TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 521
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.... and the whole of it sometimes feels like a piece of fiction, a hybrid of Marquez, Ludlum and Grisham. It could only happen in Goa. Yet, while there is no dearth of distractions, the common issue in law in all five appeals is very narrow indeed: without any seizure or confiscation of the alleged contraband gold, i.e., without it being available and in hand, and based only on the evidence of three witnesses who were not allowed to be cross-examined, could the authorities ever have embarked on and concluded any penalty adjudication proceedings for its 'improper importation' under Section 112(a) of the Customs Act, 1962? There are, to be sure, other issues that arise, implicit or embedded in this question. 2. Having heard learned Counsel on both sides, we are not in the least satisfied that the impugned order can be sustained. The absence of an essential component for penalty adjudication proceedings - the contraband itself - is sought to be substituted by conjecture: 'it must have existed'. Worse yet, the value of the contraband remains unknown to this day, and it is on the rankest speculation, and on one astonishing statement by one officer who plays a central role, viz., that his ....
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.... rigours of the law's mandated processes. The consequences would, otherwise, be appalling: every one of us might then be subjected to the most hideous penalties with no protection from the law. More than the adage of it being preferable that nine guilty persons go free than one innocent be punished, we are mindful of the 2000 year old saying attributed to Cicero: legum servi sumus ut liberi esse possimus: "in the end, we are all slaves to the law so that we may be free." 4. For the reasons that follow, we have allowed all five appeals, and set aside the impugned orders. B. FACTUAL BACKGROUND 5. The appeals all challenge the order and judgment dated 13th December 2004 of the Customs, Excise & Service Tax Appellate Tribunal ("CESTAT", "the Tribunal"), West Regional Bench, at Mumbai, dismissing the Appellants' appeals, five in all. Appeals Nos. C/28 to C/32 of 1995. Those appeals came up from an order-in-original dated 14th October 1994 passed by the 2nd Respondent, the Collector of Customs ("the Collector"). Order in original No 15/Cus/Goa/94. The Collector's order is also under challenge. The CESTAT upheld the Collector's order. 6. The present appeals were admitted on 14th....
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....es hid his motorcycle in some shrubbery and went on to a vantage point near the beach. Construction was on even at night. The site was lit. At about 8:30 pm, in Fernandes' telling of it, he saw Joaquim Alemao, Ciabro Alemao and Alvernaz Alemao arrive at the site. At about 11 pm, Joaquim and Ciabro Alemao went towards the sea. They returned, and left the site in their vehicles. Anticipating a return, Fernandes stayed on site. Dawn broke; the morning of 16th May 1991. Fernandes presumed that the possibility of contraband being smuggled during daylight was remote. He left for his residence at around 8 am on the fateful morning of 16 May 1991. 12. Fernandes is on record to say that later that very morning, at about 11 am, he received a tip-off at his residence of some suspicious activities involving the Alemaos at the Fatrade/Varca Holiday Beach Resort site. He rushed back. There, he claims he saw a white Contessa no GA-02A-4567, a blue Maruti motor car no DAC 5942 and a black Fiat car at the site. The cars all had dark tinted glasses. 13. Fernandes claims he saw Ciabro Alemao and two 'canoes' with outboard motors approaching Carmona Beach from the high seas. At noon, the canoes touc....
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....Fernandes did not seek aid there. There is also some telling of Fernandes, still injured, then swimming across a river and losing his clothing in the process. Nothing turns on either of these facts for our present purposes and so we press on. 15. At about 1:00 pm, the Customs Office at Mormugao received a telephone call from Fernandes' wife saying her husband had detained a vehicle with contraband goods near the Ramada Hotel at Varca. The Customs staff rushed to Varca at around 1:45 pm, to find the Contessa parked off the road at Gunneavaddo. There was no one in the car. There was nothing in the boot, which had been left open. 16. Subsequent investigations made the claim that Joaquim Alemao, Ciabro Alemao, Reginaldo Rodrigues, Romeo, Roy Miranda, Anton Fernandes, and others came to the spot where the Contessa was, opened its boot, removed the gold and took it away. Churchill Alemao took Alvernaz to Dr. Maurito Rock Furtado's home in Varca. Alvernaz died there. 17. On 7th June 1991, the CBI registered a crime against Costao Fernandes for murdering Alvernaz. 18. On 20th December 1991, the Collectorate of Customs and Central Excise, Goa, issued a show cause notice to the present A....
