Abetment penalty and section 108 statements require proof of knowledge and mandatory section 138B compliance before use

Penalty for abetment under section 112(a)(i) of the Customs Act, 1962 requires proof of knowledge of the misdeclaration and intentional participation in the offending import activity; mere facilitation is insufficient, so penalty cannot be sustained without conscious complicity. Statements recorded under section 108 can be used in adjudication only when the mandatory requirements of section 138B are satisfied, including examination of the maker as a witness where applicable and a proper admissibility determination by the adjudicating authority. Reliance on section 108 statements without following that procedure renders them inadmissible for sustaining penalty.

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Issues: (i) Whether penalty under section 112(a)(i) of the Customs Act, 1962 could be sustained against the appellant on the basis of alleged abetment without proof of knowledge of misdeclaration. (ii) Whether the Commissioner could impose penalty solely on the basis of statements recorded under section 108 of the Customs Act, 1962 without following the procedure under section 138B of that Act.

Issue (i): Whether penalty under section 112(a)(i) of the Customs Act, 1962 could be sustained against the appellant on the basis of alleged abetment without proof of knowledge of misdeclaration.

Analysis: Penalty for abetment under section 112(a)(i) requires intentional aiding or active complicity, and mere facilitation without knowledge does not amount to abetment. The facts relied upon did not establish that the appellant had knowledge of the alleged misdeclaration or conscious participation in the offending import activity. In the absence of such knowledge, the statutory basis for penalty was not made out.

Conclusion: The issue was decided in favour of the appellant and against the Revenue.

Issue (ii): Whether the Commissioner could impose penalty solely on the basis of statements recorded under section 108 of the Customs Act, 1962 without following the procedure under section 138B of that Act.

Analysis: Statements recorded under section 108 become relevant in adjudication only when the conditions in section 138B are satisfied. Where clause (a) does not apply, the person making the statement must first be examined as a witness before the adjudicating authority, and the authority must then form an opinion on admissibility in the interests of justice. That mandatory procedure was not followed, so the statements could not be treated as relevant evidence for sustaining penalty.

Conclusion: The issue was decided in favour of the appellant and against the Revenue.

Final Conclusion: The penalty order could not be sustained because the essential element of knowing abetment was not established and the relied-upon statements were inadmissible in the manner used.

Ratio Decidendi: For penalty under section 112(a)(i) of the Customs Act, 1962, abetment requires knowledge and intentional participation, and statements recorded under section 108 of that Act cannot be relied upon in adjudication unless they are made relevant in accordance with the mandatory procedure prescribed by section 138B.

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