K.N. Venugopal v. Commissioner of Customs, Customs House, Cochin

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT** **THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR** **&** **THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH TUESDAY, THE 26[TH] DAY OF SEPTEMBER 2023 / 4TH ASWINA, 1945 CUS.APPEAL NO. 11 OF 2019** ## **APPELLANT/APPELLANT:** K.N.VENUGOPAL, AGED 44 YEARS S/O.A.N.L.NARAYANAN MENON, IX/285-A, ALAPPATT HOUSE, COL.VISHWANATHAN ROAD, EROOR WEST, TRIPUNITHURA, ERNAKULAM- 682036. BY ADVS. P.A.AUGUSTIAN SRI.M.A.BABY SMT.LINDA.M.J. KUM. JOVIT LOBO ## **RESPONDENT/RESPONDENT:** COMMISSIONER OF CUSTOMS, CUSTOMS HOUSE, COCHIN. BY ADV SREELAL WARRIAR ADV NANDA SURENDRAN THIS CUSTOMS APPEAL HAVING COME UP FOR ADMISSION ON 26.09.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Customs Appeal No.11/2019 -:2:- ## **J U D G M E N T** ## **Kauser Edappagath, J.** This appeal under Section 130 of the Customs Act, 1962 has been preferred, challenging the Final Order No. 20400/2019 dated 8/5/2019 passed by the Customs, Excise & Service Tax Appellate Tribunal South Zonal Bench, Bangalore (for short, “CESTAT”). 2. The appellant is the proprietor of a freight forwarding company viz. M/s. Unicom Logistics. On 8/1/2015, the Directorate of Revenue Intelligence (DRI), Kerala Regional Unit, Cochin, restrained a container intended for export to Sharjah at the International Container Transshipment Terminal, Vallarpadam, Cochin, based on secret information that it contained Red Sander logs, an item prohibited for export. The container was declared to consist of a consignment of plywood exported from ICCT, Vallarpadam, Cochin, in the name of M/s. Liberty Marketing, Customs Appeal No.11/2019 -:3:- Maharashtra and consigned to M/s. Al Hamoud General Trading LLC, Sharjah. The officers of DRI, on a detailed examination of the container on 9/1/2015, found 11,178 kgs of Red Sander logs, having a market value of `1,90,02,600/- and international grey market value of `4,47,12,000/- approximately, placed inside plywood boxes. The SIO, DRI, Cochin seized the said 11,178 kgs of Red Sanders, 12 plywood boxes and the container on the reasonable belief that they are liable to confiscation under the provisions of the Customs Act, 1962. After that, confiscation proceedings under Chapter XIV of the Customs Act were initiated. 3. The investigation revealed that M/s. Liberty Marketing, Abdul Razak @ Ashraf, K.P. Sibu, P.Sanoj, A.Shaheer, R.Rajesh @ Renjith, Vineeth Kumar @ Kannan (hereinafter referred to as the ‘co-accused’) and the appellant were involved in the illegal export of Red Sander logs. Their statements under Section 108 of the Customs Act were recorded. A show cause notice was issued to the appellant on 30/6/2015 to show cause why the penalty should not be imposed against him under Sections 114 and 114AA of the Customs Act. The appellant gave a reply denying his Customs Appeal No.11/2019 -:4:- involvement and pleading innocence. A personal hearing was conducted on 30/1/2017 at the office of the Additional Commissioner of Customs, the adjudicating authority. The appellant appeared through his counsel. The adjudicating authority, after conducting the enquiry, ordered the confiscation of the goods and imposed a penalty of `5,00,000/- each on the appellant under Sections 114 and 114AA of the Customs Act as per Annexure C order. Aggrieved by Annexure C order, the appellant preferred appeal at the Commissioner (Appeals), Cochin. After hearing both sides, the Commissioner rejected the appeal as per Annexure D order. Challenging Annexure D order, the appellant preferred further appeal at the CESTAT. The appeal was partially allowed, reducing the penalty amount to `2,50,000/each as per Annexure E order, which is under challenge before us. 4. We have heard Adv.Baby M.A., the learned counsel for the appellant and Adv.Sreelal N. Warriar, as well as Adv.Nanda Surendran, the learned counsel for the CBI. 5. The learned counsel for the appellant submitted that Customs Appeal No.11/2019 -:5:- the investigation and the adjudication which led to the impugned order had not been done in conformity with the canons of natural justice. It is submitted that though the appellant requested to cross-examine the investigating officer and the co-accused, it was denied by the adjudicating authority, the appellate authority, and the Tribunal. The learned counsel further submitted that the adjudicating authority, the appellate authority, and the Tribunal failed to appreciate that the appellant was not at all involved in handling the container allegedly loaded with Red Sander logs, and he did not know the content of the container. The learned counsel also submitted that the finding against the appellant was based on his statement recorded under Section 108 of the Customs Act, which he retracted. There is no evidence that the appellant did make, sign, or use any declaration, statement or document pertaining to the alleged