Ummer Abdulla v. Commissioner of Central Excise, Customs and Service Tax, Calicut

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **TUESDAY ,THE 12TH DAY OF FEBRUARY 2019 / 23RD MAGHA, 1940 Cus.Appeal.No. 43 of 2018** **AGAINST THE ORDER/JUDGMENT IN O.NO. 22442-22447/2017 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE** ## **APPELLANT/S:** **UMMER ABDULLA, M.S. HOUSE, KADAVATH, POST THALANGARA, KASARAGOD, KERALA-671122.** **BY ADVS. SRI.C.P.MOHAMMED NIAS SMT.V.NAMITHA** ## **RESPONDENT/S:** **THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, CR BUILDING, CALICUT - 673001.** **BY ADV. SRI.R.HARISHANKAR, SC, CENTRAL BOARD OF EXCISE & CUSTOMS** **OTHER PRESENT:** **THIS CUSTOMS APPEAL HAVING BEEN FINALLY HEARD ON 12.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** _Cus.Appeal No.43 of 2018_ 2 ## **JUDGMENT** ## Ashok Menon, J. Aggrieved by the final order of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore, the appellant is before us raising the following substantial questions of law: - _“(i) Whether the Tribunal was justified in imposing a penalty under sections 112(a) and (b) of the Customs Act, given that the provisions of Customs Act, 1962, does not extend beyond the territory of India ?_ - _(ii) Whether the Original Authority was bound to follow the mandatory procedure prescribed under section 138B of the Customs Act, 1962 ?_ - _(iii) Whether the Tribunal was justified in penalising the Appellant on the basis of uncorroborated statements of co-accused, without any independent material evidence against the Appellant, and on the basis of conjectures and suspicions ?_ - _(iv) Whether the Tribunal was justified in imposing a penalty on the Appellant ex-parte, without affording the Appellant with an opportunity of contesting the case on merits ?_ - _(v) Whether the Tribunal and the authorities below were justified in imposing a penalty on the Appellant when the Show Cause Notice itself had no case that the Appellant was within the territory of India during the said period ?”_ _Cus.Appeal No.43 of 2018_ 3 We also raised an additional question of law as follows: _“Is not the decision of the Tribunal without any application of mind , also perverse in the facts and circumstances of the case ?”_ 2. The facts in brief are thus: The appellant claims to be a Non-Resident Indian businessman in UAE. He received a show cause notice at Annexure D on 01.08.2014 from the Commissioner of Customs (Preventive), Cochin, requiring him to show cause as to why the 24 gold biscuits weighing 2.8 kgs, having a market value of Rs.83,47,525/- and an international value of Rs.70,36,051/- should not be confiscated under Sections 111(d), 111(i), 111(l) and 111(m) of the Customs Act, 1962 (for short “the Act”) and as to why penalty should not be imposed on him under Section 112(a) and (b) of the Act. 3. According to the Department, the Superintendent of Customs, Customs Preventive Division, Kozhikode and his party intercepted a car bearing No.KL-60-F-6363 with four persons inside it, at the car parking area of the Calicut International Airport at about 2.45 AM on _Cus.Appeal No.43 of 2018_ 4 06.02.2014. One Altaf travelling from abroad arrived with his baggage, while others, namely Kaleemullah T.A., Abdul Basheer and Mahmood T.M. were waiting in the car. On being questioned, Altaf admitted having brought gold biscuits in two black cloth pouches, which on alighting from the aircraft, were handed over to Manoj P., a Senior Security Agent of Air India. Thereafter, the officers intercepted Manoj, while he was exiting the Airport Terminal. On being questioned, he took the package containing contraband gold from his pocket and handed it over to the Superintendent. All the four persons found in the car together with Manoj were taken into custody and subjected to search, which did not reveal anything further. 