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....Appellants appeals. On 3rd January 2005, the Deputy Commissioner of Customs (Preventive), Custom House, Mormugao, Goa, served letters on the Appellants under Section 131 of the Customs Act, 1962, calling upon the Appellants to pay the penalties. A detention notice followed on 1st February 2005. These appeals were filed on 14th February 2005 and admitted a month later on 14th March 2005. 26. From this narrative, it is clear that by the time the CESTAT passed its order of 13th December 2004, two things had come to pass; (i) Fernandes had finally obtained a quashing of the murder or homicide case launched by the CBI; and (ii) the Customs Case filed against the Appellants had failed all the way to the Supreme Court. Of course, the principal reason for the latter, the dismissal of the Customs Case, is that the contraband in question was not produced at all. As we shall see, this is pivotal to the present case, for this lacuna continues, and is sought to be covered up by a reliance on some observations of the Supreme Court in Fernandes' entirely separate case regarding the homicide charges against him. C. QUESTIONS RAISED 27. The substantial question of law framed at the time of admis....
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....es 14. 8 July 1991 Francis Correia Yes 15. 3 July 1991 and 25 July 1991 Quiteria D'Silva Not attended 16. 3 July 1991 Treza Mergulhao Not requested for cross examination 17. 3 July 1991 Shalini Peter Not attended 18. 3 July 1991 Eknath Verenkar Not attended 19. 8 June 1991 H. Padmanabha Pai Not attended 20. 6 July 1991 Cruz Rodrigues Yes 21. 2 July 1991 Sergio Almeida Yes 22. 13 June 1991, 22 August 1991, and 29 August 1991 Churchill Alemao Accused 23. 11 June 1991, 19 June 1991, 26 July 1991, 30 July 1991, and 1 August 1991 Joaquim Alemao Accused 24. 10 June 1991, 13 June 1991, 15 July 1991, 19 August 1991, and 22 August 1991 Ciabro Alemao Accused 25. 30 August 1991 Anthony John Rodrigues aka Reginald Rodrigues Accused 26. 6 July 1991 Emilia Monteiro Yes 27. 29 August 1991 Ashok Bhasin Accused 28. Not interrogated Roy Miranda and Anton Fernandes Absconding 29. Sharanappa, the watchman at Varca Holiday Beach Resort, stated that at about 7 am on 16th May 1991, he saw Joaquim Alemao and Subhash Pandey arrive at the site. Joao Minguel Luis, the owner of Luis Bar, claimed Ciabro Alemao visited him, and was accompanied b....
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.... 33. What, if anything, is to be made of all this? We must be mindful of two cardinal aspects: first, that we are concerned with an adjudication and penalty case; and, second, that we are constrained by a substantial question of law. We are not here to re-appreciate evidence. We can, however, test whether the conclusions drawn in the impugned orders are supported by the material. If not, there is perversity. 34. In summary, the testimony of Sharanappa is that Joaquim was present at the Varca Holiday Resort construction site. Alvernaz's presence is confirmed by his brother Churchill. Luis said Ciabro was present at the beach, but changed his statement during the personal hearing, and retracted his statement that he was threatened by Ronnie Rodrigues. All that this shows as undisputed, is that Alvernaz and Alemao were at the construction site on 16th May 1991. As against this, the only evidence that canoes approached the shore and something alleged to be contraband was being smuggled was that of Fernandes. It is impossible to conjecture that statements were withdrawn or changed due to influence or pressure. 35. Vincy, Baptista and Sebastiao are the witnesses to whose evidence we m....
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....under Sections 112(a) and (b) of the Customs Act. That Section reads: 112. Penalty for improper importation of goods, etc.- Any person- (a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, or (b) who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under section 111, shall be liable,- (i) in the case of goods in respect of which any prohibition is in force under this Act or any other law for the time being in force, to a penalty not exceeding the value of the goods or five thousand rupees, whichever is the greater; (ii) in the case of dutiable goods, other than prohibited goods, to a penalty not exceeding the duty sought to be evaded on such goods or five thousand rupees, whichever is the greater; (iii) in the case of goods in respect of which the value stated in the entry made under this Act or in the case of baggage, in the dec....
