HC confirms penalty on custom official for clearance of Consignment without proper Verification

Brief of the Case

Delhi High Court held In the case of S.N. Ojha vs. Commissioner of Customs that apart from the statement recorded, there is sufficient corroboration by the fact that as many as 100 consignments were allowed to be cleared without proper verification. The Appellant has been unable to show that any relevant piece of evidence has been overlooked or that the appreciation of the evidence by the Commissioner or the CESTAT is perverse. Considering the number of consignments and the value thereof, the submission that there was heavy pressure of work and therefore, the Appellant cannot be held responsible is unacceptable.

Facts of the Case

The Appellant joined the Customs Department as Customs Appraiser on 25th April 1986. Later on 24th July 1998 he was posted as Assistant Commissioner (Export) at the Internal Container Depot (ICD), Tughlakabad and also Assistant Commissioner (Adjudication). He was in-charge of processing of the shipping bills filed for export of goods through the ICD. He also performed other functions allied and incidental thereto.

The processing of shipping bills at the level of Assistant Commissioner was limited to the verification of online particulars already entered into the EDI system. It is sought to be suggested that at the stage of processing, neither are the original documents produced before the Assistant Commissioner nor are the goods brought within the customs area. On 12th December 1998 the Directorate of Revenue Intelligence (DRI) received information that the old and used clothes were being exported from ICD, Tughlakabad by certain exporters in order to fraudulently claim drawback.

When the containers were examined by the Officers of DRI between 12th December 1998 and 11th March 1999 the goods were found to be old and used. On examination of 26 containers it was found that there was no marking of serial numbers on the cartons in some of the containers. Further although some cartons were numbered, those did not tally with the serial numbers given in the shipping bills, invoices and packing lists. Also the goods were not found as per the declarations given in the shipping bills and invoices by the exporter. Some of the garments were spoiled, discoloured and torn. The value of the goods in all 26 containers was assessed at Rs. 69,26,325 as against the declared FOB value of Rs. 31,39,72,656.77 on which fraudulent drawback claimed was Rs. 5,43,91,420.

A SCN was issued to the several parties including the Appellant on 3rd December 1999 proposing an imposition of penalty under Section 114. Finally a penalty of Rs. 3 lakhs was imposed on the Appellant under Section 114 (i) and 114 (iii).

Contention of the Appellant

The ld counsel of the Appellant submitted below contentions:

During the initial interrogation neither Lovkesh Sharma nor Joseph Kuok, inspectors named the Appellant. However, in their statements tendered after two months after the search, in order to save themselves, they falsely implicated the Appellant. While Lovkesh Sharma, Zaki Anwar, Joseph Kuok and even J.P. Singh had been suspended by the Department, the Appellant was not. He was, in fact, promoted to the grade of Deputy Commissioner.

The Central Bureau of Investigation („CBI‟) registered an FIR on 1st June 1999 against Lovkesh Sharma and Joseph Kuok, the Custom House Agent and the exporter. However, the Appellant was not named in the chargesheet dated 29th April 1999.

The finding of the Commissioner of Customs that the Appellant had been responsible for the clearance of the consignments covered by 100 shipping bills was perverse since the said bills were filed in a span of 20 days and during that time the Appellant had processed about 3000 bills for export of garments. Therefore, 100 bills out of 3000, particularly of five different exporters, could not have raised any suspicion as there was no alert qua the said five exporters. None of the 100 bills was ever returned to the Appellant or was showed to the Appellant after processing.

Lovkesh Sharma and Zaki Anwar were habitual offenders and had been penalised or convicted in several other cases. Zaki Anwar‟s statement that he had shown samples to the Appellant in the room of Superintendent was patently wrong and uncorroborated. Neither Joseph Kuok nor R.S. Tandon, who were the Superintendents, had ever stated in their respective statements that Anwar had showed the samples to the Appellant in their room. There were numerous inconsistencies in the statements of Joseph Kuok, Lovkesh Sharma and Zaki Anwar which made their statements unreliable and inadmissible in law. Reliance was placed on the decisions in Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate 2007 (8) SCC 254, Vinod Solanki v. Union of India 2009 (233) ELT 157 (SC), Union of India v. Bal Mukund 2009 (12) SCC 151, Noor Aga v. State of Punjab (2008).

