Penalty u/s 112(b) of Customs Act, 1962 unsustainable in absence of sufficient evidence

Vipul Joshi Vs C.C.-Ahmedabad (CESTAT Ahmedabad)

CESTAT Ahmedabad held that direct participation and knowledge on the part of the person has to be established. In absence of sufficient evidence, penalty u/s 112(b) of the Customs Act, 1962 cannot be levied.

Facts-

Post search by the officers of Airport Intelligence Unit, Ahmedabad it was argued that there was smuggling of gold from Dubai to India with intent not to pay Customs Duty. Accordingly, show cause notices were issued proposing confiscation of the seized goods under Sections 111(d), 111(i), 111(I) and 111(m) of the Customs Act, 1962 and demanding customs duty and imposition of penalty under Section 112(a) & 112 (b) and Section 114A & Section 114AA read with Section 123 of the of the Customs Act. Appellant was also issued show cause notice whereby it was alleged that the Appellant had also financed to Shri Rutugna Trivedi, which was used by him to procure Gold in Dubai and to smuggle the same into India. Thus it appears that Appellant was knowingly involved in smuggling of gold into India which he had reasons to believe the smuggle under Section 111 of the Customs Act, 1962. After following due process, the adjudicating authority vide impugned order dated 29-11-2021 confirmed the charges and demands proposed in Show Cause Notice. He imposed the penalty of Rs. 2,28,00,000/- under Section 112(b)(i) of the Customs Act 1962 on the appellant. Being aggrieved, the appellants preferred appeal before this Tribunal.

Conclusion-

Held that in the present case the activity of financing of a fund has been turned by the Ld. Commissioner into direct participation in the conspiracy to smuggle gold. For imposition of penalty under Section 112(b) of the Customs Act, 1962 the knowledge on part of the person has to be established. In the present matter department failed to do so. During the investigation officers did not find any documents/ piece of paper or any other evidence from the premises of Appellant to show that the Appellant financed money for smuggling of gold into India.

From the section 112(b) it can be seen that penalties can be imposed only if the individuals were in knowledge of the act of smuggling. Further, for imposition of penalty under Section 112(b) of the Customs Act, 1962 the knowledge of offence on part of the person has to be established. In the present matter department failed to do so.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

This appeal isfiled by the Appellant against the Order-In-Original No. AHM-CUSTM-000-COM-015-016-21-22 dated 29.11.2021 whereby the Commissioner of Customs, Ahmedabad imposed the penalty of Rs. 2,28,00,000/- under Section 112(b)(i) of the Customs Act 1962 in relation to his role in the alleged smuggling of Gold activity.

2. The brief facts of the case as per the department is that the officers of Airport Intelligence Unit, Ahmedabad found that Shri JigneshSavaliya working as Duty Officer, M/s Globe Ground India on 04.06.2019, to be behaving in a suspicious manner with a passenger in the Aerobridge of Bay No.32 and found to be in possession with yellow metals. The officers conducted personal search of Shri Jignesh Savaliya whereby it was found to him carrying 9 brown packets in the presence of panchas under panchanama dtd. 04.06.2019. The officers opened the packet and found the same contained 47 gold bars. The officers seized the said gold under Seizure memo dated 04.06.2019. Statement of Shri Jignesh Savaliya was recorded wherein he stated that the said gold bars were given to him by a person named Shri Lokesh Sharma and he was supposed to hand over the same to Shri Rutugna Trivedi outside the Airport terminal. The officers further carried out the investigation and the evidences in the form of statements of persons involved in smuggling of gold, documents recovered after searches carried out at various locations, documents recovered and retrieved from the Mobile phones of various persons involved in smuggling of gold, data storage devices recovered from the residence of Ms. Nita C Parmar and also the email recovered from account of Shri Jignesh Savaliya and Shri Jitendra Rokad reveal that a Gold smuggling racket was orchestrated and operated by Shri Rutunga Trivedi, his wife Smt. Hina Rutunga Trivediand their employee and key associate Ms. Nita C Parmar. This smuggling activity was aided by Shri Jignesh Savaliya, Asst. Duty Officer of M/s Global Ground India Pvt. Ltd., ground handling agency working at Sardar Vallabhbhai Patel International (SVPI) Airport, Ahmedabad, in as much as he received the gold from these carriers and brought them outside the airport by exiting from the cargo gates. It further emerges from the evidences that this smuggling racket was actively financed by Shri Jitendra Rokad, Mehul Bhimani, Raju Goswami, Vipul Joshi and Lalit Jain.