illegal export to attract Section 114AA of the Customs Act, added the counsel. On the other hand, the learned counsel for CBI supported the findings and verdict of the Tribunal and submitted that no substantial question of law is involved to invoke the jurisdiction of this Court Customs Appeal No.11/2019 -:6:- ## under Section 130 of the Customs Act. ## 6. The following substantial questions of law have been raised by the appellant in the appeal memorandum: “a. Whether penalty under 114AA of the Customs Act, 1962 can be imposed on appellant when appellant have not made, signed or use any declaration, statement or document pertaining to alleged illegal export when all the activities regarding this export was carried out by the exporter and his Clearing House Agent. b. Whether adjudication authority or appellate authority can impose penalty under stringent provision of Section 114AA of the Customs Act, 1962 casually as done in appellant's case or bound to consider the discussion held while introducing Section 114AA of the Customs Act, 1962 in Lok Sabha on 12/05/05, when said invoked against the appellant. c. Whether adjudication authority or appellate authority is bound to give opportunity for cross examination sought by the appellant while submitting reply to SCN and whether denial of the same is against natural justice which every judicial, quasijudicial and administrative agency must follow while taking any decision adversely affecting the rights of a private individual.” Customs Appeal No.11/2019 -:7:- 7. As stated, the case pertains to the seizure of 11.178 MT wooden logs identified as Red Sanders placed inside 12 plywood boxes from the export consignment of M/s. Liberty Marketing, West Mumbai, Maharashtra, covered by shipping bill No.7061124 dated 6/1/2015 stuffed in container No. CRSU1378497. The shipping bill was purportedly filed for the export of 480 numbers of plywood weighing 13,440 kgs valued at USD 12,360 (`7,75,590) to M/s. Al Hamoud General Trading LLC, Sharjah, UAE. On 8/1/2015, the consignment was intercepted by officers of DRI at the International Container Transshipment Terminal, Vallarpadam, after granting of let export order. Detailed examination of the container on 9/1/2015 resulted in the seizure. The investigation by the officers of DRI, Cochin revealed that the modus operandi involved tampering with the inner sides of the latches of the door locks to open the container doors without breaking the customs seal to remove the plywood stuffed under the supervision of proper officer at CFS, M/s. KSIE, Kalamasserry and replacing with Red Sander logs, at the godown rented by the smuggling syndicate. After that, the search of the premises of Customs Appeal No.11/2019 ## -:8:- said godown at Kadungalloor Panchayat, Ernakulam, was conducted on 12/1/2005 which resulted in recovery and seizure of 940 kgs of Red Sanders valued at `15,98,000/-, 480 numbers of plywood in 12 pallets valued at `7,75,590/-, one forklift (3 T) valued at `2,75,000/- and 13 numbers of plywood boxes. The samples drawn during seizure proceedings on 9/1/2015 and 12/1/2015 were forwarded to the Kerala Forest Research Institute, Trichur, Kerala, and the test results received identified the samples as Pterocarpus Sandalinus Linn (Botanical Name), having trade name Red Sander. Schedule 2 Export Policy – Appendix 2 under Appendix 1 of the Foreign Trade Policy 2009-14 (FTP) formulated under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 shows that Red Sanders is notified as a “Prohibited Species”. Further, under tariff item HS Code 4403 99 18, against the entry Sl. No.188 (Chapter 44) of Table-B to Schedule 2 of the Export Policy, Red Sanders wood in any form is prohibited for export. The seized Red Sander logs were not included in the shipping bill, nor did they correspond in respect of value or material particular with the entry made in the shipping Customs Appeal No.11/2019 -:9:- bill. Neither the exporter nor the appellant or any other accused disputed either the seizure of the said Red Sanders or had raised any objection against the confiscation. 8. According to the appellant, he has no connection whatsoever with the alleged export of Red Sanders. It is contended that in August 2014, one Mr. Ashraf approached him to arrange the export of a container stuffed with plywood for export to UAE and informed that the container would be in packed condition and properly sealed by either Customs or Central Excise officers in accordance with law. Since he did not hold a customs broker license to handle the goods, he introduced Mr.Ashraf to Mr.Sibu, who undertook the export. According to him, after that, he was not involved in the export and did not know about the smuggling of Red Sanders. 