The public notice issued by the Department required the Assistant Commissioner to scrutinise export declarations/shipping bills by perusing the particulars online. He was not required to inspect the bills even where the drawback claimed was over Rs. 1 lakh. The processing of the shipping bills was complete even prior to the arrival of the goods in the shed. Once a shipping bill was processed, the Assistant Commissioner had no access or control over the movement of the shipping bill or the cargo and would come to know of it if and only if the bills were returned to the Assistant Commissioner‟s screen with objection/query. The Court was shown the chart and the flow sheet showing the movement of the goods from one stage to the other to buttress the above submission.

The fact that there were several calls from Rajesh Kumar only showed that the Appellant as a nodal officer for grievance redressal, had to attend to complaints and queries of the exporters on a regular basis. The inference that he was acting in collusion with Mr. Rajesh Kumar was perverse. Further, in the absence of the transcript of the alleged conversations, the data concerning the calls could not lead to any adverse inference. Despite their being 120 calls from J.P. Singh to Rajesh Kumar and 82 calls from Rajesh Kumar to J.P. Singh, they were both exonerated.

Contention of the Revenue

The ld counsel of the revenue relied on the order passed by the Delhi High Court in Sudhir Sharma v. Commissioner of Customs 2015 (319) ELT 450 (Del) where, in similar circumstances, the Court had upheld the order of the CESTAT which had affirmed the penalty levied on the custom officers involved in a large scale case of fraud in respect of drawback claims. He referred to the order passed by the Supreme Court dated 27th February 2015 in Special Leave Petition (Civil) No. 22381 of 2015 [Ajay Yadav v. Commissioner of Customs (Import and General)] where the SLP of Mr. Ajay Yadav against the above order of this Court was dismissed as withdrawn.

He further pointed out that the Court ought not to interfere with the concurrent findings of the Commissioner and the CESTAT unless they were shown to be perverse. Reliance was placed on the decisions in Naresh J. Sukhawani v. Union of India 1996 (83) ELT 258 (SC); Collector of Customs, Madras v. D. Bhoormul (1974) 2 SCC 544; K.I. Pavunny v. Assistant Collector (HQ), C. Ex. Collectorate, Cochin 1997 (90) ELT 241 (SC); Balkrishna Chhaganlal Soni v. State of West Bengal 1983 ELT 1527 (SC); Vishnu Kumar v. Commissioner of Customs, New Delhi 2010 (26) ELT 356 (Del); Surjeet Singh Chhabra v. Union of India (1997) 1 SCC 508 and Telstar Travels Private Limited v. Enforcement Directorate (2013) 9 SCC 549. Mr. Kaushik also drew the attention of the Court to the fact that as far as the co-noticees were concerned, the appeals filed by Mr. Satish Gupta and Mr. Anwar against the order of the CESTAT had failed. The further appeals filed by them in Supreme Court were also dismissed.

 Held by CESTAT

The CESTAT in the impugned order found that both Lovkesh Sharma and Joseph Kuok, inspectors had been acting under the instructions of the Appellant and had permitted the consignments to be exported without examination. Consequently, the findings of the Commissioner of Customs in the order-in-original were upheld.

 Held by High Court

Since one part of the evidence relied upon by the Department in the present case is comprised of the statements of the co-noticees, the legal position as regards the evidential value of such statements requires to be examined. In the context of the Foreign Exchange Regulation Act, 1973, the Supreme Court in K.T.M.S. Mohd. v. Union of India 1992 (3) SCC 178 emphasized in the context of a retracted statement by the noticee, it had to be shown that the initial statement was voluntary. Any statement obtained under inducement, threat, coercion or other improper means had to be rejected. At the same time, merely because a statement is retracted, it would not automatically lead to the inference that it was obtained involuntarily. The burden would shift to the maker of the statement to establish that improper means had been adopted for obtaining such statement. If the maker failed to establish the allegation of inducement, threat etc. the adjudicating authority would not proceed to decide the show cause notice on the sole basis of such statement but look for other corroborative evidence.