2.1 The smuggling of gold from Dubai to India was carried out with intent not to pay Customs Duty using the persons as carriers. Upon arrival at SVPI Airport, Ahmedabad the gold carried by the carriers sent by Shri Rutugna Trivedi was handed over to Shri Jignesh Savaliya, either in the Aerobridge or in the ramp area of the airport. Shri Jignesh Savaliya had been concealing the gold in the dress worn by him and smuggled the same into India by exiting SVPI Airport, Ahmedabad and was handed over by him to Shri Rutugna Trivedi or the specific person sent by Shri Rutugna Trivedi and informed to Shri Jignesh Savaliya. Adopting the above modus operandi, Shri Rutugna Trivedi and his associates smuggled into India 4886.206 Kgs. Gold during the period from 07.03.2013 to 26.05.2019. The authenticity of the details of the gold smuggled into India by various carriers sent by Shri Rutugna Trivedi has also been corroborated by the travel details provided by the travel agent through whom the tickets were purchased for the carriers on the instruction of Shri Rutugna Trivedi & Ms. Nita C. Parmar and the dates of arrival of the carriers in India at SVPI Airport, Ahmedabad. The details recorded in the diary of Shri Jignesh Savaliya as well as in the WeChat messages recovered from his mobile phone were verified with the actual arrival dates of the persons as available in records of Airport and found to be correct.

2.2 With this background, show cause notices were issued proposing confiscation of the seized goods under Sections 111(d), 111(i), 111(I) and 111(m) of the Customs Act, 1962 and demanding customs duty and imposition of penalty under Section 112(a) & 112 (b) and Section 114A & Section 114AA read with Section 123 of the of the Customs Act. Appellant was also issued show cause notice whereby it was alleged that the Appellant had also financed to Shri Rutugna Trivedi, which was used by him to procure Gold in Dubai and to smuggle the same into India. Thus it appears that Appellant was knowingly involved in smuggling of gold into India which he had reasons to believe the smuggle under Section 111 of the Customs Act, 1962. After following due process, the adjudicating authority vide impugned order dated 29-11-2021confirmed the charges and demands proposed in Show Cause Notice. He imposed the penalty of Rs. 2,28,00,000/- under Section 112(b)(i) of the Customs Act 1962 on the appellant. Being aggrieved, the appellants preferred appeal before this Tribunal.

3. Shri Hardik Modh, Learned Counsel appearing on behalf of Appellant submitsthat Learned Commissioner erred in imposing penalty on Appellant. The impugned order violates the principles of natural justice. The impugned order has solely relied upon the worksheet title “Vipul Joshi” which was found in the folder named “Rajubhai” from pen drive retrieved from the residence of Ms. Nita Parmar. Appellant vide letter dated. 12.10.2021 and 30.11.21 demanded the said worksheet and reiterated the said request at the time of personal hearing. Despite this facts, the Ld. Commissioner passed the impugned order without supply of these vital documents. Since the impugned order has been passed without supply of these documents, it violates the principles of natural justice, and therefore, the same is required to be quashed and set aside. He placed reliance on the following decisions.

• M.G.M Metalisers Ltd. Vs. UOI – 2018 (10)GSTL 537
• Manish Lalitkumar Bavishi Vs. Additional Director General 2011 (272) ELT 42
• Arya Fibers Pvt. Ltd. Vs. Commissioner of Central Excise – 2014(311)ELT 529 (T);
• TV Sundaram Iyengar Vs. Commissioner of CGST & C.E. -2020 (41) GSTL 449 (Mad).