4. The persons were summoned by the Superintendent of Customs and their statements were recorded under Section 108 of the Act. Manoj from whom the gold was actually recovered, admitted having received the gold from Altaf on his arrival from abroad. One Navas had sent him the photograph of the passenger, who was supposed to deliver the gold and for this, Manoj received Rs.40,000/-. _Cus.Appeal No.43 of 2018_ 5 5. Abdul Basheer was employed in Abu Dhabi. He claims to be a friend of the appellant Ummer Abdulla. He states that the appellant wanted to bring gold from abroad since it was very profitable and it was at his behest that he arranged Manoj to receive the gold and bring it out of the Airport. Abdul Basheer, stated that he would contact one Shamsudhin, who was the owner of a Jewellery at Pallam. On information being passed, his representative would approach him to collect the gold, and would handover Rs.30,000/- to him, and Rs.40,000/- to Manoj. He also admitted having collected the smuggled gold three or four times earlier. He disclosed the mobile numbers of Shamsudhin and that of the appellant. Keleemulla and Mohmood T.M. stated that they were just accompanying Abdul Basheer and had nothing to do with the incident. 6. A search was conducted in MS Jewellery owned by Shamsudhin, resulting in seizure of cash worth Rs.25,77,500/- reasonably believed to be the sale proceeds obtained on sale of smuggled gold. Aramana Gold, another jewellery situated in M.G.Road, _Cus.Appeal No.43 of 2018_ 6 Kasaragod, was also searched resulting in recovery of foreign made gold bar weighing 1 kg., 60 gold coins weighing 395.2 grams and Rs.25,14,000/- in cash. Search in the residence of Altaf did not disclose anything. 7. The statement of Shamsudhin was also recorded on 07.02.2014 and he had stated that Abdul Basheer was known to him as a friend of the appellant, whom, he knew for the past 15 years. He too revealed the mobile number of the appellant, as well as confirmed his own mobile number as disclosed by Abdul Basheer. He also revealed that his daughter Jaseela, and the appellant's wife Haseena, were partners of Aramana Jewellery. He also accepted the fact that the appellant used to purchase gold from abroad and sent it through passengers which was collected at the Airport by Abdul Basheer and brought to Kasaragod and handed over to him. He further admitted having paid money to Abdul Basheer on receipt of the gold. He was under the belief that the gold was duty paid and he said that he did not know anything about the smuggling. _Cus.Appeal No.43 of 2018_ 7 8. The Managing Partner of Aramana Jewellery, namely one Mahmood A.S., was also questioned under Section 108 and in his statement, he admitted having acquaintance with Shamsudhin and also admitted that the daughter of Shamsudhin and the wife of the appellant were partners in the Jewellery. The appellant was also distantly related to him. Abdul Basheer too was known to him. Apart from Jaseela and Haseena, there was another partner in Aramana Jewellery, namely, Haneef Armana. 9. According to the appellant, the version of the Department is totally unreliable. The statements of witnesses recorded were contradicting each other, and investigation was not conducted further by questioning Abdul Basheer and Shamsudhin. The allegation of the Department was that Abdul Basheer had made some calls to the appellant's Dubai phone number and thus concluded that the gold was received by Abdul Basheer, at the behest of the appellant. The appellant distances himself from the alleged smuggling stating that he was a businessman in Dubai, staying there with _Cus.Appeal No.43 of 2018_ 8 his family and rarely visited India. The telephone number 0559271137 allegedly belonging to the appellant as revealed from the statements of Shamsudhin and Abdul Basheer does not belong to the appellant and there are no documents to prove that the said telephone belongs to him. No investigation was made regarding the call details of the phone belonging to Shamsudhin or that of Mahmood A.S. or the partners of Aramana Jewellery. 