The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that statements made under Section 108 of Customs Act cannot be relied upon if procedure under Section 138B is not followed.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain.
The appellant, Ashfaq Baig has challenged the order passed by the Commissioner of Customs, ICD, Tughlakabad, New Delhi in so far as it imposes penalty of Rs. 5 lakhs upon him under section 114 of the Customs Act, 1962. Intelligence was received by the department that M/s. Sundram Export Pvt. Ltd. and M/s. Netcompware Pvt. Ltd. had exported CD-ROMs under Duty Entitlement Pass Book6 Scheme by grossly overvaluing it with an intention to wrongly avail DEPB scrips and evaded customs duty.
Enquiries were, therefore, initiated by the Directorate of Revenue Intelligence. Statement of various persons, including the appellant, were recorded and ultimately a show cause notice dated 04.12.2000 was issued to 26 persons including the appellant.
The case setup by the department in the show cause notice is that Sundram Export exported 96,800 pieces of CD-ROMs at highly inflated Freight on Board value of US 19$ per piece. Another exporter, by name of Netcompware, also exported a consignment of 40,000 pieces of CD- ROMs at overvalued price of US 19$ per piece. The 5 shipping bills covering the above exports were filed under the DEPB Scheme.
The department contended that the overvalued export was used by the exporter to fraudulently procure DEPB scrips from the Directorate General of Foreign Trade and subsequently these DEPB scrips were sold in the open market and were thereafter used by companies to import goods without payment of duty.
The department stated that the 40,000 CD-ROMs exported by Netcompware to Hong Kong were subsequently re-imported and cleared by M/s. Arvind International10 under a Bill of Entry dated 08.09.1998. It is said that the appellant was involved in the day to day affairs of Netcompware.
The appellant contended that the order is based on the statements made by Pankaj Soni under section 108 of the Customs Act. Such a statement cannot be relied upon in view of the provisions of section 138B of the Customs Act. The appellant is not at all connected with the day to day affair of Netcompware and the finding to the contrary has been recorded by the Commissioner only on the basis of statements made under section 108 of the Customs Act.
The tribunal noted that except for the statement made by Pankaj Soni under section 108 of the Customs Act, there is no other evidence which has been considered by the Commissioner in the impugned order for imposing penalty upon the appellant under section 114 of the Customs Act. As this statement cannot be relied upon, the imposition of penalty upon the appellant under section 114 of the Customs Act cannot be sustained and is set aside.
Case Details
Case Title: Mr. Ashfaq Baig Versus Commissioner of Customs
Case No.: Customs Appeal No. 329 Of 2006
Date: 06.06.2025
Counsel For Appellant: Alekshendra Sharma
Counsel For Respondent: Rajesh Singh
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