3.1 He submits that Ld. Commissioner erred in not granting cross examination of Shri Rutugna Trivedi and Ms. Nita Parmar on the premise that no reason had been attributed by the Appellant seeking cross examination of such persons. Since entire case has been booked based on the worksheet /documents retrieved from the pen-drive recovered from the residential premises of Ms. Nita Parmar and Ld. Commissioner relied upon the documents retrieved from the third party, it was an obligation upon him to grant cross –examination, so that the correct facts can be revealed. Section 138B of the Act cast responsibility upon the Ld. Adjudicating authority to examine the person before relying upon the statement of such witness. He placed reliance on the following decisions:

•  M/s Jindal Drugs Pvt. Ltd. Vs. Union of India 2016 (340)ELT 67.
•  M.P. Ganesan Vs. Commercial Tax Officer – 2020 (42) GSTL 178
•  Thoppil Agencies Vs. Assistant Commissioner of Commercial Tax -2020 (41) GSTL 30(Kar.)
•  Shree Parvati Metals Vs. Union of India -2018 (11)GSTL 137
•  Kay Pan SugnadhPvt. Ltd. Vs. C.C.Ex. – 2017 (7) GSTL 276

3.2 He also submits that the investigating authority neither searched the premises of the Appellant nor recorded his statement during the course of investigation. Except the alleged worksheet retrieved from pen-drive recovered from the residential premises of Ms. Nita Parmar, no other documents was unearthed for which the Appellant can be fastened for huge liability of penalty. Burden lies upon the revenue to prove that the Appellant was indulged in smuggling of gold into India. Such burden has to be discharged with cogent and tangible evidence. The revenue has not discharged its burden. In absence of any affirmative statement or corroborative documents or evidence, such serious finding made in the impugned order cannot be sustained. He placed reliance on following decisions.

•  Dabesh Prasad Nanda Vs. C.C.Ex. 2016 (332) ELT 733 (T)
•  Asha Shivshankar Pillay Vs. C.C. 2003 (161) ELT 392 (T)
• Jai Narain Verma Vs. C.C. 1995 (76) ELT 421 (T)

3.3 He also submits that impugned order heavily relies upon the emails retrieved from Pen Drive seized from residential premises of Ms. Nita Parmar. Based on these emails, it is held that the Appellant financed to Shri Rutugna Trivedi for Smuggling of gold for which profit earned out of these activities were shared between the Appellant and Shri Rutugna Trivedi. The Appellant denies that he financed to Shri Rutugna Trivedi for smuggling of Gold. The Appellant is not concerned with the documents/ emails retrieved from Pen Drive seized from residential premises of Ms. Nita Parmar. In absence of any documentary evidence to show that the Appellant financed to Shri Rutugna Trivedi for smuggling of gold, the impugned order imposing penalty based on the documents retrieved from third party cannot be sustained as it does not implicate the Appellant. He placed reliance on the following decisions.

• Raipur Forging Pvt. Ltd. Vs. Commissioner of Central Excise – 2016(335) ELT 297
• Commissioner of Central Excise Vs. P.D. Industries Pvt. Ltd. – 2016(340)ELT 249

3.4 He further submits that Airport Intelligence unit did not find incriminating documents against the Appellant to show prima facie that the Appellant has financed money for smuggling of gold into India. Even no evidence whatsoever was found to substantiate the finding of the Ld. Commissioner that the Appellant has financed to Shri Rutugna Trivedi for smuggling of gold.

3.5. He also submits that in the absence of any charges on malafide intention in as much as not having dealt with smuggled gold, penalty under Section 112(b) cannot be sustained. He placed reliance on following decisions:

•  Deepak Kumar Vs. Commissioner of Customs 2017 (358) ELT 854 (T)
•  Jaisukh GobarbhaiSavalia Vs. Commissioner of Customs 2019(367) ELT 290 (T)
•  A V Global Corporation Pvt. Ltd. Vs. CC 2018 (363) ELT 676 (T)

4. Shri R P Parekh, Learned Superintendent (Authorized Representative) appearing on behalf of the Revenue reiterates the findings of the impugned order.

5. Shri Hardik Modh, Learned Counsel, post hearing, filed written submission on 20th September, 2022 along with compilation of judgments, which is taken on record.

6. We have carefully considered the submissions made by both sides and perused the record. The appellant has challenged the penalty imposed upon him under Section 112(b)(i) of the Customs Act, 1962.

