The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has set aside a ₹10 lakh penalty imposed on a Customs Havildar in a gold smuggling case, finding that the department relied on uncertified electronic records and statements without following the statutory procedure for admitting them as evidence.

The bench of P.K. Choudhary (Judicial Member) found that the employee had not been assigned duty at the airport’s door frame metal detector and that no connection between him and the seized gold had been established.

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The dispute arose from the arrival of two passengers, Mohseen and Naushad Ahmad, at CCSI Airport, Amausi, Lucknow, on August 15, 2021. The appellant was serving as a Havildar in the Customs and Central Excise Department and was on duty in the Customs arrival hall.

After clearance at the airport, the passengers travelled towards Noida in separate vehicles. Teams of the Directorate of Revenue Intelligence intercepted the vehicles near the Fatehabad Toll Booth on the Lucknow–Agra Expressway.

According to the chronology recorded in the order, officers recovered 40 gold bars weighing 4,663.540 grams, valued at ₹2,31,31,158, and Indian currency of ₹1.43 lakh from Mohseen and his fellow passengers. Another 37 gold bars weighing 4,314.200 grams, valued at ₹2,01,97,358.72, and Indian currency of ₹2.10 lakh were recovered from Naushad Ahmad and his fellow passengers.

The two seizures led to separate proceedings handled by the DRI’s Lucknow and Noida units.

The department alleged that appellant failed to stop Mohseen when the door frame metal detector’s light turned red and did not inform senior officers. It treated this alleged omission as assistance in the smuggling of foreign-origin gold.

The authorities also alleged collusion between appellant and Mohd. Javed, described as a handler and co-accused. Telephone call records, WhatsApp chats and Yadav’s statement recorded under Section 108 of the Customs Act were relied upon to support the allegations.

The appellant disputed the purported confession, maintaining that DRI officers had taken him from his residence on September 6, 2021, and obtained the statement under duress and threats. He submitted that he retracted it at the first opportunity in connection with the bail proceedings.

Supplementary show cause notices were subsequently issued against him in both seizure cases. Separate adjudication orders dated January 24, 2023, imposed penalties of ₹10 lakh each under Section 112(b).

While the Commissioner (Appeals) set aside the penalty in the Naushad Ahmad matter on March 21, 2024, the penalty in the Mohseen matter was upheld the following day. The appellant challenged the latter decision before CESTAT.

Examining the telephone records, the Tribunal found that the Commissioner (Appeals) had treated the number of calls between appellant and Mohd. Javed as abnormal without having the contents of those conversations.

It also noted that the records showed no calls after August 11, 2021. Consequently, they did not establish any telephone conversation between the two during August 12–15, immediately preceding and including the date of the incident.

The Tribunal held that no adverse conclusion could be drawn merely from the number of calls.

It further found that the electronic material lacked certification under Section 138C of the Customs Act and that the prescribed procedure concerning recovery of the call records had not been followed. The WhatsApp chats, too, could not be used as evidence without the certification required under Section 65B of the Evidence Act or Section 138C of the Customs Act.

The Tribunal rejected the allegation that appellant’s failure to act on the metal detector’s red light established involvement in smuggling.

The machine had turned red more than 20 times between 4:52 p.m. and 5:14 p.m. on the day of the incident. The Commissioner (Appeals), in the connected Naushad Ahmad case, had already accepted that the machine was faulty.

CESTAT observed that omission, inaction or negligence in duty could not, by itself, prove abetment in smuggling.

The Tribunal also examined the duty records and found that appellant had been assigned to the arrival or departure area, with no specific allocation of duty at the door frame metal detector.

It further noted that he was not a “proper officer” authorised to exercise the relevant powers of personal search or screening under Sections 100 and 103 of the Customs Act. No office order assigning passenger-frisking duties to him had been shown.

Against that background, the Tribunal found that the allegation of failing to search Mohseen when the detector’s light turned red could not be sustained against Yadav.

CESTAT noted that Mohseen, the passenger from whom the gold was recovered, had not implicated the appellant in his statement.

The department had also failed to establish any correlation between appellant and the confiscated gold. There was no allegation that he had acquired possession of it or participated in carrying, removing, depositing, harbouring, keeping, concealing, selling, purchasing or otherwise dealing with it.

The Tribunal therefore held that Section 112(b), under which the penalty had been imposed, was not applicable on the allegations made against him. It observed that the department’s allegation was essentially one of abetment, which falls under Section 112(a).

The Tribunal also questioned the inconsistent outcomes in the two connected proceedings. Both passengers had arrived on the same flight, appellant had performed the same duty, and the allegations rested on identical categories of evidence. Yet, the penalty had been cancelled in one case and sustained in the other.

A central issue was whether statements recorded during investigation under Section 108 could be relied upon without complying with Section 138B of the Customs Act.

The Tribunal explained that, subject to the statutory exceptions, the person who made the statement must first be examined as a witness before the adjudicating authority. The authority must then decide whether the statement should be admitted in evidence in the interests of justice. An opportunity for cross-examination must thereafter be given to the person against whom the statement is relied upon.

CESTAT relied on the Delhi High Court’s decision in Additional Director General (Adjudication) v. Its My Name Pvt. Ltd., which examined the relationship between Sections 108 and 138B and the procedure required before investigative statements acquire relevance in adjudication.

The adjudicating authority had neither examined the crucial witnesses nor offered them for cross-examination despite his request. The Tribunal held that the statements could not be admitted as evidence against him without following Section 138B.

It also found that appellant had been penalised on the basis of a statement given under duress and linked to the alleged offence without a proper opportunity to challenge the evidence. Referring to Commissioner of Customs (Preventive), Kolkata v. Amit Jalan, it reiterated the need for corroboration rather than blind acceptance of statements.

Finding that the electronic records and statements could not sustain the penalty, and that the necessary connection with the seized gold had not been established, CESTAT set aside the Commissioner (Appeals)’ order dated March 22, 2024.

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