Custom, Excise & Service Tax Tribunal
Ambica Vikas Udyog vs Principal Commissioner, Customs, Acc ... on 5 August, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH, COURT NO. 1
CUSTOMS APPEAL NO. 50788 OF 2020
(Arising out of Order-in-Original No. 01/2020/UG/PR.COMM dated 09.01.2020 passed by
the Principal Commissioner of Customs, ACC Import, New Delhi)
M/s. Ambica Vikas Udyog .....Appellant
12, Mohini Market, Kucha Mahajani,
Chandni Chowk, New Delhi
versus
Principal Commissioner of Customs (A), .....Respondent
ACC Imports
New Customs House, Near IGI Airport,
New Delhi 110 037
WITH
CUSTOMS APPEAL NO. 50791 OF 2020
(Arising out of Order-in-Original No. 01/2020/UG/PR.COMM dated 09.01.2020 passed by
the Principal Commissioner of Customs, ACC Imports, New Delhi)
Vipul Jain (Partner) .....Appellant
B-59, East Jyoti Nagar,
Delhi - 110093
versus
Commissioner of Customs (A), .....Respondent
ACC Imports
New Customs House,
New Delhi 110 037
AND
CUSTOMS APPEAL NO. 50792 OF 2020
(Arising out of Order-in-Original No. 01/2020/UG/PR.COMM dated 09.01.2020 passed by
the Principal Commissioner of Customs, ACC Imports, New Delhi)
Sanjeev Jain, Manager .....Appellant
B-59, East Jyoti Nagar,
Delhi - 110093
versus
Commissioner of Customs (A), .....Respondent
ACC Imports
New Customs House,
New Delhi 110 037
APPEARANCE:
Shri J.M. Sharma and Ms. Pooja Aggarwal, Advocates for the Appellant
Shri C. Dhanasekharan, Special Counsel for the Respondent
2
C/50788/2020 & 2 others
CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL)
Date of Hearing: 25.02.2025
Date of Decision: 05.08.2025
FINAL ORDER NO's. 51133-51135/2025
JUSTICE DILIP GUPTA:
Customs Appeal No. 50788 of 2020 has been filed by M/s.
Ambica Vikas Udyog 1 to assail that part of the order dated 09.01.2020
passed by the Principal Commissioner of Customs, ACC Import, New
Delhi 2 that confirms the customs duty forgone with interest under section
28AA of Customs Act, 1962 3 for failure to abide by the conditions of the
Notification No. 57/2000-Cus dated 08.05.2000 4 by enforcing the bond
executed by M/s. MMTC (the importer of gold) with the customs
authorities. The order also imposes a penalty upon the appellant under
section 112 of the Customs Act.
2. Customs Appeal No. 50791 of 2020 and Customs Appeal No.
50792 of 2020 have been filed by Vipul Jain (Partner of the appellant)
and Sanjeev Jain (Manager of the appellant) to assail that part of the
order dated 09.01.2020 passed by the Principal Commissioner that
imposes penalties upon them under section 114AA of the Customs Act for
the acts of omission and commission, including deliberate mistake of
overlooking the procedure envisaged in the Notification.
3. The appellant is engaged in the manufacture of jewellery for
domestic sale and export. Vipul Jain is a partner of the appellant and
Sanjeev Jain is the Manager of the appellant. The present dispute relates
1. the appellant
2. the Principal Commissioner
3. the Customs Act
4. the Notification
3
C/50788/2020 & 2 others
to 18.7 kgs of gold procured by the appellant from MMTC that imported
gold after giving a bank guarantee as security deposit to MMTC against
possible duty liability MMTC in terms of provisions of the Notification.
4. The appellant availed the benefit of a Scheme called "Export Against
Supply by Nominated Agencies" as contained in the Notification. The
period involved in this appeal from 21.09.2015 to 20.10.2015.
