Legal principle

A statement recorded under section 108 of the Customs Act cannot be relied upon in adjudication unless, as mandated by section 138B, its maker is examined before the adjudicating authority, the authority admits the statement in the interests of justice, and an opportunity of cross-examination is given.

Court decision

All six appeals were allowed: the confiscation of the 838 watches under section 111 and the penalties imposed under section 114A on Kapoor Watch Co. and Kapoor N Company and under section 112 on Raunaq Kapoor, Amarjeet Kapoor, Sandeep Kapoor and Amit Kumar were held unsustainable and set aside. Amit Kumar's penalty specifically failed because his statement was inadmissible absent section 138B compliance and because his role in the 2 seized watches (subject of the 08.10.2013 notice) could not be extended to the 838 watches under the 06.10.2017 notice.

Facts

On 08.10.2012, DRI officers intercepted a foreign national, Nigel Nicholas Bright, outside Terminal-3 of IGI Airport while he handed a package containing 2 high-end 'Frank Muller' watches to Amit Kumar, an employee of M/s Kapoor Watch Co. Pvt. Ltd., who said he was collecting them for Director Sandeep Kapoor. Searches of Amit Kumar's residence and of 7 showrooms of Kapoor Watch Co., a showroom of Kapoor N Company and allied premises led to detention of 4424 watches and 428 foreign-origin merchandises, with cash of Rs 1,85,62,500/- and 115 watches resumed; most detentions and the cash were later released after import/procurement documents were furnished. A show cause notice dated 06.10.2017 (issued after 4 years and 363 days) confined the case to 838 watches (807 without serial numbers on import documents, 24 with model/serial mismatches, 7 undocumented), proposing duty of Rs 4,66,79,491/- under section 28(4), confiscation under section 111 and penalties under sections 112/114A. The Order-in-Original dated 12.12.2019 confiscated the watches with a redemption-fine option, confirmed the duty and penalised the company under section 114A and the Directors and Amit Kumar under section 112. A separate show cause notice dated 08.10.2013 to Amit Kumar about 14 watches and cash remains pending adjudication, the watches and 50% of the cash having been released on court orders.

Key provisions

• Section 123, Customs Act, 1962 — Burden of proof in certain cases
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 138B, Customs Act, 1962 — Relevancy of statements under certain circumstances
• Section 111, Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 114, Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 2(39), Customs Act, 1962 — Definitions
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material