Section 112(b) Penalty Requires Evidence of Knowledge; Alleged Receipt Alone Is Insufficient.

On 4 November 2014, DRI officers seized six gold bars or pieces, weighing approximately six kilograms, from two persons near Park Street, Kolkata.

The Department alleged that the appellants were the intended recipients of the gold, relying principally on statements made by those persons.

An adjudicating authority imposed penalties under Section 112 of the Customs Act, 1962—Rs. 8,00,000 on Debopreo Acharya and Rs. 5,00,000 on Swapan Ghoshal—and the Commissioner (Appeals) upheld them.

The appellants challenged the penalties before the Tribunal, denying any connection with the gold and disputing reliance on the statements.

1. Whether the appellants’ alleged role as recipients of the seized gold was established where the allegation rested on statements of third persons and no independent corroborative evidence was identified.

2. Whether penalties under Section 112(b) could be sustained without evidence that the appellants knew, or had reason to believe, that the gold was liable to confiscation.

3. Whether the statements could be relied upon in adjudication when the requirements of Section 138B, including examination-in-chief, had not been complied with.

Section 112(b) of the Customs Act, 1962 requires proof of the person’s relevant dealing with goods liable to confiscation and, under the applicable clause, that the person knew or had reason to believe that the goods were liable to confiscation; such knowledge cannot be presumed merely from an allegation that the person was to receive the goods.

Section 138B governs the use in adjudication of statements recorded under the Customs Act. Relying on Sampad Narayan Mukherjee v. Union of India & Ors., 2019 (366) E.L.T. 280 (Cal.), the Tribunal stated that the maker of a statement ordinarily must be made available for cross-examination, subject to the statutory exceptions, and found examination-in-chief had not been complied with in this case.

It also relied on Mayeen Uddin v. Commissioner of Customs (Prev.), Shillong, 2020 (371) E.L.T. 779 (Tri.-Kolkata), and Shankeshwar Metal Corporation v. Commissioner of Customs (Imports), Mumbai, 2014 (312) E.L.T. 344 (Tri.-Mumbai), concerning the knowledge requirement under Section 112(b).

The Tribunal found that the gold was seized from two other persons and that the case against the appellants depended on those persons’ statements.

The record disclosed no independent evidence establishing that the appellants possessed, arranged delivery of, financed, received, or otherwise dealt with the gold; the appellants’ alleged roles, as described in the adjudication order, did not substantiate receipt of the goods.

Because the statements were not tested in accordance with Section 138B, the Tribunal held that they could not sustain the allegations against the appellants.

Further, the absence of independent evidence linking the appellants to the gold also left no basis to establish that they knew or had reason to believe it was liable to confiscation, as Section 112(b) required.

It set aside the penalties, allowed both appeals, and granted consequential relief, if any, in accordance with law.