By TIOL News Service

ALLAHABAD, FEB 08, 2019: SCN dated 15.05.2014 issued by the Customs (Preventive), Lucknow, inter alia alleged that -

(a) The 1700.73 grms (14 pieces) foreign origin gold was owned by Mridul Agarwal (1 kg) and Satish Kumar (700 grms.).

(b) Shakil Ahmad Khan has failed to produce any document pertaining to import or otherwise purchase of seized goods.

(c) Mridul Agarwal and Satish Kumar has smuggled the gold into India from Nepal through unauthorized routes and had handed over the same to Shakil Ahmad Khan for delivery in Lucknow.

(d) Shakil Ahmad Khan, Mridul Agarwal and Satish Kumar were involved in such carrying and smuggling of foreign origin gold in past also in similar manner to fetch profit.

(e) The aforesaid Shakil Ahmad Khan, Mridul Agarwal and Satish Kumar were fully aware that carrying and smuggling of foreign origin gold into India from Nepal through unauthorized routes and selling the same in India is prohibited and attracts penal action under the Customs Act, 1962.

(f) Call details indicated that the appellants had frequent telephone conversations from different locations between Bahraich and Lucknow and the Statements of Shakil Ahmad Khan, Mridul Agarwal, Satish Kumar and Krishan Kumar were full of contradiction.

The SCN, therefore, proposed to confiscate the seized gold weighing 1700.73 grms under the provisions of the Customs Act and also impose penalties u/s 112 on the three persons.

The Commissioner adjudicated the case in August 2014 and ordered confiscation in absolute terms of the 14 Pcs. (broken) of Gold bars totally weighing 1700.730gms valued at Rs.53,23,285/- under Section 111 (b) & (d) and imposed penalties of -

a. Shakil Ahmad Khan - Rs.5 Lakhs

b. Mridul Agarwal - Rs.20 Lakhs

c. Satish Kumar - Rs.10 Lakhs.

u/s 112 of the Customs Act, 1962.

The CESTAT in its order dated 22.05.2018 - 2018-TIOL-2495-CESTAT-ALL held that in the absence of compliance with the provision of Section 138B of the Act, the statements are not admissible as evidence and accordingly, the case of revenue against the appellants does not stand.

Furthermore,

"19…We further find that the appellants namely Shri Mridul Agarwal and Shri Satish Kumar have categorically denied their connection with the seized Gold and in absence of any corroborative evidence the imposition of penalty on them is bad and fit to be set aside.

20. We also set aside the penalty imposed on Shri S.A. Khan, as smuggling is not established. However, as the appellant Shri S.A. Khan have not discharged the burden of proof under Section 123 of the Act (the presumption of gold being smuggled), we uphold the confiscation but set aside the absolute confiscation by the learned Commissioner.

21. The confiscated Gold will be redeemable to Shri S.A. Khan on payment of duty and redemption fine of Rs.5,00,000/-. Thus, the appeal of Shri S.A. Khan is allowed in part and the appeals of Shri Mridul Agarwal and Shri Satish Kumar is allowed."

Revenue is aggrieved by this order and is in appeal before the Allahabad High Court on the following substantial questions of law:-

"1. Whether the CESTAT is correct in setting-aside the Order-in-Original No. 07 / Commissioner / LKO / 2013, Dated 05.08.2014, passed by the Commissioner, Customs (Preventive), Lucknow and allowing appeal of the respondent, vide impugned Final Order No. C/A/70944 - 70946/2018 - CU (DB) dated 22.05.2018, contrary to the law laid down by Hon'ble Supreme Court of India in the matter of Commissioner of Customs, Madras Vs. D. Bhoormull -   2002-TIOL-253-SC-CUS ?

2. Whether statement given by instant respondent (Shakil Ahmad Khan) during investigation (at least thrice on 27.11.2013, 20.12.2013 and again on 13.01.2014), that the seized gold was given to him by Shri Satish Kumar and Mridul Agarwal for delivering at Lucknow, can be used against 'noticee' for fixing liability, even if retracted subsequently in his defense reply dated 11.06.2014?"

After extracting paragraph 33 of the apex court decision in D. Bhoormull, the High Court noted that the facts in the said case are distinguishable and would not be applicable in the facts of the present case as there was no other evidence produced by the Customs department against the respondents except their confessional statement which could assist them in linking the respondents to the offence of smuggling.

Relying on the Supreme Court decision in Surinder Kumar Khanna Vs. Intelligence Officer, Directorate of Revenue Intelligence  -  2018-TIOL-307-SC-CUS, it is further observed -

++ A perusal of the aforesaid order would indicate that no efforts were made by the appellants to prove that the confessional statements were made voluntarily. No Customs Officer or any independent witness was examined by the said authority which could prove that the said confessional statement was taken voluntarily and could be used as a substantial piece of evidence against the respondents.

++ It is clear that a confessional statement of a co-accused cannot by itself be taken as a substantive piece of evidence against another co-accused and can at best be used or utilized in order to lend assurance to the Court. In the absence of any substantive evidence it would be inappropriate to base the conviction of the appellant purely on the statements of co-accused.

Concluding that there is no infirmity in the order of the CESTAT, the Revenue appeals were dismissed.

(See 2019-TIOL-314-HC-ALL-CUS)