Penalty under Section 112(b)(i)(ii) Customs Act quashed; Section 123 burden inapplicable absent proven ownership of goods

CESTAT Kolkata set aside the penalty imposed under Section 112(b)(i)(ii) of the Customs Act on the appellant in relation to seized contraband cigarettes and foreign-origin goods. The Tribunal held that Section 123 was inapplicable because the appellant never claimed ownership of the goods, and cigarettes being notified goods did not shift the burden to him absent such claim. The alleged admission of ownership was made in custody, later retracted, and was unsupported by independent corroborative evidence. No verification of the godown owner, no proof of hiring or possession of the premises, and no other inquiry were conducted. Penalty was held legally unsustainable and the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1. Whether the statutory presumption and reverse burden of proof under Section 123 of the Customs Act, 1962 applied to the appellant in respect of the seized cigarettes and other notified goods.

1.2. Whether, in the absence of independent corroborative evidence, the custodial and retracted statement of the appellant and the inculpatory statement of the co-accused were sufficient to establish the appellant's ownership of the seized goods and justify imposition of penalty under Section 112(b)(i) & (ii) of the Customs Act, 1962.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of Section 123 of the Customs Act, 1962 to the appellant

Legal framework

2.1. The Court reproduced and examined Section 123 of the Customs Act, 1962, which places the burden of proving that notified goods are not smuggled on (a) the person from whose possession they are seized and (b) any person claiming to be the owner; the provision applies to notified goods such as cigarettes.

Interpretation and reasoning

2.2. The Court noted that cigarettes are notified goods under Section 123(2) and, in general, the burden to prove that such goods are not smuggled would lie on the person from whose possession they are seized and on any person who claims ownership.

2.3. The Court found that the appellant, in his consistent stand before the adjudicating authority and in appeal, categorically denied ownership of the seized goods and denied any connection with the godown or its owner.

2.4. The only material suggesting ownership by the appellant was (i) his own statement recorded under Section 107 of the Customs Act while in custody on 03.03.2019, and (ii) the statement of the co-accused, both of which were subsequently retracted and alleged to have been obtained under coercive circumstances.

2.5. The Court accepted the appellant's contention that statements recorded while in custody are inherently involuntary and, in the absence of independent corroboration, are inadmissible to fasten liability or to thrust ownership upon him.

2.6. Since there was no independent evidence linking the appellant to the godown or to the goods seized therefrom, the Court held that ownership was not "claimed" by the appellant but was merely thrust upon him through uncorroborated statements.

Conclusions

2.7. The Court held that Section 123 of the Customs Act, 1962, which shifts the burden of proof to the owner of notified goods, was not attracted in the appellant's case because he did not claim ownership of the seized goods and the alleged admission of ownership, being custodial and uncorroborated, could not be relied upon.

2.8. Consequently, no adverse presumption under Section 123 could be drawn against the appellant to support the penalty.

Issue 2: Sufficiency of evidence to sustain penalty under Section 112(b)(i) & (ii) of the Customs Act, 1962

Legal framework

2.9. The penalty under Section 112(b)(i) & (ii) requires proof that the person has, by his acts or omissions, dealt with, kept, concealed, transported, harboured, or was otherwise concerned in the improper importation or attempted improper importation of smuggled goods.

2.10. The Court considered judicial precedents holding that (i) the confession of a co-accused is a weak type of evidence, not substantive, and cannot by itself be the sole basis for conviction or penalty; (ii) such confession can only be used for corroboration when there is other independent evidence; and (iii) uncorroborated co-accused statements or statements under Section 108/107 of the Customs Act cannot alone sustain penal action.

Interpretation and reasoning

2.11. The Court reconstructed the sequence of events and found: officers entered the godown on specific information, searched it in the presence of the co-accused and witnesses, found foreign-origin goods, and initially had no information regarding the appellant; the search was neither in the appellant's presence nor based on any prior input about him.

2.12. The Court observed that the search warrant was not issued in the appellant's name; the appellant was not present in the godown at the time of search and seizure; and his name emerged only from the statement of the co-accused, who implicated him as the alleged owner.

2.13. The appellant came to the Customs office on learning that his friend (co-accused) had been detained. The Court found it consistent with ordinary prudence that a person genuinely involved in smuggling would not voluntarily approach the seizing authority, thereby lending credence to the appellant's version that he had no expectation of arrest and had only come to seek his friend's release.

2.14. The Court accepted the appellant's contention that his statement under Section 107 was obtained while he was in custody, that he had retracted it, and that both his own and the co-accused's statements were alleged to have been procured under coercive circumstances, including obtaining signatures on blank or unexplained documents.

2.15. The Court held that such custodial, retracted statements, without any corroboration, are inherently unreliable and cannot be treated as voluntary or as substantive evidence to establish ownership or conscious involvement in smuggling.

2.16. Referring to the cited precedents, the Court reiterated that the inculpatory statement of a co-accused is a "fragile and feeble" form of evidence, cannot be used as the sole basis to impose penalty, and requires corroboration from independent sources before it can be relied on.

2.17. On the aspect of independent evidence, the Court noted significant investigative gaps: no statement of the godown owner was recorded; no tenancy or lease document was collected; no witness statement linked the appellant to hiring or using the godown; and no other investigation such as call-detail analysis or similar inquiry was carried out to show that the appellant had any control over the premises or the goods.

2.18. The Court held that, in the absence of any such corroborative material, the prosecution's case rested solely on the co-accused's uncorroborated inculpatory statement and the appellant's own retracted custodial statement, both of which were legally insufficient to fix responsibility or establish the requisite mens rea for penalty under Section 112(b).

Conclusions

2.19. The Court concluded that there was no reliable evidence to prove that the appellant was the owner of, or was knowingly concerned with, the seized contraband cigarettes, cosmetics and fireworks stored in the godown.

2.20. It was held that penalty under Section 112(b)(i) & (ii) of the Customs Act, 1962 cannot be imposed where the case against the noticee rests solely on custodial and retracted statements and the exculpatory or inculpatory statements of a co-accused, without any independent corroborative evidence.

2.21. The Court therefore held the penalty imposed on the appellant under Section 112(b)(i) & (ii) to be legally unsustainable and set it aside, allowing the appeal with consequential relief as per law.

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