10. The appellant could not have been implicated solely on the statements purportedly given by Abdul Basheer and Shamsudhin and on the basis of a mobile number which did not belong to the appellant. The appellant submitted a detailed reply to the show cause notice received by him before the Adjudicating Authority and sought permission to cross-examine Abdul Basheer, Shamsudhin and Mahmood A.S. He had also submitted that he did not have any objection in the seized gold being confiscated, but opposed to the penalties imposed on him under Section 112(a) and (b). The statement filed by the appellant is at Annexure E. The authorised representative of the appellant had _Cus.Appeal No.43 of 2018_ 9 appeared before the Adjudicating Authority on 17.09.2015 and submitted argument notes. The appellant himself traced out the real owner of the Dubai phone number as one Khaleel Ibrahim Mohammed Ishaq. He also obtained an affidavit from that person along with the KYC copy. The personal identity, documents and passport copy of the aforesaid Khaleel Ibrahim Mohammed Ishaq was also submitted along with the affidavit. The argument note is at Annexure F and the affidavit of Khaleel is at Annexure G. Without considering the submissions made on behalf of the appellant, and relying solely on the contradictory statements of the witnesses recorded under Section 108 of the Act, and ignoring the request made by the appellant to crossexamine the witnesses, a penalty of Rs.8 lakhs was imposed on him as per Annexure H on 29.02.2016. 11. Aggrieved by the order of the Adjudicating Authority, the appellant filed an appeal before the Tribunal as Annexure I. He had entrusted an Advocate to appear before the Tribunal, but there was no appearance and the Tribunal passed an _exparte_ order _Cus.Appeal No.43 of 2018_ 10 against him and therefore the appellant is aggrieved and approached us with this appeal under Section 113 of the Act. 12. In the impugned order, it is stated that none had appeared on behalf of the appellant, despite notice, and therefore, the Tribunal had proceeded to consider the appeal in the absence of the appellant. The allegation is that, the appellant had arranged to smuggle 24 gold biscuits weighing 2.8 kgs, through Altaf, a carrier. The Adjudicating Authority had vide Annexure H order found the appellant guilty of having violated Sections 112(a) and (b) of the Act, resulting in imposing of a penalty of Rs.8 lakhs. The finding of the Authority is based mainly on the statement of Altaf, the carrier of contraband gold, Manoj, who collected it and got it safely out of the Airport, to be entrusted to Abdul Basheer, for being ultimately handed over to Shamsudhin, who on receipt of the gold, had to make payment to Abdul Basheer and Manoj. Altaf and Manoj did not spoke of the appellant. _Cus.Appeal No.43 of 2018_ 11 13. The statements given under Section 108 of the Act by these witnesses have been retracted. The allegation against the appellant is that he is the one who had arranged the smuggled gold from Dubai. He has been residing there for the past 17 years with his family. It is alleged that he was transacting with Abdul Basheer and had made arrangements to sent the photographs of the carrier to Manoj, who was to receive the contraband on identifying Altaf and bring the smuggled gold outside the Airport to be handed over to Basheer, who in turn was supposed to hand it over to Samshudhin. The appellant had sought cross-examination of the persons, whose statements were relied upon by the Adjudicating Authority. It is alleged that he was not permitted to cross-examine the witnesses, so as to test their veracity. Altaf was allegedly handed over the contraband gold at Dubai by one Shafeeq. Identity and whereabouts of the said Shafeeq is not established. There is not a scintilla of direct evidence regarding the appellant handing over any gold to the carrier, Altaf. It was under the directions of Shafeeq that _Cus.Appeal No.43 of 2018_ 12 Altaf came to Karipur Airport, where the Airline Security Officer approached him and collected the gold. The photograph of the Security Officer was also shown to Altaf so that he could identify him. After Manoj brought the gold stealthily out of the Airport, Abdul Basheer, along with Kaleemullah and Mahmood were waiting outside the Airport in a Mahindra XUV vehicle bearing Reg.No.KL-60-F-6363, to receive the contraband. It is the testimony of Altaf which reveals that it was one Shafeeq, who gave him 2730 Dirhams and the air ticket from Dubai for bringing the gold. He does not know the mobile number of Shafeeq. 