5. Prior to 15.05.2015, the nominated agency, which in this case is
MMTC, in terms of the Notification was allowed to import gold without
payment of duty after executing a bond with the Assistant Commissioner
of Customs. The gold imported by the nominated agency was then
required to be exported in the form of jewellery or articles thereof either
by the nominated agency itself or through any other exporter.
6. The relevant portion of the Notification, as it stood prior to
15.05.2015, is reproduced below:
"Notification: 57/2000-Cus. dated 08-May-2000
*****
***** the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts silver, gold and platinum, falling under heading Nos. 71.06, 71.08 and 71.10 respectively of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, -
(a) *****
(b) under the Scheme for 'Export Against Supply by Nominated Agencies' as referred to in Paragraph 8.22 of the Export and Import Policy, read with relevant provisions of Chapter 8 of the Handbook of Procedures, Volume I, from the whole of the duty of customs leviable thereon, which is specified in the said First Schedule and from the whole of the additional duty leviable 4 C/50788/2020 & 2 others thereon under section 3 of the said Customs Tariff Act:
Provided that ***** ***** Provided further that in the case of import of gold/silver/platinum under the scheme for 'Export Against Supply by Nominated Agencies', the importer executes a bond in such form and for such sum as may be specified by the Assistant Commissioner of Customs or Deputy Commissioner of Customs undertaking to export, either by itself or through other exporters gold/silver/platinum jewellery or articles, as the case may be, including studded articles having gold/silver/platinum content equivalent to the imported gold/silver/platinum within a period of 120 days from the date of issue of gold/silver/platinum to the exporters, or such extended period as the Assistant Commissioner of Customs or Deputy Commissioner of Customs, on sufficient cause being shown may allow, and binding himself to pay on demand duty on quality of gold/silver/platinum representing the difference between the quantity issued and that contained in the exported jewellery or articles: *****"
(emphasis supplied)
7. The second proviso to the opening paragraph of the Notification was deleted by Notification No. 33/2015-Cus dated 15.05.2015 and the relevant portion is reproduced below:
"Notification No. 33/2015-Cus dated 15.05.2015 In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government being satisfied that it is necessary in the public interest so to do, hereby directs that each of the notification of the Government of India in the Ministry of 5 C/50788/2020 & 2 others Finance (Department of Revenue), specified in column (2) of the Table hereto annexed shall be amended or further amended, as the case may be, in the manner specified in the corresponding entry in column (3) of the said Table, namely :-
Serial Notification Amendments
number number
and date
(1) (2) (3)
***** ***** *****
5. 57/2000- In the said notification,-
Customs,
(I) in the opening
dated the
paragraph
8th May,
2000, G.S.R. (i) in clause (a), for
413 (E), the word, letter
dated the and figures
8th May, "paragraph
2000 4A.14", the word,
letter and figures
"paragraph 4.46"
shall be
substituted;
(ii) in clause (b), for
the word, letter
and figures
"paragraph 4A.9",
the word, letter
and figures
"paragraph 4.41"
shall be
substituted;
(iii) the second
proviso shall be
omitted;
(emphasis supplied)
8. It would be seen that prior to 15.05.2015, in terms of the second proviso to the Notification, the importer had to in case of import of gold under the "Export Against Supply by Nominated Agencies" Scheme, the importer had to execute a bond in such form and for such sum as may be specified by the Assistant Commissioner undertaking to export, either by itself or through other exporters, within a period of 120 days from the date of issue of gold to the exporters and binds himself to pay on demand duty on the quantity of gold representing the difference between the quantity issued and that contained in the exported jewellery. However, the 6 C/50788/2020 & 2 others second proviso to the opening paragraph of the Notification was omitted by the subsequent Notification dated 15.05.2015.
9. According to the appellant, 17 kgs of duty free gold out of the said 18.7 kgs of gold purchased by the appellant were exported during the period from 21.09.2015 to 21.10.2015. The jewellery manufactured from the balance 1.7 kgs of gold could not be exported and so the appellant deposited the entire duty through challan dated 21.11.2014.