6.1 We find that role of the Appellant in the whole episode has been derived only from the printout sheet/emails retrieved from the pen-drive seized from the residential premise of Ms. Nita Parmar. The said pen drive containing worksheet title “Vipul Joshi” which was allegedly found in folder named “Rajubhai”. The foremost point raised by the appellant is that they have not been supplied said worksheet. It is seen that the department has not given copies of the said relied upon documents to Appellant. This is clear from the letter dtd. 12.10.2021, 11.11.2021 and 30.11.2021 submitted by the Appellant. Clearly, relied upon documents have not been supplied by department. When the show cause notice is issued proposing to impose such huge penalties, the department ought to have taken sufficient care to supply all relied upon documents to the appellant. The adjudication conducted without supply of relied upon documents is against principles of natural justice and vitiated.

6.2 The Adjudication Authority held that the appellant was issued summons dated 10.09.2019 and 12.09.2012 to appear before investigating authority. It is observed that the appellant had sought time and requested for another date of his appearance. However, the Adjudicating Authority held that act of none appearance of the appellant, hence mensrea on part of the appellant. We find that only because the appellanthas not appeared that to stating the reasons of his non-availability on one or other pretext. It does not mean that the appellant is involved in smuggling of goods. The Hon’ble Mumbai High Court in the case of Mokhtar Mistry Vs. Additional Collector of Customs- 1994 (71) ELT 380 (Mum.) held that merely avoiding summonsis not sufficient to conclude that a person is concerned in the smuggling of goods. The Adjudicating Authority based on the statement of Shri Milan Raythatha, partner of S.R. Tours & Travels recorded on20.06.2019 that in certain cases, the appellant made payments pertaining to air-tickets booking of Shri Rutugna Trivedi only on this basis, it is not sufficient to conclude that appellant had knowledge about the smuggling of gold. From the statement of Shri Milan Raythatha, it reveals that appellant used to make payment in occasional cases under instruction of Shri Rutugna Trivedi, since he is brother in law of the appellant.Merely because the appellant made payment in some occasions that itselfdoes not mean that the appellant has financed to Shri Rutugna Trivedi for smuggling of Gold.

6.3 Most important aspect is that no inquiry was extended to the appellant. The Adjudicating Authority heavily relied upon the work sheet retrieved from pen drive recovered from the residence of Ms. Nita Parmar. In the statement of Ms. Nita Parmar and Shri Rutugna Trivedi they had not made any comment on the worksheet retrieved from Pen drive. Therefore, in the absence of any confessional statement of Ms. Nita Parmar and Shri Rutugna Trivedi against the appellant, it cannot be held that the appellant has financed Shri Rutugna Trivedi for smuggling of Gold. Even though the appellant could not appear before investigating Authority, when the summons were issued.No further inquiry was conducted with the appellant. The statements of Shri Rutugna Trivedi and Ms. Nita Parmar and so called worksheet retrieved from Pen drive were not made confronted with the appellant. Therefore, in absence of any inquiry that the appellant with regard to the above evidence, the appellant cannot be charged for imposition of penalty under Section 112(b). It is also matter of concerned that despite the name of the appellant was found appearing in the worksheet retrieved from Pen drive, the investigating authority neither searched the premises of the appellant nor recorded his statement during the course of investigation.Except the alleged worksheet retrieved from Pen drive, no other documents were unearthed. Therefore, there is no direct evidence to implicate the appellant for fastening the huge penalty under Section 112(b). In spite of whatever material found by the investigating Agency for making allegation against the appellant, but it could not be established that the appellant was indulged in smuggling of Gold into India, with cogent and tangible evidence. Thus, the revenue failed to discharge its burden.In absence of any affirmative statements or corroborative documents or evidence, such serious finding made in the impugned order, in our view, it cannot be sustained. This gets support from this Tribunals decision in the case of Shakil Patel Vs. Commissioner of Customs (General) Mumbai -2018 (361) ELT 382 (Tri.-Mum.), wherein it was held as under:

“3. After going through the impugned order and after appreciating the submissions made by both the sides, we note that the entire case of the Revenue is based upon the statement of co-noticee without there being any further evidence. Though a number of summons were issued to the present appellant, but his statement could not be record as the appellant did not honour the summons. Further, no efforts were made by revenue to approach the present appellant in person, so as to record his statements. As such, we note that there is no statement of appellant and the penalty stand imposed upon him only on the basis of incriminating statement of the co-noticee. It is well-settled law that such statement of the co-noticee cannot be made the sole basis for penalizing a person”.

