(4) of the Customs Act, 1962. As, on tabulation a grave mismatch in the declaration made by the importer, while comparing the export and import declarations/documents and clearance of the goods imported vide impugned Bills of Entry and declaration made by the exporter at the port of shipment in respect of these Bills of Entry is obvious. The facts on record reveal a huge mis-declaration in respect of the valuation of the goods and there is also blatant mis-declaration in respect of the description of the items in many of the impugned Bills of Entry. As at the port of shipment, the declared items/products is ‘Mobile Phone. Mobile Phone Parts/ Accessories’, however the importer has declared multiple different items viz. Footwear, Nails, Playing cards, Auto lamps etc. in the impugned Bills of Entry at the time of their clearance from Customs in India. Denial of cross-examination - HELD THAT:- It is observed that statements recorded under Section 108 of the Customs Act, were voluntary and confessional in nature. There is nothing to show that such statements were given under duress or a threat. Moreover, the independent evidence as gathered by way of overseas enquiry is irrefutable. Nothing has also been stated before the lower authority, as to what purpose the corss-examination was being sought for. The plea is no more than a ruse now, made out to criticize the order. Therefore denial of cross examination cannot be held to be violative of Principles of Natural Justice, under the given circumstances. Moreover, denial of request for cross-examination of Noticee who tendered voluntary statements during investigations has also been upheld by Courts on several instances as the factual position varies from case to case and circumstance to circumstance. It is noted from records that a faint plea of seeking shelter under Section 155 of the Customs Act, has also been canvassed by the Departmental Officers. However, having arrived at the irresistible conclusion about the complicity of the said officers in the entire matter - no room exists for the officers to seek such an umbrella of protection. Also we note that the officers were put to sufficient notice and extended all fair play and natural justice during the course of enquiry/adjudication. This plea therefore is clearly unacceptable and dismissed. Section 138B(2) or any other provisions of the Customs Act do not provide for such explicit arrangement for an examination-in-chief, cross examination and re-examination. The instant case is not merely based on the statements of any other person, but also the statements of the noticees themselves, who have sought cross-examination of each other without specifying any stated purpose or even alluding to their of being involuntary and co-erced - In the present matter, the modus, role play, misdeclaration etc. are all well brought out rendering the deliberate infringement in law obvious and crystal clear, hence we hold that the denial of unspecified request for cross examination causes no prejudice to the appellants in determining the final fate of the notice issued. As no cogent reason(s) have been adduced to seek and justify cross-examination, not affording cross-examination to the noticees, does not vitiate the proceedings. The onus of responsibility therefore, cannot be shed off by the officers concerned. It is thus evident that the three officers, together, have acted in a very casual manner, having disregarded completely the guidelines and instructions issued by the Board. They have actively acted and assisted the dubious designs of the unscrupulous importers and other members of the syndicate. Their role in perpetuating the massive fraud cannot be considered lightly. In fact they have facilitated illegal clearance by resorting to examination/inspection of only the fraudulently selected packages for examination, flouting norms for assessment of imported goods and grant of their out of charge, in the process violating and/or circumventing all known legal provisions, in all ways more than one, thereby subverting and undermining the legitimate process. The Hon’ble Calcutta High Court in the case of Vikash Kumar Vs Revenue and Others [2018 (2) TMI 1748 - CALCUTTA HIGH COURT] Calcutta High Court had held that Show Cause Notice issued to the Customs officer in the matter was in his capacity as “any person”. Deriving a cue therefrom, it can be nobody’s case that the three departmental officers herein cannot be issued notice under the Customs Act, and subjected to penal provisions for their contumacious conduct and involvement in the matter. Quantum of penalty imposed - HELD THAT:- Two things be noted here-(i) the law uses the expression “any person,” and (ii) the imported goods should be “liable to confiscation”. Thus actual confiscation of goods has no bearing for levy of penalty under the provision. The quantum of penalty however is actually governed by the various sub classes (i)-(v) depending upon the nature of goods whether prohibited, dutiable etc. The adjudicating authority has taken recourse to sub clause (ii) that concerns dutiable goods and going by the exporters declaration or the nature of imports, it is nobody’s case that the impugned goods were not dutiable. As concerns imposition of penalty under section 114AA, the same comes into operation for intentional making, signing or usage, of material i.e. false or incorrect. The upper cap of its quantum is however restricted therein. Appeal disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a show cause notice invoking Section 28(4) read with Section 124 of the Customs Act can be validly issued in respect of alleged collusive mis-declaration, suppression and under-valuation where departmental officers and non-importer persons are implicated. 