10. The show cause notice dated 29.11.2017 mentions that on 27/28.10.2015 Directorate of Revenue Intelligence 5 Officers intercepted two international passengers Mukesh Kumar Sawalchand Bohra and Ranjit Kumar Hirachandji Jain. The said passengers were carrying gold jewellery of M/s. Nikkamal Jewellers6 for export, but they handed over the export consignments to two domestic passengers on the airport. During the relevant period the appellant had manufactured some gold jewellery for Nikkamal Jewellers on job work basis.
11. Searches were also conducted at the premises of the appellant on 29.10.2015. No incriminating information/documents were found by the department during the search. The statements of all the four passengers were recorded but none of the passengers named the appellant. The call details of mobiles shows that there was no call made or received from the appellant by Vipul Jain and Sanjeev Jain who are said to be involved in attempted diversion of gold consignments.
12. The department however, entertained a belief that the gold jewellery exported in between 21.09.2015 to 21.10.2015 by the appellant, out of 18.7 kgs of duty free gold procured from MMTC, was not exported and a show cause notice dated 29.11.2017 was issued to the appellant
5. DRI 6, Nikkamal Jewellers 7 C/50788/2020 & 2 others demanding the duty of Rs. 46,48,286/-. The show cause notice also proposed confiscation of gold jewellery under section 111(o) of the Customs Act and also proposed penalty under sections 112 and 114AA of the Customs Act. The relevant portions of the show cause notice, in so far as it concerns the appellant are reproduced below:
"26. *****
(v) ***** Therefore, it appears that M/s Ambica Vikas Udyog has diverted the duty free gold as detailed above taken from M/s. MMTC and has not exported the gold jewellery manufactured from said duty free gold in contravention of conditions laid down in Notification No. 57/2000-Customs dated 8th May, 2000.
(vi) Further, during investigation it has been found that 1700 grams of duty free gold procured by M/s. Ambica Vikas Udyog from M/s. MMTC was declared non export for failing to fulfil export obligation.
(vii) In view of the above, M/s. Ambica Vikas Udyog is liable to pay Customs duty forgone, penalty, interest etc. on duty free imported gold procured from M/s. MMTC, as detailed below, as the same were not utilized in manufacture of gold jewellery meant for export and was not exported.
***** 31.2 Now therefore, M/s. Ambica Vikas Udyog, S/Shri Sanjeev Jain, Vipul Jain, Mukesh Kumar Sawalchand Bohra, Jinesh Kumar Jain, Ranjit Kumar Hirachandji Jain, Manoj Kumar Vaishnav, Pankaj Jain, Neeraj Jain, Mahendra Kumar Amritlal Jain and Komal Jain are hereby called upon to show cause to the Commissioner of Customs, Air Cargo Complex (Import), New Delhi as to why penalty should not be imposed upon each of them under Section 112 and 114AA of the 8 C/50788/2020 & 2 others Customs Act, 1962 for their acts of omission and commission, as brought out herein."
(emphasis supplied)
13. The appellant submitted a reply dated 10.03.2018 to the show Cause Notice explaining that the appellant had exported the jewellery manufactured out of 17 Kgs of duty free gold procured from MMTC, and the appropriate duty was paid to MMTC in respect of balance 1.7 Kgs of duty free gold which could not be utilized in manufacture of export jewellery. During the search proceedings the DRI Officers had asked the appellant to deposit an amount of Rs. 42,50,000/-.
