CESTAT Rules, Statement Recorded U/S 108 Of Customs Act Is Not Valid Evidence U/S 138B Of Customs Act
Pranav B Prem
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member), has held that statements recorded under Section 108 of the Customs Act, 1962 cannot be treated as valid evidence under Section 138B of the Act unless the mandatory procedure laid down therein is followed.
The case arose from appeals filed by Shanti Swaroop Sharma and Sangeeta Tuteja, Directors of M/s New Era Trading Pvt. Ltd., against an order passed by the Principal Commissioner of Customs, ICD (Exports), Tughlakabad, New Delhi. The appellants had been penalized under Sections 114(iii) and 114AA of the Customs Act for allegedly abetting fraudulent export practices to gain undue benefits under the Focus Market Scheme.
M/s New Era Trading Pvt. Ltd., engaged in the export of readymade garments, had availed of the benefits provided under the Focus Market Scheme. However, on the basis of intelligence received by the authorities, it was alleged that the company mis-declared the country of destination in the shipping documents to claim unwarranted incentives. The authorities claimed that, instead of exporting goods to countries eligible under the Focus Market Scheme, the company diverted consignments to Dubai, which was not an eligible destination under the scheme. It was also alleged that the appellants had colluded with Imran Mirza, proprietor of M/s Concorde Shipping and Logistics India, to carry out this diversion by altering the export documents after the Let Export Order had been issued.
The Principal Commissioner had imposed penalties on both the appellants under Sections 114(iii) and 114AA of the Customs Act. The findings against them primarily relied on the statements made by Shanti Swaroop Sharma under Section 108 of the Act during the investigation, which purportedly disclosed their involvement in providing false information about the destination of export goods.
The appellants contended that the statements recorded under Section 108 could not be treated as evidence since they were not subjected to examination before the adjudicating authority as required under Section 138B of the Act. They also argued that the confiscation of goods, which formed the basis for the imposition of penalties, had already been set aside by the Tribunal in a separate appeal filed by M/s New Era Trading Pvt. Ltd. Therefore, penalties under Section 114(iii) were not sustainable. Furthermore, they asserted that there was no independent evidence to establish their involvement, apart from the statements recorded during the inquiry.
The Tribunal, after examining the matter, referred to its earlier decision in M/s Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [Excise Appeal No. 51148 of 2020 decided on 01.04.2025], and reiterated that statements recorded under Section 108 could not be admitted as evidence unless the person making such statements was first examined as a witness before the adjudicating authority and cross-examination was allowed to the opposite party. The Tribunal emphasized that failure to follow this mandatory procedure would render such statements inadmissible as evidence.
The Tribunal noted that the finding of the adjudicating authority that the appellants knowingly provided false information was entirely based on statements recorded under Section 108, which were inadmissible for want of compliance with Section 138B. Apart from these statements, no independent or corroborative evidence was found on record to sustain the charges against the appellants.
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In view of the above, the Tribunal held that the penalties imposed on the appellants under Sections 114(iii) and 114AA of the Customs Act were unsustainable. The Tribunal also took note of the fact that the confiscation of goods had been set aside in the connected matter, further weakening the foundation of the penalties imposed. Consequently, the appeals filed by Shanti Swaroop Sharma and Sangeeta Tuteja were allowed, and the impugned order dated 27.04.2023 passed by the Principal Commissioner of Customs was set aside.
Appearance
Shri Ashirwad, Shri Virat Sharma, Advocates for the Appellant
Shri Shashi Kant Sharma, Authorised Representative of the Department
Cause Title: Shanti Swaroop Sharma, Director v. The Principal Commissioner of Customs
Case No: Appeal No. 50071 of 2024
Coram: Hon’ble Mr. Justice Dilip Gupta [President], Hon’ble Mr. P. V. Subba Rao [Member (Technical)]
[Read/Download order]