6.3 This Tribunal in the case of the Dabesh Prashad Nanda Vs. Commissioner of C.Ex.- 2016 (332) ELT 733 (Tri.Del.) set aside the penalty on the premise that statement of the appellant was not recorded, even though import took place during his tenure when he was director of the Company.

6.4 Similarly, in the following decisions, it is held that uncorroborated statements of the co-accused cannot be made basis sole basis for the imposition of penalty in the absence of recording the statement of the appellant.

• •  K. K Jain Vs. Commissioner of Customs, Kandla- 2009 (235) ELT 170 (Tri. Ahmd.)
  • Dhananjay N. Khalwadekar Vs. Commissioner of Customs (Prev.), Mumbai- 2003 (156) ELT 888 (Tri.- Mum.)

6.5 Similarly, in the case of Haricharan Kurmi Vs. State of Bihar- AIR 1964 SC 1184, it was held that confession of co- accused is not admissible evidence. In this case it is admitted position that except third party document and statements there is no direct or cogent evidence recovered from the appellant. The entire case was decided on the basis of third party evidence without confronting the same with the appellant. Therefore, in such case the penalty against the appellant is not legal and correct. This legal position has been decided in following decision, wherein it is held that third party records cannot be relied upon in the absence of direct link of the transactions or corroborative evidence:

• •  Commissioner of C.Ex. Indore Vs. Prag Pentachem Pvt. Ltd.- 2018 (360) ELT 1025 (Tri.- Del.)
  •  Commissioner of C. Ex..& S.T. Raipur Vs. P. D. Industires Pvt. Ltd.-2016 (340) ELT 249 (Tri.- Del.)
  •  Habib Uz ZamanVs. Commissioner of Customs, New Delhi- 2021 (376) ELT 666 (Tri. Del.)

6.6 On merit to examine the above issues, it would be appropriate to analyse Section 112 of the Customs Act, 1962 which reads thus:-

“112. Penalty for improper importation of goods, etc. – Any person, –

(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 not exceeding the value of the goods or five thousand rupees, whichever is the greater;

From the perusal of above provision, it will be seen that for imposition of penalty on a person under Section 112(b), the following conditions must be satisfied.

(i) The person must have acquired possession of or must be in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which are liable for confiscation under Section 111 of Customs Act, 1962.

(ii) The person must have knowledge or have reason to believe that the goods acquired by him or dealt with by him in the manner as mentioned above, are liable for confiscation under Section 111 i.e. he has knowledge or has reason to believe that any one or more of the contraventions mentioned in Clause (a) to (p) of Section 111 have been committed in respect of the imported goods acquired or dealt with by him.For imposition of penalty under Section 112(b) of Customs Act, 1962, it is also necessary to prove that the person had knowledge or had reason to believe that the goods acquired or dealt with by him are liable for confiscation under Section 111.

6.7 We find that statements of Ms. Nita Chunilal and others persons remain uncorroborated during the investigation. Of course, no offence should be established merely based on the statement of thirdparty and without corroborative evidence and without granting cross examination of person whose statement alone is relied upon.The evidence on record is not sufficient to hold that the appellant involved in alleged activity of smuggling of gold.It is well settled law that the statements of the co-noticee cannot be adopted as a legal evidence to penalize the accused unless the same are corroborated in material particulars by independent evidence.The statement of co-accused cannot be relied upon, particularly when appellant has denied his involvement in respect of the goods in question. In this connection, the following judgments are relevant and they fortify the views taken by us :

