The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a penalty under the Customs Act cannot be sustained solely on the basis of a retracted confessional statement and the uncorroborated statement of a co-accused. 

The bench of R. Muralidhar (Judicial  Member) has set aside a penalty of Rs. 30 lakh imposed on an alleged participant in a gold smuggling racket after finding that the Department had failed to produce any independent corroborative evidence linking him to the offence.

The dispute arose from the seizure of 40 pieces of smuggled gold valued at approximately ₹1.50 crore from one Kartik Sen, who was intercepted and arrested by officers of the Directorate of Revenue Intelligence (DRI) on 13 January 2018. During investigation, Sen allegedly stated that he had been introduced to the appellant by one Sushil Bauli and that, acting on the appellant’s instructions, he regularly collected smuggled gold from a person identified as Bharat Biswas for transportation.

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Following investigation, customs authorities confiscated the seized gold and imposed penalties on several noticees. While none of the other noticees challenged the adjudication order, the appellant approached the Tribunal challenging only the penalty of ₹30 lakh imposed upon him under the Customs Act.

The Tribunal found that the Department’s entire case rested primarily on three recorded statements: the statement of carrier Kartik Sen; the statement of Sushil Bauli; and the appellant’s own statement recorded under Section 108 of the Customs Act.

However, Sushil Bauli completely denied introducing the appellant to Kartik Sen and further stated that he did not even know either the appellant or the alleged supplier Bharat Biswas. This directly contradicted Kartik Sen’s version and substantially weakened the prosecution’s narrative.

The appellant had made an inculpatory statement before DRI officers on 7 July 2018 allegedly admitting involvement in the smuggling activities. However, immediately after being produced before the Magistrate, he retracted the statement, alleging that it had been obtained through coercion and force.

The Tribunal observed that the retraction was made at the earliest available opportunity and even in the presence of DRI officials. After this retraction, the investigating agency neither recorded any fresh statement nor produced any independent material to corroborate the earlier confession. Consequently, the evidentiary value of the confessional statement stood seriously undermined.

Apart from the disputed statements, the Tribunal found that the investigation had failed to uncover any material connecting the appellant with the alleged smuggling operation.

Notably, no smuggled gold was recovered from the appellant; no incriminating documents, records or financial trail were found; no cash transactions were established; no transport records or ledgers were recovered; and even the alleged call records merely showed contact between certain mobile numbers without proving the identity of the callers or the purpose of the conversations.

The Tribunal further noted that one of the mobile numbers allegedly belonging to Bharat Biswas was found during investigation to be registered in the name of an entirely different individual, thereby weakening the Department’s case even further.

Relying upon several judicial precedents including the Supreme Court’s judgment in Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate, the Tribunal reiterated that the confession of a co-accused is merely a weak piece of evidence and cannot constitute substantive evidence against another person unless supported by reliable independent corroboration.

The Tribunal emphasized that while such statements may provide assurance to an already established case, they cannot themselves become the foundation for imposing penal consequences.

The Tribunal also held that the adjudicating authority failed to comply with the mandatory safeguards governing the use of statements recorded under Section 108 of the Customs Act.

Referring extensively to the Punjab and Haryana High Court’s landmark decision in G-Tech Industries v. Union of India, the Tribunal observed that before relying upon statements recorded during investigation, the adjudicating authority must follow the statutory procedure by examining the makers of those statements and admitting them into evidence in accordance with law.

Failure to follow this mandatory procedure renders such statements unreliable for proving the truth of their contents.

The Tribunal also relied upon the Supreme Court’s decision in Commissioner of Customs (Imports), Mumbai v. Ganpati Overseas, wherein the Court held that although statements recorded under Section 108 are generally admissible, statements obtained under coercion or subsequently retracted cannot be relied upon unless supported by independent corroborative evidence.

Applying this principle, the Tribunal held that the appellant’s retracted confession could not legally sustain the penalty in the absence of supporting material.

After analysing the evidence, the Tribunal concluded that the appellant’s confessional statement had lost its evidentiary value because it was promptly retracted; the statements of Kartik Sen and Sushil Bauli contradicted each other; no independent corroborative evidence existed against the appellant; and the Department failed to follow the statutory safeguards governing reliance upon statements recorded under Section 108 of the Customs Act.

Accordingly, the Tribunal held that continuation of penal proceedings on such defective evidence was unsustainable in law.

Allowing the appeal, the CESTAT Kolkata set aside the penalty of ₹30 lakh imposed on the appellant and granted consequential relief in accordance with law. The Tribunal reaffirmed that customs penalties cannot be founded merely upon retracted confessions or uncorroborated statements of co-accused without independent evidence establishing involvement in the alleged offence.

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