2026 (2) TMI 346 - AT - Customs

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 ... Penalty u/s 112(b)(i) - admissibility of statements recorded u/s 108 - procedure u/s 138B - confiscation and smuggled goods - HELD THAT:- Penalties upon the appellants under section 112(b)(i) of the Customs Act has been imposed in view of the statements made by Gourav Jain and the appellants under section 108 of the Customs Act. In the appeal filed by Gourav Jain, it has been held that such statements cannot be considered as relevant as the procedure contemplated under section 138B of the Customs Act was not followed. The gold bars have not been found to be smuggled as documents were produced, though later. For the reasons stated in Customs Appeal, the imposition of penalties upon the appellants cannot be sustained and is set aside. The two appeals are, accordingly, allowed. 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).