14. From this it is very clear that the carrier Altaf did not have any contact, whatsoever, with the appellant. Abdul Basheer, who was waiting for Manoj and Altaf, outside the Airport to receive the gold, has in their statement testified that he was working with the appellant in Dubai and that the appellant had informed him that the smuggled gold from abroad was very profitable and thus it was he who approached Manoj, who is a resident of Kasaragod and working at _Cus.Appeal No.43 of 2018_ 13 Karippur Airport, to collect gold biscuits from passengers smuggling it from abroad. He has also given a statement that he had consulted the appellant and agreed to give Rs.40,000/- to Manoj for collecting the gold and handing it over outside the Airport, while he himself was paid at the rate of Rs.30,000/- for each consignment. Shamsudhin, who was running a jewellery at Pallam, used to collect gold at Kasaragod and would handover the remuneration to Abdul Basheer and Manoj. Abdul Basheer, had allegedly disclosed the mobile number of the appellant as 0559271137 on which he used to issue instructions regarding the transactions. 15. Manoj, the other important witness, apprehended with the contraband, who gave statement under Section 108 of the Act, does not know Shamsudhin, who had contact only with Abdul Basheer and one Navas of Dubai. The photographs of the carriers used to be sent to him by Navas, who too is neither traced or identified. He had, allegedly got similar consignments of gold from passengers on four previous occasion. _Cus.Appeal No.43 of 2018_ 14 16. Manoj, Altaf and Abdul Basheer were arrested under Section 104 of the Act and produced before the Additional CJM (EO), Ernakulam and remanded to judicial custody. All the three of them were subsequently granted bail. Follow up searches were made in two jewelries, one belonging to Shamsudhin, who used to receive the smuggled gold from Basheer, and another was one Aramana Jewellery in which wife of the appellant was alleged to be a partner. The gold and cash were also seized from both the jewelleries. Searches of the residences of Altaf and one Mahmood T.M., who was the Manager of the Aramana Jewellery, did not yield any result. 17. The appellant has produced documents to show that the mobile number, which is stated to be his and used for communication with Basheer and Shamsudhin, actually does not belong to him, but to some other person by name Khaleel Ibrahim Mohammed Ishaq. His passport and affidavit admitting that the telephone number belongs to him had been produced. _Cus.Appeal No.43 of 2018_ 15 18. Annexure D is the show cause notice issued under Section 124 of the Act to persons implicated as accused and to those who are connected with the smuggling. It would indicate that there is specific allegation against the appellant that he, with the aid of Navas and Shafeeq in Dubai, had arranged for smuggling gold through Karipur Airport with the assistance of Abdul Basheer and arranged a carrier among the passengers from Dubai to carry the gold and also made arrangement for it to be collected by Manoj, an Airline Security Officer, who very skillfully brought the contraband gold out of the Airport to hand it over to Abdul Basheer. The Customs Authorities assumed that the appellant has a major role in the commission of the offence by Altaf, Abdul Basheer, Shamsudhin and Manoj. Assuming that the appellant is the mastermind in the smuggling operations by Altaf, the appellant was liable for penal action under Section 112(a) and (b) of the Act and the gold biscuits seized from Manoj, which has been handed over to Altaf, was liable for confiscation, are the findings of the lower authorities. _Cus.Appeal No.43 of 2018_ 16 19. On getting the show cause notice, the appellant sent a letter to the Commissioner of Central Excise & Customs on 01.10.2014. In that reply, he has mentioned that the documents referred to in the notice, and stated to be relied upon by the prosecution, were not handed over to him. The allegations against him of having arranged for smuggling of gold through Karipur Airport with the aid of Navas and Shafeeq in Dubai, and of Abdul Basheer, his friend, at Calicut Airport, is also denied by the