Kolkata CESTAT Sets Aside ₹39 Lakh Customs Penalty On Jagtar Singh, Finds No Proof He Controlled Shed Holding 33.6 Lakh Cigarettes

In brief

The question

1. Whether the evidence established that Singh possessed or controlled the shed, or was otherwise knowingly involved with the cigarettes, so as to sustain a penalty under Section 112(b)(i).

The court held

The Tribunal held that the evidence did not establish the essential ingredients for imposing a personal penalty on Singh under Section 112(b)(i).

It also directed

It set aside the penalty of Rs. 39,00,000 and disposed of the appeal accordingly.

01Facts

DRI officers seized 33,60,000 sticks of foreign-origin cigarettes from a locked bamboo shed near Beharbari, Guwahati, on 28 November 2018.

pp. 2–3

The Revenue alleged that the shed and cigarettes were connected to Jagtar Singh, relying principally on statements by the landowner and persons familiar with the premises; Singh denied ownership, tenancy, possession, or control.

pp. 4–8

The adjudicating authority imposed a penalty of Rs. 39,00,000 on Singh under Section 112(b)(i) of the Customs Act, 1962.

pp. 7–8

The Commissioner (Appeals) upheld the penalty, leading to this appeal.

pp. 7–8

02Issues

i.1. Whether the evidence established that Singh possessed or controlled the shed, or was otherwise knowingly involved with the cigarettes, so as to sustain a penalty under Section 112(b)(i).

pp. 15–16, 21–24

ii.2. Whether the statutory burden under Section 123 could apply to Singh when the cigarettes were not shown to have been seized from his possession and he denied ownership.

pp. 8–9, 21–23

03Law Applied

Section 112(b) of the Customs Act permits a personal penalty against a person involved in acquiring, possessing, keeping, concealing, selling, or otherwise dealing with goods liable to confiscation; the individual’s culpable connection with the goods must be established.

pp. 13, 21–24

Section 123 provides a reversed burden of proof for notified goods in specified circumstances, but does not itself create possession or ownership; its burden cannot be placed on a person merely because the Revenue seeks to associate that person with the premises.

pp. 8–9, 21–23

Applying Ajay Sarawagi v. Commissioner of Customs (Preventive), NER, Shillong, the Tribunal held that a co-accused’s inculpatory statement, without independent corroboration, is insufficient to establish the person’s connection with the goods.

pp. 21–23

Provisions in the judgment · 5 · Linked ones open on LawLens

Customs Act,1962 Section 7 Section 107 Section 110 Section 112 Section 123

04Reasoning

The Tribunal found that the cigarettes were not recovered from Singh’s personal possession, residence, vehicle, or established business premises, and that the alleged tenancy was unsupported by a rent agreement, receipts, payment records, or other objective evidence.

pp. 15–17

The contemporaneous panchnama recorded that the shed’s ownership could not be ascertained and did not identify Singh as its occupier.

pp. 19–20

The statements relied on by the Revenue were not independently corroborated; nor did they establish that Singh handled or stored the cigarettes, or knew of their illicit character.

pp. 17–19

Applying the principle in Ajay Sarawagi, the Tribunal concluded that neither possession or control nor conscious involvement had been proved, and that Section 123 could not supply the missing foundational facts.

pp. 21–24