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Issues: (i) Whether the penalties could be sustained on the basis of statements and Angadiya records without affording cross-examination and without compliance with Section 138B of the Customs Act, 1962. (ii) Whether the alleged facilitation or connivance of the Customs officers, so as to attract Section 112(b) of the Customs Act, 1962, was proved on the evidence on record.
Issue (i): Whether the penalties could be sustained on the basis of statements and Angadiya records without affording cross-examination and without compliance with Section 138B of the Customs Act, 1962.
Analysis: The statements relied upon against the appellants were not tested through examination and cross-examination, although the adverse material was central to the adjudication. Section 138B makes such statements relevant only when the maker is examined as a witness, subject to the statutory exceptions. The Angadiya documents were also treated as incriminating without proper proof of their evidentiary foundation or regular course of business. In the absence of cross-examination and proper proof, the relied-upon material lacked admissibility and reliability.
Conclusion: The adverse statements and Angadiya records could not lawfully be used to sustain the penalties against the appellants.
Issue (ii): Whether the alleged facilitation or connivance of the Customs officers, so as to attract Section 112(b) of the Customs Act, 1962, was proved on the evidence on record.
Analysis: The record did not establish any direct nexus between the appellants and the smuggling activity. There was no inculpatory statement by the appellants, no reliable proof of the alleged payments, no dependable identification by the passengers, and no corroborative material showing duty roster, presence, or actionable coordination sufficient to prove facilitation or concern with the goods. The surrounding circumstances and recovered contraband did not, by themselves, establish that the appellants knowingly dealt with goods liable to confiscation. On the standard of preponderance of probability, the department failed to prove the alleged role.
Conclusion: The ingredients of Section 112(b) were not made out and the penalties could not be sustained.
Final Conclusion: The appeals succeeded and the penalties imposed on both appellants were set aside.
Ratio Decidendi: Where the department relies on third-party statements as the principal basis of penalty, compliance with the statutory rule on witness examination and cross-examination is essential, and in the absence of reliable corroboration a penalty under Section 112(b) cannot be imposed unless knowing concern with confiscable goods is proved.
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