appellant. He has denied having any connection with Navas and Shafeeq or arranging gold for smuggling through Altaf. He denies having any acquaintance with Navas or Shafeeq. It is also pointed out that neither Altaf nor Abdul Basheer, who were apprehended in this connection, could give any whereabouts of Shafeeq or Navas, and therefore, without identifying those persons who have admittedly contacted the passenger Altaf or Manoj, it would not have been possible to connect the appellant to the alleged act of smuggling. It is also stated that the mobile number, which the witnesses have allegedly mentioned as that _Cus.Appeal No.43 of 2018_ 17 belonging to him, does not actually belong to him. The appellant had also requested that he be given an opportunity to cross-examine the witnesses, who have given the statements under Section 108 and intended to be relied upon for proceeding against him, but was never given that opportunity. 20. Our attention is drawn to Section 138B(2) of the Act. Apart from Annexure E reply, the appellant had also submitted Annexure F argument notes before the Commissioner of Customs, in which all the contentions mentioned above have been detailed. That apart, the documents pertaining to ownership of the offending mobile number is also produced by the appellant before the Commissioner. The findings of the Commissioner is solely based on the statements given by Abdul Basheer, Manoj and Altaf, who were directly involved with the smuggling, and from whom the seizure of the contraband was effected. Shamsudhin, was referred to as the recipient of the gold at Kasaragod. The finding of the Commissioner in paragraph 36(g) pertaining to the appellant is that he along with his aids Navas and _Cus.Appeal No.43 of 2018_ 18 Shafeeq in Dubai arranged smuggling of gold through Karipur Airport, through Abdul Basheer and that he has organised the entire smuggling activity and therefore he has been made liable for the penalty. The reply filed by the appellant on 01.10.2014 is referred to in paragraph 43(i). It is stated in paragraph 48 that during the personal hearing on 17.09.2015 one Sadanandan Nair, a Consultant, appeared for the appellant and reiterated the submissions made in the reply to the show cause notice and the argument note filed by the appellant. In the discussions and findings, which starts from paragraph 50, it is seen that the Adjudicating Authority has relied on the statements given by different witnesses. It is also on the basis of the decision of the Hon'ble Supreme Court in _**Surjeet Singh Chhabra v. UOI, 1997 (89) ELT 646 (SC),**_ the Adjudicating Authority concluded that the statements given before the Customs Officer, though retracted, is binding. In paragraph 64 the Adjudicating Authority has confirmed that the allegation of the telephone number being that of one Khaleel in Dubai is _Cus.Appeal No.43 of 2018_ 19 completely disproved by the evidence, which is discussed above and that the particular number was used by the appellant has been confirmed by Abdul Basheer as well as Shamsudhin, who had acquaintance with the appellant for the past 15 years. We pause here to notice that there is no independent evidence connecting the appellant with the mobile number other than the statements of persons who were apprehended for the direct link with specific instance of smuggling. 21. It is pertinent to note that the appellant had produced documentary proof of the fact that the telephone number spoken to by the witnesses as his, belonged to someone else. But the authority had concluded that the mobile number belongs to him relying solely upon the statements of Basheer and Shamsudhin. Going through the entire Annexure H order of the Adjudicating Authority, we do not find anything concrete to rope the appellant in the alleged smuggling of gold, but for the recorded statements of persons, who were directly involved. _Cus.Appeal No.43 of 2018_ 20 ## 22. A Division Bench of this Court in the _**judgment**_ ## _**dated 23.06.2017 in Cus.Appeal No.4/2017 (Krishna**_ ## _**Brothers v. Commissioner of Customs)**_ , held thus: “ _9. Insofar as the second contention raised by the learned counsel with reference to Annexures A6, A7 and A8 is concerned admittedly these are statements recorded under Section 108 of the Customs Act. In terms of Section 138 B (2) of the Customs Act such statements could not have been used in any proceedings under the Act without the person who made the statement being examined as a witness, so long as the maker of the statement is available. Insofar as this case is concerned even the department has no case that the makers of the statements, who are very much available, were examined. If that be so, these statements could not have been relied on.”