Statements Under Section 108 of Customs Act Found Non-Admissible; Tribunal's Order to Set Aside Penalties Upheld
In a significant ruling, the Kerala High Court dismissed the appeals filed by the Central Board of Indirect Taxes and Customs, affirming the Customs, Excise, and Service Tax Appellate Tribunal's (CESTAT) decision to set aside penalties imposed under the Customs Act, 1962. The appeals stemmed from a high-profile gold smuggling case where penalties were levied against various individuals, including Subair Kallungal, for alleged involvement in smuggling activities through Cochin International Airport.
The case involved multiple appeals from the revenue department, challenging the Tribunal's order dated March 29, 2022, which annulled the penalties imposed on several respondents. On September 19, 2013, two women were found with concealed gold bars near the airport, leading to a series of legal actions based on statements recorded under Section 108 of the Customs Act.
The High Court bench, comprising Justices A. Muhamed Mustaque and Harisankar V. Menon, meticulously examined the procedural compliance of the statements recorded under Section 108 of the Act. It was contended by the revenue that these statements were essential evidence. However, the court noted that the statutory requirements under Section 138B, which mandates examination and cross-examination of witnesses whose statements are used as evidence, were not adhered to.
The court emphasized that the Tribunal was justified in setting aside penalties based on statements that did not meet the procedural safeguards required by the law. The judgment reiterated that without the examination of witnesses in accordance with Section 138B, the statements cannot be considered reliable evidence.
Moreover, the simultaneous imposition of penalties under Sections 112(a) and 112(b) of the Customs Act was deemed impermissible, with the statute allowing for either one of them, but not both. This interpretation was crucial in the Tribunal's decision to nullify penalties against individuals like Ashraf Kallungal and T.K. Faiz.
The High Court further clarified that the failure to record a statement under Section 108 does not preclude respondents from contesting proceedings, as the principle of natural justice, embedded in Sections 122A and 124 of the Act, ensures a reasonable opportunity for defense.
This ruling underscores the importance of procedural compliance in adjudication under the Customs Act and reinforces the necessity for evidence to be admitted in line with statutory provisions to uphold penalties. The revenue's appeals were dismissed, reaffirming the Tribunal's holistic appreciation of evidentiary requirements.
Bottom Line:
Customs Act, 1962 - Admissibility and evidentiary value of statements recorded under Section 108 of the Act are subject to compliance with the procedural safeguards under Section 138B - Statements cannot be relied upon unless the person making the statement is examined as a witness, allowing the right of cross-examination - Simultaneous imposition of penalties under Section 112(a) and 112(b) is impermissible as the statute provides for either one of them.
Statutory provision(s): Customs Act, 1962 Sections 108, 112(a), 112(b), 122A, 124, 138B