• •  Punam Chand Bhotrav. Collector of Customs – 1993 (63) E.L.T. 237.
  •  Jai Narain Verma v. Collector of Customs, New Delhi – 1995 (76) E.L.T. 421.
  •  Jaswinder Singh v. Collector of Customs, New Delhi – 1996 (83) E.L.T. 175.
  •  Mahabir Prasad v. Commissioner of Cus. (Prev.), I.N.B., Patna – 2000 (126) E.L.T. 803.
  •  Pradeep Shah Vs. Commissioner of Customs, Patna -2006 (197) E.L.T. 301 (Tri. – Kolkata)
  •  Vikram Singh DahiyaVs. Comm. Of Cus.(Export), New Delhi – 2008 (223)ELT 619 (Tri. Del.)
  •  Surinder Kumar Khanna Vs. Intelligence Officer, DRI- 2018(362) ELT 935 (SC)
  •  Habib Uz Zaman Vs. Commissioner of Customs, New Delhi – 2021(376) ELT 666 (Tri. Del.)
  •  K.K. Jain Vs. Commissioner of Customs, Kandla – 2009(235) ELT 170 (Tri. Ahmd.)

6.8 We further find that in the present case the activity of financing of a fund has been turned by the Ld. Commissioner into direct participation in the conspiracy to smuggle gold. For imposition of penalty under Section 112(b) of the Customs Act, 1962 the knowledge on part of the person has to be established. In the present matter department failed to do so. During the investigation officers did not find any documents/ piece of paper or any other evidence from the premises of Appellant to show that the Appellant financed money for smuggling of gold into India.

6.9 We also find that there is absolutely no evidence on record connecting the appellant with the commission of any offence in relation to the alleged gold smuggling activity. Merely because name of Appellant was appearing in printout sheet retrieved from the pen drive of Ms. Nita Parmar, that would not ipso facto make the appellant in any way privy to the commission of any offence with reference to the alleged gold smuggling activity. It will be unfair to fasten the appellant with penal consequences merely on the basis of a printout sheet recovered from the third party and statements of third party. Moreover we also observed that during the investigation statements of Ms. Nita Parmar, Shri Mehul Bhimani, Shri Jitendra Rokad and Shri Rutugna Trivedi were recorded whereby they did not say that the Appellant also involved in alleged activity of gold smuggling or Appellant had knowledge about smuggling of gold into India or financed them for smuggling of gold.

6.10 From the section 112(b) it can be seen that penalties can be imposed only if the individuals were in knowledge of the act of smuggling. Further, for imposition of penalty under Section 112(b) of the Customs Act, 1962 the knowledge of offence on part of the person has to be established. In the present matter department failed to do so. During the investigation officers did not find any documents/ piece of paper or any other evidence against the Appellant to show that the Appellant had financed the money for smuggling of gold into India. Even if it is assumed that the appellant has arranged the finance but appellant had no knowledge and did not deal with alleged gold smuggling activity in question. Facts borne on record revealed that the appellant has maintained all along that he never had the possession of the impugned goods nor was in any way concerned with the carrying, removing, etc., of the consignments in question and hence, it was beyond their comprehension that the goods in question were per se liable for confiscation under Section 111(d) ibid. It nowhere appears on record that the appellant, in his capacity, was knowingly involved in alleged activity of smuggling gold. Section embodies the phrase “…which he knows or has reason to believe are liable to confiscation under Section 111…” which is of specific importance in this situation. Revenue has nowhere ascertained as to the knowledge of the appellant whether he knew or had reason to believe that the goods in question were liable for confiscation. Undisputed peculiar facts of the case are that the appellant is neither the importer nor the owner who had acquired possession nor in any way concerned with the carrying, removing, etc., of the goods in question, and Revenue has nowhere ascribed knowledge of the appellant as to the confiscation.

6.11 Penalty under Section 112(b) can be imposed when a person 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. It is submitted that it is not the case of the Revenue that the Noticee was indulged in any of the activities as mentioned under Section 112(b) of the Customs Act. As the Appellant did not acquire possession of or in any way concern with import of gold, penalty under Section 112(b) ought not to have been imposed.

6.12 Section 112(b) of the Customs Act is identical to earlier Rule 209A of the Central Excise Rules, 1944 and Rule 26 of Central Excise Rules, 2002. Relevant extracts of the provisions of Customs Act, 1962 Central Excise Rules, 1944 and Central Excise Rule, 2002 are reproduced hereunder:-

“Section 112 Penalty for improper importation of goods etc.

