Custom, Excise & Service Tax Tribunal
Linkers Clearing And Forwarding Pvt Ltd vs New Delhi -Airport And General on 8 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH- COURT NO. I
Customs Appeal No. 54831 of 2023
(Arising out of Order-in-Original No. 68/ZR/POLICY/2022 dated 02.12.2022 passed
by the Commissioner of Customs (Airport & General), New Customs House, New
Delhi.)
M/s Linkers Clearing and Forwarding Pvt. Ltd. ....Appellant
WZ-361, Ram Chowk Sadh Nagar,
Palam Colony,
New Delhi-110045
Versus
Commissioner of Customs (Airport & ....Respondent
General) New Custom House, Near IGI Airport, New Delhi-110037 APPEARANCE:
Ms. Reena Rawat, Advocate for the Appellant Shri M.K. Shukla, Authorised Representative of the Department CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) DATE OF HEARING/ DECISION: July 08, 2025 FINAL ORDER NO. 51018/2025 JUSTICE DILIP GUPTA M/s Linkers Clearing and Forwarding Pvt Ltd1 has filed this appeal to assail the order dated 02.12.2022 passed by the Commissioner of Customs (Airport & General)2 by which the Customs Broker License of the appellant has been revoked. The order also forfeits the whole amount of the security deposit furnished by the appellant and also imposes a penalty of Rs. 50,000/- upon the appellant.
1 the appellant 2 the Commissioner of Customs 2 C/54831/2023
2. The appellant is a Customs Broker. In the usual course of business, the appellant filed a Bill of Entry on 28.07.2021 on the basis of the documents provided by M/s. Fashion Boutique. According to the appellant all the relevant KYC documents of the importer which had been provided to the appellant by Vikas Aggarwal were verified before filing the Bill of Entry. However, subsequently, it was realized that there were some defects in the KYC documents and, therefore, the appellant submitted a letter dated 02.08.2021 to the Assistant/Deputy Commissioner of Customs withdrawing from the responsibility as it came to its notice that the KYC documents were not proper.
3. A show cause notice dated 09.06.2022 was issued to the appellant for revoking the Customs Broker License of the appellant alleging violation of the provisions of regulations 10(b), 10(d) and 10(n) of the Customs Broker Licensing Regulations, 20183.
4. The appellant filed a reply denying the allegations made therein. The Inquiry Officer submitted a report dated 06.09.2022 confirming the allegations made in the show cause notice. The appellant was provided an opportunity to submit comments to the report. Thereafter, the order dated 02.12.2022 was passed by the Commissioner revoking the Customs Broker License of the appellant and also ordering for forfeiture of the security deposit and imposing a penalty of Rs. 50,000/-.
5. The Commissioner has, while examining the contravention of the provisions of regulations 10(b), 10(d) and 10(n), merely referred to the statements made by certain persons to arrive at a conclusion that 3 the 2018 Regulations 3 C/54831/2023 the said provisions had been violated. These statements had been recorded under section 108 of the Customs Act.
6. In paragraph 23.1 of the order, the Commissioner has commented on the statements made under section 108 of the Customs Act in the following manner:
"23.1 I find that the observations made by the Inquiry Officer hold ground as it is evident that all the above said statements were recorded under section 108 of the Customs Act, 1962 which are admissible before Court of law and none of them have been retracted till date. Therefore, I uphold the observations made by the Inquiry Officer."
7. Ms. Reena Rawat, learned counsel for the appellant submitted that the Commissioner committed an error in relying upon the statements made by persons under section 108 of the Customs Act to arrive at a conclusion that the provisions of the 2018 Regulations had been violated.
8. In this connection, learned counsel has also placed the provisions of regulations 17(3) and 17(4) of the 2018 Regulations. These are reproduced below:
"17 ...
(3) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall, in the course of inquiry, consider such documentary evidence and take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings, and he may also put any question to any person tendering evidence for or against the Customs Broker, for the purpose of ascertaining the correct position (4) The Customs Broker shall be entitled to cross-
examine the persons examined in support of the grounds forming the basis of the proceedings, and where the Deputy Commissioner of Customs or Assistant Commissioner of Customs declines permission to examine any person on the grounds that his evidence is not relevant or material, he shall record his reasons in writing for so doing." 4
C/54831/2023
9. A bare perusal of regulation 17(3) shows that the Deputy Commissioner of Customs or the Assistant Commissioner of Customs in the course of inquiry shall take such oral evidence as may be relevant or material to the inquiry in regard to the grounds forming the basis of the proceedings. Regulation 17(4) provides that the Customs Broker shall be entitled to cross-examine the persons examined in support of the grounds forming the basis of the proceedings. In the instant case, the statements were not recorded by the Inquiry Officer or the Principal Commissioner of Customs and the statements were recorded under section 108 of the Customs Act before the show cause notice issued. Such persons whose statements were relied upon have not been examined by the Inquiry Officer or by the Commissioner of Customs. In fact, the Commissioner of Customs has even observed that the statements made under section 108 of the Customs Act are admissible before a court of law, more particularly when they have not been retracted.
10. This finding by the Commissioner of Customs cannot be sustained. It was imperative for the Inquiry Officer or the Commissioner to have examined the persons whose statements were intended to be relied upon and then granted an opportunity to the appellant to cross examine such persons.