2. Whether the re-determination of assessable/transaction value on the basis of overseas export declarations and diplomatic-channel reports is permissible under the Customs Valuation Rules (CVR), including rejection of declared transaction value under Rule 12 and reliance upon Rule 3(1). 3. Whether call data records, handwriting expert opinion and overseas customs reports constitute admissible/corroborative evidence sufficient to establish collusion, mens rea and conspiracy for purposes of adjudication under the Customs Act. 4. Whether denial of cross-examination and related procedural requests violated principles of natural justice in quasi-judicial adjudication under Chapter XIII (Sections 122/122A) and whether non-production of original hard copies of documents vitiates proceedings. 5. Whether RMS classification or status of certain Bills of Entry absolves officers of responsibility where manual Out of Charge (OOC) orders, gate pass timings and post-facto EDI entries indicate irregular clearance. 6. Whether departmental officers and a non-departmental intermediary are liable for confiscation-linked penalties under Section 112(a)(ii) and for use of false/incorrect material under Section 114AA, and what quantum of penalty is appropriate given the facts. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of SCN under Section 28(4) read with Section 124 Legal framework: Section 28(4) permits issuance of recovery notices within five years where short-levy arises from collusion, wilful mis-statement or suppression by importer/exporter/agent/employee; Section 124 applies to persons related to goods who do/abet acts rendering goods liable to confiscation. Precedent Treatment: The Tribunal and High Court authorities recognize extended period invocation where overseas enquiries demonstrate deliberate undervaluation/mis-declaration and collusion; departmental officers can be noticed as 'any person'. Interpretation and reasoning: The Court found on evidence (overseas export declarations, CDRs, handwriting verification, interrogation statements) that elements of collusion, wilful mis-statement and suppression were present. Section 28(4) was properly invoked to demand duty from the importer; Section 124's scope covers persons who abet or are related to goods, so issuance to officers and intermediaries was not impermissible. Ratio vs. Obiter: Ratio - SCN under Section 28(4) and Section 124 is maintainable against non-importer persons where collusion/suppression is established. Obiter - none beyond application to present facts. Conclusion: The SCN was validly issued under the invoked provisions; challenge to maintainability is rejected. Issue 2 - Valuation: reliance on overseas export declarations; rejection of declared transaction value Legal framework: CVR 2007 (Rules 3,4,5,12) and Section 14 allow determination/redetermination of transaction value; Rule 12 permits rejection of declared transaction value when evidence shows it is incorrect. Precedent Treatment: Tribunal and bench authorities have upheld valuation re-determination based on official reports from exporting jurisdiction and diplomatic enquiries where export declarations/invoices were found false. Interpretation and reasoning: Official trade declarations from Hong Kong via diplomatic channels established materially higher CIF/transaction values and different descriptions (mobile phones/parts vs low-value items). Given mis-declaration of description and value, transaction value could be rejected under Rule 12 and reworked under Rule 3(1) without sequentially resorting to Rule 4/5; contemporaneous NIDB data reliance was unnecessary where direct overseas investigation established real transaction value. Ratio vs. Obiter: Ratio - overseas official reports proving inaccurate export declarations are admissible and can form basis for re-determination under CVR; rejection of declared transaction value under Rule 12 is proper where deception proved. Obiter - reference to specific cases corroborative only. Conclusion: Re-determination of assessable value on the basis of overseas declarations was lawful; declared values were rightly rejected and reassessed. Issue 3 - Admissibility and weight of CDRs, handwriting expert opinion and overseas reports Legal framework: Quasi-judicial adjudication admits variety of evidence; official overseas reports and expert forensic opinion are admissible and carry evidentiary value; CDRs are relevant circumstantial evidence of contact/collusion. Precedent Treatment: Decisions recognize the evidentiary value of diplomatic-channel reports and accept graphologist opinions and digital timestamps/CDRs as corroborative; confessional statements under Section 108, if voluntary, are binding and may obviate cross-examination. Interpretation and reasoning: The tribunal treated CDRs as corroborative of frequent