Admissibility of recorded customs statements and penalty under section 112(b)(i): penalties set aside after noncompliance with 138B procedure

Admissibility of recorded customs statements was contested because the prescribed procedural safeguards for special confiscation were not followed; the tribunal found those statements irrelevant where the procedure was not complied with, and consequently penalties imposed under the customs penalty provision could not be sustained. Separately, seized gold bars were not held to be smuggled after production of supporting documents; on those bases the penalties were set aside and the appeals allowed.

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Issues: (i) Whether the imposition of penalties under Section 112(b)(i) of the Customs Act, 1962 upon the appellants for carrying/possessing the seized gold can be sustained where statements under Section 108 were relied upon but the procedure under Section 138B was not followed and a co-accused's appeal held the gold not to be smuggled.

Analysis: The appeals challenge confirmation of penalties imposed under Section 112(b)(i) based on recorded statements under Section 108 and related findings of involvement in smuggling. In Customs Appeal No. 50647 of 2024 concerning the principal accused, it was held that the gold bars were not smuggled and that statements recorded under Section 108 could not be treated as relevant evidence because the procedure required by Section 138B was not complied with. The impugned penalty orders against the present appellants were founded on the same class of statements and on the finding that the gold was smuggled. Given the earlier reasoned decision that the gold was not smuggled and that the Section 108 statements lacked admissibility in the absence of Section 138B procedure, the factual and evidentiary basis for imposing penalties under Section 112(b)(i) on these appellants is undermined.

Conclusion: The imposition of penalties under Section 112(b)(i) upon the appellants is not sustainable and is set aside; decision is in favour of the appellants (assessee).

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