11. Even with regard to proceedings under the Customs Act, statements made under section 108 of the Customs Act cannot be relied upon if the procedure contemplated under section 138B of the Customs Act is not followed. This is what has been observed by this Tribunal in Surya Wires Pvt. Ltd. vs. Principal Commissioner, 5 C/54831/2023 CGST Raipur4 and M/s. Drolia Electrosteel P. Ltd. vs. Commissioner, Customs, Central Excise & Service Tax, Raipur5.
12. In Surya Wires, the Tribunal examined the provisions of sections 108 and 138B of the Customs Act as also the provisions of sections 14 and 9D of the Central Excise Act, 1944 and observed:
"21. It would be seen section 14 of the Central Excise Act and section 108 of the Customs Act enable the concerned Officers to summon any person whose attendance they consider necessary to give evidence in any inquiry which such Officers are making. The statements of the persons so summoned are then recorded under these provisions. It is these statements which are referred to either in section 9D of the Central Excise Act or in section 138B of the Customs Act. A bare perusal of sub- section (1) of these two sections makes it evident that the statement recorded before the concerned Officer during the course of any inquiry or proceeding shall be relevant for the purpose of proving the truth of the facts which it contains only when the person who made the statement is examined as a witness before the Court and such Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence, in the interests of justice, except where the person who tendered the statement is dead or cannot be found. In view of the provisions of sub-section (2) of section 9D of the Central Excise Act or sub-section (2) of section 138B of the Customs Act, the provisions of sub-section (1) of these two Acts shall apply to any proceedings under the Central Excise Act or the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry
4. Excise Appeal No. 51148 of 2020 decided on 01.04.2025
5. Excise Appeal No. 52612 of 2018 decided on 30.10.2023 6 C/54831/2023 has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain."
(emphasis supplied)
13. After examining various judgments of the High Courts and the Tribunal, the Tribunal observed:
"28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections are not applicable, then the statements made under section 14 of the Central Excise Act or under section 108 of the Customs Act during the course of an inquiry under the Acts shall be relevant for the purpose of proving the truth of the facts contained in them only when such persons are examined as witnesses before the adjudicating authority and the adjudicating authority forms an opinion that the statements should be admitted in evidence. It is thereafter that an opportunity has to be provided for cross- examination of such persons. The provisions of section 9D of the Central Excise Act and 7 C/54831/2023 section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The Courts have also explained the rationale behind the precautions contained in the two sections. It has been observed that the statements recorded during inquiry/ investigation by officers has every chance of being recorded under coercion or compulsion and it is in order to neutralize this possibility that statements of the witnesses have to be recorded before the adjudicating authority, after which such statements can be admitted in evidence."
(emphasis supplied)
14. In Drolia Electrosteel, the Tribunal had also while examining the provisions of section 9D of the Central Excise Act held:
"13. Of the above, the 35 statements of various persons recorded under the Central Excise Act will be relevant to the proceedings only as per section 9D which lays down the procedure to be followed to make them relevant and the exceptions to such procedure.*****
14. Evidently, the statements will be relevant under certain circumstances and these are given in clauses (a) and (b) of subsection (1). There is no assertion by either side that the circumstances indicated in (a) existed in the case. It leaves us with (b) which requires the court or the adjudicating authority to first examine the person who made the statement and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence. Of course, the party adversely affected by the 8 C/54831/2023 statement will have to be given an opportunity to cross examine the person who made the statement but that comes only after the statement is, in the first place, after examination by the adjudicating authority, admitted in evidence. This has not been done in respect of any of the 35 statements. Therefore, all the statements are not relevant to the proceedings.
15. It has been held in a catena of judgments including Jindal Drugs Pvt. Ltd. versus Union of India [2016 (340) E.L.T. 67 (P&H)] that section 9D is a mandatory provision and if the procedure prescribed therein is not followed, statements cannot be used as evidence in the proceedings under Central Excise Act. The relevant extracts are as follows:
"13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof.
14. Clause (a) of Section 9D(1) refers to the following circumstances :
(i) when the person who made the
statement is dead,
(ii) when the person who made the
statement cannot be found,
(iii) when the person who made the
statement is incapable of giving
evidence,
(iv) when the person who made the
statement is kept out of the way by
the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense.
15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of 9 C/54831/2023 subsection (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioners have also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 2183/1994, dated 3-
1-1995 wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby.
16. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and
(ii) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and
17. There is no justification for jettisoning this procedure, statutorily prescribed by plenary Parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise Officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word "shall" in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory.
10
C/54831/2023
18. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise Officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned.
19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice.
20. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the 11 C/54831/2023 sequence of evidence, in which evidence- in-chief has to precede cross-examination, and cross-examination has to precede re- examination".
16. Therefore, the 35 statements relied upon in the SCN are not relevant and hence also not admissible."
(emphasis supplied)
15. In view of the aforesaid decisions of the Tribunal, the view taken by the Commissioner for revoking this Customs Broker License of the appellant only on the basis of statements recorded under section 108 of the Customs Act cannot be sustained. The forfeiture of security and imposition of penalty cannot also be sustained.
16. The impugned order dated 02.12.2022 passed by the Commissioner is, accordingly, set aside and the appeal is allowed.
(Order dictated in the Open Court) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Shenaj