Smuggling Penalty Not Sustainable Solely On Statements: CESTAT

The Delhi Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside a Rs. 10 lakh penalty imposed under Section 112(a)(i) of the Customs Act, holding that statements recorded under Section 108 cannot be relied upon to sustain a smuggling-related penalty unless the mandatory procedure under Section 138B is followed. The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Member Technical) has observed that statements recorded during investigation do not automatically become admissible evidence. Where the circumstances under Section 138B(1)(a) do not apply, the adjudicating authority must examine the maker of the statement as a witness before it; Form a reasoned opinion that the statement should be admitted in evidence in the interest of justice; Thereafter provide opportunity for cross-examination. The appeal challenged an Order passed by the Commissioner of Customs, ICD Tughlakabad, New Delhi, which imposed a penalty of ₹10 lakh under Section 112(a)(i) of the Customs Act, 1962. The appellant, a G-Card holder of a Customs House Agent (CHA) firm, was alleged to have abetted the smuggling of foreign-origin goods in collusion with other individuals. According to the department, he had assisted in filing Bills of Entry, preparing documentation, and arranging transportation of imported consignments that were later found to involve misdeclaration. The penalty was imposed primarily on the basis of statements recorded from the appellant under Section 108 of the Customs Act during investigation. The Tribunal identified two principal issues. Firstly, whether the appellant had abetted smuggling so as to attract penalty under Section 112(a)(i) of the Customs Act. Secondly, whether the Commissioner erred in relying solely on statements recorded under Section 108 without complying with Section 138B of the Customs Act. The Tribunal emphasized that abetment under Section 112(a)(i) requires intentional aiding and active complicity. Mere facilitation, without knowledge or intent, is insufficient. Referring to judicial precedents, the Bench reiterated that abetment must involve knowledge and mens rea. Innocent facilitation cannot automatically attract penal liability. Knowledge of misdeclaration must be clearly established. The Tribunal found that there was no specific allegation or evidence establishing that the appellant had knowledge of misdeclaration of goods. Therefore, the essential ingredient of abetment in a smuggling case was not satisfied. A major part of the judgment focused on the evidentiary value of statements recorded under Section 108 of the Customs Act. The Tribunal undertook a detailed examination of Section 138B of the Customs Act and comparable provisions under Section 9D of the Central Excise Act. The Tribunal observed that this mandatory procedure was not followed in the present case. Accordingly, the statements recorded under Section 108 could not be treated as relevant or admissible evidence for imposing a smuggling-related penalty. The Bench noted that both the show cause notice and the impugned order were based almost entirely on the appellant’s statements recorded under Section 108. Since the mandatory safeguards under Section 138B were not complied with, the Tribunal held that a statement recorded under Section 108 cannot be treated as relevant for proving the truth of its contents unless admitted in accordance with Section 138B. In the absence of admissible evidence establishing knowledge or active abetment, the penalty was found unsustainable. Setting aside the impugned order insofar as it imposed penalty on the appellant, the Tribunal allowed the appeal and quashed the Rs. 10 lakh penalty. Case Details Case Title: Nawal Kishore Singh Versus Commissioner of Customs Case No.: Customs Appeal No. 58373 Of 2013 Date: 12.02.2026 Counsel For Petitioner: Advocate Archit Jindal Counsel For Respondent: AR Mukesh Kumar Shukla Click Here To Read Order

Smuggling Penalty Not Sustainable Solely On Statements: CESTAT

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