Subsequently, in Vinod Solanki v. Union of India 2009 (233) ELT 157 (SC), the Supreme Court reiterated the above legal position. The Court also referred to the decision in Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate 2007 (8) SCC 254 which held that “a confession of a co-accused person cannot be treated as substantive evidence and can be pressed into service only when the Court is inclined to accept other evidence and feels the necessity of seeking for an assurance in support of the conclusion deducible therefrom.”

In K.I. Pavunny v. Assistant Collector 1997 (90) ELT 241 (SC) , the Supreme Court held in the context of a retracted confession, that “ rule of prudence and practice does require that the Court seeks corroboration of the retracted confession from other evidence.”

From the above discussion, it is clear that while the strict requirements of the Evidence Act, 1872 would not apply to enquiries and investigations undertaken by the DRI or the Customs Department, the broad principle that statement made have to be voluntary and not under threat, coercion, would nevertheless apply. Where the maker of such statement retracts it later by alleging that it was obtained under coercion, threat or duress, the burden was on the maker of the statement to prove such coercion, threat or duress. Even where he fails to do so, the adjudicating authority would not rely solely on the retracted statement but would look for other independent corroboration

The other aspect in the present case concerns the conduct of the officers of the Department and their role in the large scale fraud concerning the claim of duty drawback. The case explaining the legal position in this regard require to be briefly discussed. Vishnu Kumar v. Commissioner of Customs 2010 (26) ELT 356 (Del), concerned the conduct of a sorting assistant at the post office. In the context of a charge against him of abetting the smuggling of dutiable goods under Section 112 of the Act, the Court observed that “knowledge and intention being state of mind, it may not be possible to prove them by way of direct evidence and they have to be primarily inferred from the act and conduct of the charged person, which need to be analysed in the light of attending facts and circumstances of the case.”

In Sudhir Sharma v. Commissioner of Customs 2015 (319) ELT 450 (Del) the conduct of the officers of the Department in a case of abetment of smuggling of silk was being examined. The Court discussed the applicable law and observed that the Appellant there was implicated not solely on the confessional statement of one of the officers but also on the basis of other material.

At the outset, the Court would like to observe that its powers of judicial review in the present appellate proceedings would not extend to again analysing the evidence threadbare. The reference made hereafter to the statements of the officers recorded during the investigation is for the limited purpose of examining whether any relevant evidence has been overlooked or whether the appreciation of the evidence by the authorities below is perverse or whether the conclusions drawn on the analysis of such evidence is that which no prudent person could have arrived at.

The Court notices that the criticism by the Appellant of the statements of Lovkesh Sharma and Anwar is not that they were obtained under duress or coercion but they were made belatedly with a view to escaping liability and passing the blame on to the Appellant. Lovkesh Sharma and Anwar were co-noticees with the Appellant. Their statements are no perse exculpatory. Even the statement of Joseph Kuok does not appear to indicate that he was denying his role altogether.

The contention that the above statements were an afterthought or that they are unreliable and inconsistent is not borne out. Further, as observed by the Commissioner of Customs, there is sufficient corroboration by the fact that as many as 100 consignments were allowed to be cleared without proper verification. The Appellant has been unable to show that any relevant piece of evidence has been overlooked or that the appreciation of the evidence by the Commissioner or the CESTAT is perverse.

As regards the procedure followed, it is not the case of the Department that the EDI computer system had thrown up these discrepancies. The Department has been able to substantiate that the Appellant had given oral instructions to his subordinates on how they should act. The Court is conscious that in the criminal case the CBI chargesheet did not name the Appellant as an accused. However, that cannot by itself lead to the inference that in the adjudication proceedings, where the standard is of preponderance of probabilities, the Department has failed to establish its case.

The fact that Joseph Kuok was exonerated in the adjudication proceedings does not in any affect the case against the Appellant. The case of the Department against the Appellant stands substantiated by the evidence on record. Considering the number of consignments and the value thereof, the submission that there was heavy pressure of work and therefore, the Appellant cannot be held responsible is unacceptable.

Accordingly, appeal of the Appellant dismissed.