TaxTMI 
TaxTMI 
2017 (10) TMI 521
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....re than a touch of magic realism in all this, 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 of....
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....itute for evidence or excuse a departure from the 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....
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....ect being undertaken by the Alemaos. 11. On 15th May 1991, Fernandes 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 moto....
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....There seems to have been a police station not far away. We do not know why 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 Collector....
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....h April 2004. 25. On 13th December 2004, the CESTAT passed the impugned order, dismissing the 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....
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....Yes 11. 29 June 1991, 4 July 1991, 31 July 1991, and 21 August 1991 John Arcanjo Rebello Yes 12. 8 August 1991 Antonio Maurlio Rock Furtado Yes 13. 7 July 1991 and 12 July 1991 Veny Fernandes Yes 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 ....
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....er's injuries, he reached the spot and saw Alvernaz being attended to by Dr. Alvaro. He denied forcing open the boot of the Contessa. Similarly, on being told about his brother's condition, Ciabro too rushed to the spot of the incident. En route, he saw his brothers at Dr. Furtado's house. He denied that he visited Luis' Bar on 16th May 1991. E. FINDINGS 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 ....
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....ce dated 20th December 1991, required the Appellants, as owners of the vehicles, to show cause against the proposed confiscation of the Contessa, Maruti and the scooter. The reply to the Show Cause Notice dated 27 March 1992 denied all the allegations and requested the withdrawal of the Show Cause Notice. Subsequently, The Collector of Customs by his order dated 14 October 1994 imposed penalties 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 ....
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....he lofted one of the gold bars he (and he alone) claims were there, he estimated its value, purity, weight, and that of the whole cargo. Fernandes also accepted that the presence of gold in the other boxes was unascertainable as did not open these. He extended his assumption to all boxes. There is no valuation report. There is no chemical or other analysis. All we have is Fernandes' statement. That is all. That is, indeed, the whole of it. 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 Baptist....
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....n. All that the section says is that for want of production of a witness, his Section 108 statement does not automatically cease to become relevant. Questions of relevancy and proof are yet determined by the Indian Evidence Act, and the CESTAT wholly failed to take these into account. 43. In Arya Abhushan Bhandar v Union of India, 2002 (143) ELT 25 (SC). it was held that material witnesses not produced for cross-examination, though asked for, amounts to a clear breach 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 ha....
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....des v The State, etc., (1996) 7 SCC 516. The Supreme Court lauded Fernandes' efforts against smugglers in the larger interest of society. In its judgment, the Supreme Court did not, and could not have, pronounced on the factum of smuggled gold. The issue before the Supreme Court related to the protection afforded by Section 155 of the Customs Act. There was no finding returned of the existence of the contraband, or its value. The only point in issue was whether Costao should face the 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....
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....ad opened one of the battery type boxes, took out a gold biscuit and showed it to the crowd. He also relied on the statement of Costao where he narrated the conversation between him and Alvernaz. The latter seemed to have said that he was carrying gold and that he was prepared to share it with Costao. The Supreme Court also believed that gold worth Rs. 8 crores was being smuggled in the car. The evidence before the Apex Court is no better or worse than what we have before us in this regard. It is therefore 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 abou....
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....y no better answer than there was in 2003. 53. In Quinn v Leathem Lord Halsbury [1901] AC 495; See also The State of Orissa v Sudhansu Sekhar Misra and Ors., AIR 1968 SC 647 famously said: "that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other 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 tha....
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....or some water. Neither of which was given. So he threw the gold biscuit back into the dickey, locked it, deflated the tyres of the vehicle, threw the key away, and walked away in his bloodstained clothes in the general direction of one Mrs Antoinite's house (these customs officers live rather dangerously). Meanwhile, Alvernaz was wasted. (Emphasis added) 60. In paragraph 14, the CESTAT describes Fernandes' prosecution as a 'side-show'. 61. This is not the language of the law. It is not what we expect - no, demand - from Tribunals in our jurisdiction. This case had nothing that justified this sneering, sniping superciliousness. Sobriety is everything in matters like this, and to use language of this stripe trivializes something fundamental. G. THE COSTAO NARRATIVE 62. Costao Fernandes' narrative, often repeated, has survived, but without any close scrutiny. In our view, it raises very many questions - none related to his integrity - and furnishes few answers. We do not know, given the time-lines, how and when Fernandes managed to find what the CESTAT calls a 'Good Samaritan', write out a message on a chit (while on a 'motor cycle hurtling') and give it to this Samarit....