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....Testing gold is a science. It demands a laboratory test and a professional appraisal. 39. Section 111 of the Act lists the goods liable to confiscation. Section 112(a) of the Customs Act, set out above, speaks of an act or such omission that results in the goods liable to confiscation. Section 112(b)(i) stipulates a penalty not exceeding the value of the goods or Rs. 5000. Without cogent material of the contraband itself, its value, weight and purity, there is simply no basis for the penalties imposed. 40. These witnesses did not present themselves for crossexamination: Vincy Soares; Sebastiao Fernandes; Sharanappa Mallappa Padagad; Mallappa Mather; Lily D'Silva; Padmanabha Pai; Shalini Peter; Quiteria D'Silva; Tereza Mergulhao; and Baptista Fernandes. The Collector maintains that the Customs Department made all reasonable efforts to secure the presence of the witnesses. The three witnesses key to our discussion, Vincy Soares, Baptista Fernandes and Sebastiao Fernandes, never received a summons. They were said to be abroad. 41. As to these three witnesses (Vincy, Sebastian and Baptista), and the failure to produce them for cross-examination, the CESTAT relied on their Section 10....
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....of natural justice. In Union of India v TR Varma, [1958] 1 SCR 499 in paragraph 10, the Court held : "it may be observed that rules of natural justice require that a party should have the opportunity of adducing all relevant evidence on which he relies, that the evidence of the opponent should be taken in his presence, and that he should be given the opportunity of cross-examining the witnesses examined by that party, and that no materials should be relied on against him without his being given an opportunity of explaining them." 44. The Tribunal placed reliance on Cyrus Nazar Kolah v Union of India, 1988 (19) ECR 253 (Bombay) in which there were simultaneous criminal and customs proceedings. The appellant had been discharged by the magistrate. He sought quashing of the customs penalty. The Tribunal drew support from a finding that of the High Court that the mere fact that the petitioner was acquitted by the magistrate in a criminal case is not enough to hold that penalty imposed in the departmental proceeding cannot be sustained. However, the Tribunal did not consider the judgment in its entirety or in its correct perspective. What the Court held was that a penalty could not be ....
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.... criminal prosecution or whether he was afforded protection by Section 155. This could not aid the CESTAT in its findings in an entirely distinct confiscation and penalty case. The CESTAT, instead of appreciating this entirely self-evident position, proceeded to hold that the Supreme Court in the Costao Fernandes case before it had found there to be smuggled gold, and therefore nothing remained to be established. 47. What the Supreme Court said was actually this: 8. None of the aforesaid has legs to stand, as would appear from what is being stated later. A biased investigation of the type at hand from the CBI has indeed pained us, because people of this country have still high hopes from it, which would get dashed if bias creeps in its investigation. But then, the deceased was no ordinary mortal, as he was a brother of the one time Chief Minister of Goa; and the occurrence had taken place in Goa. 9. What finds the appellant before this Court is denial of the protection made available by Section 155 of the Customs Act, 1962 (the Act).... ... 17. The Additional Solicitor General has another submission to make. The same is that being faced with an organised underworld of smugglers....
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....ore safe to rely on the findings of the Apex Court that the car was carrying gold." 50. As an instance of completely and materially misdirecting itself, it is difficult to conceive of a better instance than this. The CESTAT was right in this much: that the question of whether the boxes contained gold was at large. But that question was not concluded because the material before the Supreme Court and the CESTAT was the same. The two cases were different, and the Supreme Court was not hearing a customs case or a penalty case; had it been, then the lack of evidence before it (as before the CESTAT) would have engendered another result. What the Supreme Court was hearing was a case about the prosecution of Fernandes, and his claim to immunity under Section 155. 51. Indeed, there is material in the narrative that this very lack of material in the context of a Customs Case, did not move the Supreme Court to hold as the CESTAT now has. Consider, first, the findings of this Hon'ble Court in the Criminal Revision Application No 8 of 2001: Union of India v Churchill Alemao. (2009) 245 ELT 137 : 2003 SCC Online Bom 1294. There, this Court said: 4. The learned Trial Court discharged the Compl....
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....is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it." (Emphasis added) 54. In Union of India and Ors v Dhanwanti Devi and Ors (1996) 6 SCC 44 it was held that the only thing in a decision that binds a party is the principle upon which the case is decided and that it would not be profitable to extract sentences from a judgment and build upon it. The essence of a decision is its ratio and not its every observation. A binding precedent is the question the court actually decides. 55. The contention of the Learned Counsel for the Appellants that Section 138(B) of the Customs Act applies only to prosecution of offences under the Customs Act and not to departmental adjudication proceedings is not well-founded. A bare perusal of Section 138(B)(1) (set out above) tells us otherwise. It is not possible to hold that the word 'proceeding' excludes departmental adjudication proceedings. Indeed, even the CESTAT did not think so, and we see no reason to consider this plea now. 56. Consequently, if there were gaps, retractions and inconsistencies, and even if the Section 108 statemen....