9. The statements of the appellant and others were recorded under Section 108 of the Customs Act. The appellant has admitted his involvement in the smuggling of Red Sander logs in his statements recorded on 18/3/2015 and 19/3/2015. He stated that one Mr Ashraf, an associate of Mr.Anilkumar, who was Customs Appeal No.11/2019 -:10:- earlier involved in the smuggling of Red Sanders, contacted him and asked him to handle the export of Red Sanders and they met at Hotel Dreams, Vyttila, Ernakulam. After that, he met Mr. Ashraf at Ernakulam three times and later at Bangalore and Delhi for a discussion on the smuggling. Then he contacted Mr. Sibu to make necessary arrangements for the smuggling and arranged a customs clearing agent, a container lorry for transportation and a lorry driver. He also arranged for a meeting at Hotel Holiday Inn and Hotel Empire Plaza, Ernakulam, in December 2014 to discuss arrangements for the smuggling of Red Sanders. He directed his friend Mr.Rajesh to act as Mr. Renjith, an exporter of Red Sanders, in the meetings at Hotel Holiday Inn and Hotel Empire Plaza in December 2014 to convince Mr. Sanoj, who looked after customs facilitation work. He acted as an Advocate during the meeting at Hotel Empire Plaza to convince Mr. Sanoj to facilitate customs clearance in the smuggling of Red Sanders. He gave drawings to Mr. Sibu to make rubber seals in the name of M/s. Liberty Marketing, Mumbai. He also gave the invoice and packing list of export cargo of plywood to Mr. Sibu, who in turn handed it over to Customs Appeal No.11/2019 -:11:- Mr. Sanoj, the clearing agent. He facilitated taking the godown at Edayar on lease with the help of Mr. Shaheer of Mattancherry. He admitted that he received payment of `35,00,000/- in 3 instalments, through hawala mode, for making arrangements for smuggling. The confession statements given by Sri.Rajesh and Sri. Sanoj also reveals the active involvement of the appellant in the deal. 10. It is settled that the statement recorded under Section 108 of the Customs Act is admissible in evidence in proceedings under the Customs Act and is a material piece of evidence which can be used to connect the maker in the contravention of the provisions of the Act {See K.I. Pavunny v. Assistant Collector (HQ), Central Excise Collectorate, Cochin [(1997) 3 SCC 721], IVRCL Infrastructure and Projects Limited v. Commissioner of Customs, Chennai [(2015) 13 SCC 198] and Assistant Collector of Central Excise, Rajamundry v. Duncan Agro Industries Limited and Others (AIR 2000 SC 2901)}. It is equally settled that the statement of a co-accused can be used as evidence in proceedings under the Customs Act. In a proceeding for confiscation of foreign Customs Appeal No.11/2019 ## -:12:- currency and imposition of penalty under the Customs Act, the Apex Court took the view that the statement of a co-accused recorded under Section 108 can be used as substantive evidence connecting the petitioner with the contravention by exporting foreign currency out of India { Naresh J. Sukhawani v. Union of India (AIR 1996 SC 522)}. 11. The learned counsel for the appellant vehemently argued that the appellant had retracted the confession on 26/5/2015 and, hence, it has no evidentiary value and cannot be relied upon. According to him, it was because of the torture and threat exercised by the customs officials that the appellant was forced to give the confession statements. We are unable to accept the said submission. Retraction does not always dilute, reduce or wipe out the evidentiary value of a confession statement. In each case, the court will have to examine whether the confession was voluntary and true and whether the retraction was an afterthought. In Smt.Kalawati and Another v. State of H.P. (AIR 1953 SC 131), the Apex Court held that the amount of credibility to be attached to a retracted confession would depend Customs Appeal No.11/2019 -:13:- upon the facts and circumstances of each case. In Shankaria v. State of Rajasthan (AIR 1978 SC 1248), it was held that where the confession was not retracted at the earliest opportunity but after the lapse of several months, the circumstance reinforces the conclusion that the confession was voluntary. The appellant's confession statements under Section 108 were recorded on 18/3/2015 and 19/3/2015, whereas the alleged retraction was made on 26/5/2015. There is no explanation for the delay. The appellant was arrested in the criminal prosecution against him. He was produced before the Court and released on bail on 4/4/2015. He did not make any complaint about the torture and threat allegedly exercised by the customs official when he was produced at the Court or before any authority after that. The Apex Court in Ammini and Others v. State of Kerala (1998 CRI.L.J. 481) rejected the retraction of the confession made by the accused four days after he was released on bail, alleging that he made the confession under pressure and force from the police. It was observed that no complaint was made by the accused while he was in judicial custody till he was released on bail after about Customs Appeal No.11/2019 ## -:14:- a fortnight. 