Legal principle

A retracted statement cannot, without examining the circumstances in which it was recorded and retracted and without considering the corroborative material on record, be treated as conclusive evidence of the alleged fraud, and reliance on Section 108 statements without examining the requirements of Section 138B is unsustainable.

Court decision

The Tribunal allowed all seven appeals and set aside Order-in-Original No.54992/2017 dated 28.02.2017: the demand of customs duty forgone with consequential interest and penalties against Chessman Impex was held unsustainable, and the penalties and personal penalties on the co-appellants were also set aside, with consequential relief if any in accordance with law.

Facts

Chessman Impex Pvt. Ltd. held a DEEC licence dated 14.08.2000 permitting duty-free import of 5350 MTs of non-alloy re-rollable scrap cuttings against an export obligation of 5000 MTs of non-alloy steel bars and rods, imported under three Bills of Entry and exported through Ghojadanga LCS to Bangladesh in 73 Bills of Export, partly via supporting manufacturer Goyal Ispat Ltd. (2353.760 MTs of CTD bars) and partly as segregated raw material with the foreign buyer's permission. DRI, Kolkata investigated from February 2002 on the allegation that the exports were fraudulent, and a Show Cause Notice dated 31.08.2004 to eight noticees alleged diversion of the duty-free scrap contrary to Notifications 30/31-1997-Cus, non-fulfilment of export obligation and fraudulent export of maize in place of steel bars, proposing confiscation under Sections 111(o), 113(d) and 113(i) and recovery of duty forgone of Rs.2,16,93,068.34 with interest and penalties under Sections 112(a) and 114(i). The Commissioner's Order-in-Original dated 28.02.2017 confirmed the duty forgone demand and imposed penalties of Rs.20,00,000 each on Chessman under Sections 112(a) and 114(i), besides penalties on the co-noticees, and seven appeals were filed against this common order.

Key provisions

• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 114(i), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 113(d), Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 138B, Customs Act, 1962 — Relevancy of statements under certain circumstances
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 138A, Customs Act, 1962 —  Presumption of culpable mental state