contact among syndicate members and officers; handwriting expert confirmation linked manual OOC notations to an officer; overseas customs reports established true description/values. The combination of independent digital/forensic/overseas evidence and voluntary statements provided sufficient corroboration to establish mens rea and conspiracy beyond mere allegation. Ratio vs. Obiter: Ratio - overseas official reports, forensic handwriting reports and CDRs are admissible and may, together with confessional statements, suffice to establish collusion and culpability in customs adjudication. Obiter - on weight of each item relative to others. Conclusion: The impugned documentary, digital and expert evidence were admissible and cumulatively sufficient to support findings of collusion and mis-declaration. Issue 4 - Natural justice, denial of cross-examination and absence of hard copies Legal framework: Principles of natural justice (audi alteram partem; nemo judex) apply in adjudication; Section 122A provides opportunity to be heard; cross-examination is not an absolute right in quasi-judicial customs proceedings and is discretionary. Precedent Treatment: Authorities hold cross-examination is not invariably required; voluntary confessional statements and independent corroborative evidence can justify denial of cross-examination; lack of originals may be mitigated by digital footprints and official overseas corroboration. Interpretation and reasoning: Noticees were supplied SCN and RUDs and given personal hearings and opportunities to comment. Requests for cross-examination were unspecific and not tied to demonstrable purpose; confessional statements were voluntary and corroborated. Absence of some hard copies was not fatal where EDI timestamps, gate pass timings, CDRs and overseas reports provided primary corroboration. Denial of unspecified cross-examination did not prejudice appellants given the available evidence. Ratio vs. Obiter: Ratio - denial of unspecific cross-examination does not violate natural justice where noticees had adequate opportunity to be heard and evidence is corroborative; absence of original hard copies does not vitiate proceedings if other reliable proofs exist. Obiter - guidance on circumstances where cross-examination must be allowed. Conclusion: No violation of natural justice; procedural objections on cross-examination and missing hard copies are rejected. Issue 5 - RMS status and liability of officers despite RMS facilitation Legal framework: Appraising Manual duties require supervision, test-check and control; RMS facilitation does not absolve supervisory officers from ensuring checks or placing alerts; manual OOC and post-facto EDI regularisation is irregular. Precedent Treatment: RMS facilitation recognized as not an absolute shield; officers remain responsible for assessment/examination processes and for interdicting suspicious consignments. Interpretation and reasoning: Even where some consignments were RMS-facilitated, many were examined and cleared by the implicated officers; manual OOC orders preceded physical delivery with later EDI entries, and timestamps/gate passes demonstrated deliberate post-hoc regularisation. Appraising group and shed officers' statutory and manual duties mean they cannot claim non-involvement; selective examination of pre-chosen packages at behest of syndicate indicates active collusion rather than passive RMS effect. Ratio vs. Obiter: Ratio - RMS classification does not absolve officers of liability where evidence shows manual intervention, selective examination and deliberate regularisation to evade detection. Obiter - emphasis on duty to interdict RMS BEs where suspicion exists. Conclusion: RMS status does not exonerate the officers; their conduct evidenced active participation in irregular clearances. Issue 6 - Liability and quantum of penalties under Sections 112(a)(ii) and 114AA Legal framework: Section 112(a)(ii) prescribes penalty up to 10% of duty evaded (or Rs.5,000) for dutiable goods; Section 114AA provides penalty up to five times value for false/incorrect material; confiscability under Section 111 predicates penalty exposure though actual confiscation need not precede penalty. Precedent Treatment: Courts uphold penalties where deliberate undervaluation/mis-declaration and collusion are established; mitigation may be considered based on role and factual matrix. Interpretation and reasoning: The tribunal found clear culpability and conspiracy involving departmental officers and intermediaries, justifying penal liability under the cited sections. However, the tribunal exercised appellate/moderating discretion to reduce quantum of penalties from the lower authority after considering relative roles and ends of justice; the order maintained liability while modifying amounts imposed on each appellant. Ratio vs. Obiter: Ratio - officers and intermediaries found liable to penalties under Sections 112 and 114AA where conspiracy, mis-declaration and use of false documents established; appellate authority may moderate quantum based on role. Obiter - remarks on governance, trust and need for deterrence. Conclusion: Liability to penalties upheld; quantum modified by the tribunal in light of role differentiation and justice considerations; lower order otherwise affirmed.