_ ## 23. In _**Andaman Timber Industries v. Commissioner**_ ## _**of Central Excise, Kolkotta, (2016) 15 SCC 785**_ , the Hon'ble Supreme Court has held that the Adjudicating Authority in its discretion shall permit examination of witnesses and in that case the appellant therein had challenged the finding of the Adjudicating Authority for the reason that he was not allowed to examine the dealers whose statements were recorded, relied on by the Adjudicating Authority in the order, and held thus: _“6. According to us, not allowing the assessee to cross-examine the witnesses by the_ _Cus.Appeal No.43 of 2018_ 21 _adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the adjudicating authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the adjudicating authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”_ ## 24. In _**M/s Kanungo and Co. v. Collector of**_ ## _**Customs, Calcutta, 1973 KHC 589: (1973) 2 SCC 438**_ , the Hon'ble Supreme Court held thus: _“12. We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such_ _Cus.Appeal No.43 of 2018_ 22 _breach. In the show-cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed lo be cross-examined by them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant.”_ 25. These decisions were followed by us in our judgment, reported in _**2019 (1) KLT 229, Mohammed Fariz**_ _**& Co. v. Commissioner of Customs**_ to hold that permission has to be granted to cross-examine the witnesses even at an earlier stage to ensure that eventually the proceedings are set aside, only for reason of cross-examination having been declined. 26. In view of the aforementioned precedents, we are of the opinion that the Adjudicating Authority here has relied on the statements recorded under Section 108 without affording an opportunity to the appellant to cross-examine them. In the reply to the show cause _Cus.Appeal No.43 of 2018_ 23 notice filed by the appellant, he has specifically requested for the witnesses to be cross-examined, and therefore, the Adjudicating Authority was bound to follow the mandatory procedure prescribed in Section 138B of the Act. Without having done so, the order is not sustainable. The Tribunal was also not justified in upholding the order of the Adjudicating Authority in imposing the penalty, despite the infirmity pointed out by us. The Tribunal has not considered all these aspects in its order. We therefore, set aside the impugned order imposing penalty against the appellant. The questions of law are found in favour of the appellant and the appeal is allowed. The proceedings, if so advised, shall be recommenced providing the appellant with an opportunity to cross-examine the deponents who in their statements, implicated the appellant. No order as to costs. **Sd/K.VINOD CHANDRAN JUDGE** **Sd/-** **ASHOK MENON JUDGE** _dkr_ _Cus.Appeal No.43 of 2018_ 24 ## **APPENDIX** ## **APPELLANT'S/S ANNEXURES:** **ANNEXURE-A COPY OF THE LETTER DATED 21/02/2018 SUBMITTED TO THE REGISTRY OF THE TRIBUNAL. ANNEXURE-B COPY OF THE COVERING LETTER DATED 26/04/2018 SENT ALONG WITH THE INPUGNED ORDER. ANNEXURE-C COPY OF THE COVERING LETTER DATED 05/05/2018 ALONG WITH WHICH THE DEMAND DRAFT OF RS.100/-. ANNEXURE-D COPY OF THE SHOW CAUSE NOTICE NO.11/2014 DATED 01/08/2014. ANNEXURE-E COPY OF THE REPLY DATED 01/01/2014 FILED BEFORE THE ADJUDICATING AUTHORITY. ANNEXURE-F COPY OF THE ARGUMENT NOTE SUBMITTED BY THE APPELLANT. ANNEXURE-G COPY OF THE AFFIDAVIT OF MR. KHALEEL IBRAHIM MOHAMMED ISHAQ DATED 14/09/2015. ANNEXURE-H COPY OF THE ORDER-IN-ORIGINAL DATED 29/02/2016. ANNEXURE-I COPY OF THE APPEAL FILED BY THE APPELLANT AS APPEAL NO.C/20770/2016.**