12. Coming to the facts of the case, except the bare allegations, there was no material on record to indicate that the customs officials had pressurised or forced the appellant to confess. On the other hand, the records show that the officer who recorded the statements of the appellant explained to him that he was under no obligation to answer any question and warned him that anything he said might be used against him in any court of law/proceedings. Considering the entire facts on record, we endorse the findings of the adjudicating authority that the confession statements were recorded after following the correct procedure, that it was voluntary and truthful, that the appellant was not forced or compelled to give his statement and that the retraction of the said statements was an afterthought and as such only to be ignored. 13. As to the contention of the learned counsel for the appellant that the appellant's request to cross-examine the coaccused and the investigating officer who recorded their statement was denied, it is trite that cross-examination is not a Customs Appeal No.11/2019 -:15:- matter of right in quasi-judicial proceedings and the adjudicating authority is vested with the discretion to decide whether the facts and circumstances of the case warrant cross-examination as demanded by the accused. The Apex Court in Kanungo & Co. v. Collector of Customs, Calcutta & Others [(1983) 13 E.L.T. 1486 (S.C.)] and in Surjeet Singh Chhabra v. Union of India and Others (AIR 1997 SC 2560) unequivocally held that for proceedings under the Customs Act, the right to compliance to the principles of natural justice does not cover the right to cross-examination of the witnesses. If the cross-examination of the co-accused is permitted, they would be put in a situation where they might be forced to incriminate themselves. 14. The sequence of events as described, statements of the co-accused, recovery of smuggled goods and incriminating documents coupled with circumstantial evidence of the case provide corroboration to the confession statement of the appellant. The evidence on record establishes that the smuggling syndicate coordinated by the appellant misused the IEC of the exporter, M/s. Liberty Marketing to smuggle out Red Sanders, an Customs Appeal No.11/2019 ## -:16:- item prohibited for export. It has also come out in evidence that the appellant ventured into smuggling operation at the behest of Mr. Abdul Razak @Ashraf and received `35,00,000/- as a reward on two occasions. He then met with Mr. Sibu, who agreed to take care of the logistical and customs clearance part of the operation for a commission of `5,00,000/-. Moreover, a suitable IE code and exporting firm for the smuggling operation was provided by the appellant to Mr. Sibu to facilitate the smuggling. Further, it is also evident that a false declaration in the shipping bill with the intention to smuggle out Red Sanders in the said consignment was submitted by him. Thus, the ingredients of Sections 144 and 144AA of the Customs Act are squarely attracted. The High Court’s jurisdiction under Section 130 of the Customs Act is limited. It is not within the domain of the High Court in an appeal under Section 130 of the Customs Act to reappreciate the fact on which the findings were arrived at by the Tribunal, the final fact-finding authority. True, a finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence or while arriving at Customs Appeal No.11/2019 -:17:- the said finding, relevant admissible evidence has not been taken into consideration, or inadmissible evidence has been taken into consideration, or legal principles have not been applied in appreciating the evidence or when the evidence has been misread. We find that the adjudicating authority, the appellate authority, and the Tribunal appreciated the facts and evidence on record in the correct legal perspective and rightly found that the appellant was liable to penalty under Sections 144 and 144AA of the Customs Act. The quantum of penalty imposed also appears to be reasonable. None of the substantial questions of law formulated arise in this appeal. We accordingly confirm the impugned order and dismiss the appeal. No costs. Sd/- **DR. A.K.JAYASANKARAN NAMBIAR JUDGE** ## Sd/- **DR. KAUSER EDAPPAGATH JUDGE** Sections 144 and 144AA in paragraph 14 and the operative portion of the judgment are corrected and substituted as Sections Customs Appeal No.11/2019 -:18:- 114 and 114AA as per the order dated 3/11/2023 in IA 1/23 in Customs Appeal 11/2019. Sd/Deputy Registrar Rp Customs Appeal No.11/2019 ## -:19:- ## **APPENDIX OF CUS.APPEAL 11/2019** PETITIONER'S ANNEXURES ANNEXURE A TRUE COPY OF THE SCN F.NO.DRI/BZU/CHN/01/SCN-1/2015 DATED 30.06.2015. ANNEXURE B TRUE COPY OF THE REPLY TO SCN DATED 28.01.2017. ANNEXURE C TRUE COPY OF THE ORDER-IN-ORIGINAL NO.027/2017 DATED 30.03.2017. ANNEXURE D TRUE COPY OF THE ORDER-IN-APPEAL NO.25/2018-19 DATED 30.05.2018. ANNEXURE E CERTIFIED COPY OF THE FINAL ORDER NO.20400/2019 DATED 08.05.2019.