Case Law Details
S A Dalal And Co Vs Commissioner of Customs (Import) (CESTAT Mumbai)
Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Mumbai has set aside a penalty of ₹10 lakh imposed on S.A. Dalal & Co., a Customs House Agent (CHA), by the Commissioner of Customs (Appeals). The tribunal’s decision, pronounced on June 10, 2025, underscores the importance of due process and corroborative evidence in imposing penalties.
The case, S.A. Dalal And Co. Vs. Commissioner of Customs (Import), centered on the legality of a penalty levied under Section 112A of the Customs Act, 1964. The appellant CHA was subjected to adjudication based on statements recorded from an importer, Shri Prabhat Tarsaria of M/s. P.T. Mobile and Accessories, and Mr. Rupin Parekh, a director of M/s. Parikh Clearing Agency, under Section 108 of the Customs Act. Crucially, the appellant’s statement was not recorded, nor were any documents seized from their possession during the investigation.
The Commissioner (Appeals), in an order dated March 15, 2022, had upheld the penalty, stating that recording a statement was not a prerequisite for imposing a penalty under Section 112. However, the CESTAT found this reasoning problematic.
The appellant’s counsel cited judicial precedents, including Enterprise International Ltd versus Commr of Cus.(Port), Kolkata (2010 (259) E.L.T. 629 (Tri.-Kolkata)) and Warren Trading Pvt. Ltd versus Commissioner of Customs, Kandla (2008 (222) E.L.T. 313 (Tri.-Ahmd.)). These cases established that penalties are not sustainable when an investigation has not been conducted at the appellant’s end, nothing incriminating has been recovered from their premises, and their statement has not been recorded.
The appellant had argued during the adjudication process that the show-cause notice relied on oral depositions and documents from other parties, with no evidence suggesting the CHA’s awareness of any undervaluation.
The CESTAT, disagreeing with the Commissioner (Appeals)’s findings, highlighted a violation of natural justice. The tribunal observed that bringing someone to a trial stage without an opportunity to defend themselves during the investigation phase was improper. Furthermore, the tribunal invoked Section 114 Illustration (b) of the Indian Evidence Act, which states that an accomplice’s or co-accused’s statement is unreliable unless corroborated by material particulars.
Consequently, the appeal was allowed, and the order of the Commissioner (Appeals) confirming the penalty of ₹10 lakh on S.A. Dalal & Co. was set aside, with consequential relief to the appellant.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Legality of the penalty imposed u/s. 112A of the Customs Act, 1964 on appellant CHA is assailed in this appeal.
2. I have heard from both the sides on the other day.
3. Facts of the matter would go to show that appellant was put to show-cause on the basis of statement recorded from the Importer Shri Prabhat Tarsaria, Proprietor of M/s. P. T. Mobile and Accessories and another Director of M/s. Parikh Clearing Agency, Mr. Rupin Parekh u/s. 108 of the Customs Act, and without appellant being summoned for its statement or without any record /documents being seized form appellant’s possession during investigation, it had to suffer adjudication process that resulted in imposition of penalty of Rs. Ten lakhs u/s. 112A of the Customs Act. Appellant’s unsuccessful attempt before the Commissioner (Appeals) has brought the dispute to the present forum.
4. In this context, finding of the Commissioner (Appeals) in his order dated 15.03.2022 at para 5(ii) of worth reproducing:
Further the contention of the importer that “Neither their statement was recorded nor any investigation done against them.” I find as far as investigation is concerned, investigation with regard to their role has been carried out. However as far as recording of their statement is concerned, I don not find that there is any pre requisite of recording of statement for imposing penalty under section 112.
5. During the course of hearing Ld. Counsel for the Appellant, with reference to case laws reported in –(a) Enterprise International Ltd versus Commr of Cus.(Port), Kolkata reported in 2010 (259) E.L.T. 629 (Tri.-Kolkata) and (b) Warren Trading Pvt. Ltd versus Commissioner of Customs, Kandla reported in 2008 (222) E.L.T. 313 (Tri.-Ahmd.), submitted that judicial precedent is set on the issue that when investigation has not been conducted at the appellant’s end and nothing incriminating has been recovered from the Appellant’s premises and even statement of the appellant was not recorded, fine imposed on the appellant is not sustainable. Further, as could be noticed from the adjudication order, appellant had contested against such proposal for imposition of penalty on the ground that show-cause was based on oral deposition of certain persons and documents recovered from other persons, to which no evidence of undervaluation can be attributed since none of them had stated that appellant CHA was aware of the undervaluation.
6. Though Ld. Authorised Representative Shri Dinesh Nanal, reiterated the findings of the Commissioner (Appeals), I am not agreeable to such findings as noted above for the reason that apart from principle of natural justice being violated in bringing someone to trial stage without giving him any opportunity to defend himself at the time of investigation, section 114 Illustration (b) of the Indian Evidence Act clearly states that statement of accomplice /co-accused is unworthy of credit unless he is corroborated with material particulars. Hence the order.
The Order
7. The appeal is allowed and the order No. MUM-CUSTM-AMP-APP-1924/2021-22 dated 15.03.2025 passed by the Commissioner (Appeals) confirming penalty of Rupees Ten Lakhs on the Appellant CHA M/s. S A Dalal And Co is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 10.06.2025)
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