(a) ****

(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 –

Rule 209A of the Central Excise Rules, 1944:

“Rule 209A. Penalty for certain offences. –

Any person who acquires possession of, or is any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding three times the value of such goods or five thousand rupees, whichever is greater.”

Rule 26 of the Central Excise Rules, 2002

Rule 26 came to enacted which came in force with effect from 1st March, 2007. Rule 26 reads as under :

“Rule 26. Penalty for certain offences. – (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater.

(2) Any person, who issues –

(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or

(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of Cenvat credit under the Cenvat Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.”

6.13 The Hon’ble Bombay High Court in the case of Commissioner of Central Excise Vs. Rakesh Kumar Rajendra Kumar & Co. – 2015 (325) ELT 506while interpreting Rule 209A held as under:

“The sine qua non for a penalty on any person under the above rule is : either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act i.e. the act which could not have been done without handling or movement of excisable goods as mentioned in the rule. The words “who acquires possession” would indicate that the person sought to be penalized under this rule has to first acquire the possession and then do the activity of transportation etc. as contained in the rule. It is, thus, clear that the physical possession of the goods is a must for doing the activity of transporting referred in Rule 209A. The ratio laid down by this Court in Jayantilal Thakkar & Co. (supra) covers the issue. In the said judgment, it is held that in the given situation, if the assessee is only issuing invoices wherein there is no movement of the goods, they cannot be visited with penalty under Rule 209A.”

6.14 The Larger Bench of the Tribunal in the case of Steel Tubes of India Ltd. Vs. Commissioner of Central Excise – 2007 (216) ELT 506, after referring to the decision of the Hon’ble Bombay High Court in the case of Jayantilal Thakkar and Co – 2006 (195) ELT 9 (Bom.) held that for imposition of penalty under Rule 209A of the Central Excise Rules, 1944, the person must have dealt with excisable goods with knowledge that they are liable for confiscation.

6.15 Similarly, in the case of R.C. Jain Vs. Commissioner of Central Excise and Service Tax – 2016 (334) ELT 115, the Hon’ble Tribunal held that penalty under Section 112(b) of the Customs Act cannot be imposed if the assesse has not dealt with or transported goods physically in any manner.

6.16 The Tribunal in the case of D. Ankneedu Chowdhry Vs. Commissioner of Customs – 2004 (178) ELT 578held that “in any other manner dealing with’ used in Section 112(b) of the Customs Act has to be read ejusdem generis with the preceding expression in the clause viz. carrying, removal or depositing etc. It is held that accordingly to the above doctrine, meaning of expression “in any other manner of dealing with” should be understood in sense similar or comparable to how preceding words viz. carrying, removing, depositing etc. are understood. In other words, “in any other manner dealing with” of the goods is also to some physical manner of dealing with the goods. In absence of the finding in the impugned order that the assesse has dealt with the goods physically or any allegation to this effect raised in the proceeding, penalty under Section 112(b) cannot be imposed.

6.17 We also find that the appellant cannot come within the ambit of Section 112(b) because appellants had never acquired possession or in any way concerned of the activities mentioned in the Section or any measure dealing with any goods which the appellants knew or had reason to believe are liable to confiscation. In the absence of the department having not proved the knowledge of the appellant in the activities relating to the smuggled gold, there were no grounds for imposition of penalty on him.It is now well established that mensrea is an important ingredient for imposing a penalty on the persons enumerated in Section112(b) of the Customs Act. The evidence brought out by the department nowhere suggests that the appellants were aware that the goods in question were smuggled into the India. The penalty imposed on Appellant, therefore, cannot be sustained.

6.18 The appellant have raised many other issues such as non-compliance of Section 65B, 138C etc,. However, since we decide the matter on the facts of the case and applicability of Section 112(b), we do not feel to address those other issues.

6. As per our above discussion and finding, we are of the considered view that the appellant is not liable for imposition of penalty under Section 112(b) of the Customs Act, 1962. Therefore, we set aside the penalty and allow the appeal with consequential relief.

(Pronounced in the open Court on 04.10.2022)