Customs statement evidence requires statutory safeguards before penalty can rest on it under adjudication.

A statement recorded under section 108 of the Customs Act cannot be relied on in adjudication unless the statutory safeguard in section 138B is followed. Where the maker is available, the authority must examine the person as a witness, record reasons for admitting the statement in evidence, and then permit cross-examination before using it against the affected person. Treating section 9D of the Central Excise Act as a parallel safeguard, the text notes that reliance on an untested statement without this procedure and unsupported inferences from surrounding material rendered the penalty under section 112(a)(i) unsustainable.

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Issues: Whether the penalty under section 112(a)(i) of the Customs Act, 1962 could be sustained on the basis of a statement recorded under section 108 of that Act without following the procedure prescribed for admitting such statement in evidence.

Analysis: The statement recorded under section 108 of the Customs Act, 1962 is not, by itself, sufficient to found an adverse finding unless the statutory safeguard in section 138B is complied with. When the maker of the statement is available, the adjudicating authority must first examine the person as a witness and then form an opinion, for reasons to be recorded, that the statement should be admitted in evidence in the interests of justice. Only thereafter can the statement be used and the affected person be afforded cross-examination. The same approach is reflected in section 9D of the Central Excise Act, 1944, which the judgment treats as a parallel and mandatory evidentiary safeguard. On the facts, the impugned order relied on the statement without following this procedure and also drew an unsupported inference from the bank account and summons compliance, rendering the finding unsustainable.

Conclusion: The statement recorded under section 108 of the Customs Act, 1962 could not be relied upon in the absence of compliance with section 138B, and the penalty imposed under section 112(a)(i) was unsustainable.

Ratio Decidendi: A statement recorded during customs inquiry is relevant in adjudication only after the statutory procedure for admitting it in evidence is followed, and any penalty based solely on an unfiltered statement cannot be sustained.

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