14. The Principal Commissioner did not accept the submissions made by the appellant and Vipul Jain and Sanjeev Jain in their replies and confirmed the demand proposed in the show cause notice. The order proceeds on the footing that the appellant failed to fulfill the conditions contained in the second proviso to the Notification in as much as the appellant failed to export the gold jewellery manufactured from the duty free gold procured by the appellant from the MMTC. The relevant portion of the order is as follows:
"56. I find that the present proceedings are arising on account of non-fulfillment of the conditions contained in Notification No. 57/2000-Cus dated 08.05.2000 (relating to the export obligations cast upon the exporters) in as much as the fact that they have failed in exporting the gold jewellery manufactured from the duty free gold procured by them from the agencies nominated for the purpose of importing duty free gold. *****"
(emphasis supplied) 9 C/50788/2020 & 2 others
15. The Principal Commissioner, thereafter, referred to the various statements made by certain persons under section 108 of the Customs Act and observed:
"61. The above statements divulging the modus operandi which in itself presents a background underlying the roles played by all the concerned investigation which eventually culminated in the issuance of instant show cause notice when seen in the light of the written submissions made in this respect and also the records of personal hearing, it becomes incumbent upon me to discuss the following points: ***** ***** Whether duty forgone on imported gold can be recovered from exporters:
*****
63. As can be seen, there are two nominated agencies namely M/s Bank of Nova Scotia and M/s MMTC Ltd. from whom the manufacturers cum exporters namely M/s Nikkamal Jewellers, M/s Prem Jewellers, M/s Ambika Vikas Udyog and M/s Krishan Chander Ramesh Chander (P) Ltd. had procured the gold. After manufacturing the jewellery from the said he said gold, these exporters with the help of companies/persons namely M/s Ambika Vikas Udyog (through Sh.Vipul Jain and Sh.Sanjeev Jain) and M/s Rishabh Cargo Care (through Sh. Neeraj Jain and Sh. Pankaj Jain) are getting the said jewellery exported through "hand carry" export. The gold is being imported by M/s MMTC Ltd. and M/s Bank of Nova Scotia in terms of notification No. 57/2000-Cus dated 08.05.2000 under the 'Scheme of Export against Supply by Nominated Agencies'. Under this scheme/notification, nominated agencies were allowed to import gold, duty free, and supply it to domestic jewellers through whom equivalent quantity of gold was to be exported.
For this both these importers have submitted 10 C/50788/2020 & 2 others bond with customs authorities and the exporters in turn have deposited certain amount as security with these importers.
*****
71. ***** Besides, DGEP's Circular No.28/2009-Cus dated 14.10.2009 applicable in the present case clearly prescribes a detailed procedure for implementing the provisions of notification No.57/2000-Cus dated 08.05.2000. Sub-para (ix) of para 4 of the said circular specifically provides that "the exporters intending to receive precious metal from the Nominated Agencies will register themselves with their jurisdictional Asstt. Commissioners who will issue them a one-time Certificate specifying therein the details of their units such as name and address of the unit and the head/owner of the organization. This certificate has to be produced to the Nominated Agencies while taking gold. The units shall submit an undertaking to the Asstt. Commissioner without bank guarantee to follow the conditions of notification under which they are receiving duty free precious metal and export the jewellery made therefrom within the period stipulated in the Foreign Trade Policy."
72. It thus becomes clear that the exporters are equally responsible/accountable to comply with the conditions of the aforesaid notification. Further it is seen that at the time of export, to comply with the given procedure, the exporting firms have mentioned the registration details on the body of the shipping bills which not only determines their status as exporters but also categorically differentiates them from other exporters as the said registration detail filled in the respective Shipping Bills in itself establishes that the export consignments are manufactured from the duty free gold procured by them from the nominated agencies. *****"
(emphasis supplied) 11 C/50788/2020 & 2 others
16. Shri J.M. Sharma, learned counsel for the appellant assisted by Ms. Pooja Aggarwal, apart from challenging the impugned order on various grounds, also contended that since the period involved in this appeal is from 21.09.2015 to 21.10.2015 during which period the second proviso to the Notification, of which violation has been alleged, had been omitted, there was no obligation on the part of the appellant to export jewellery having gold equivalent to the gold imported within a period of 120 days from the date of issue of the gold. Learned counsel, therefore, submitted that demand could not have been raised against the appellant for non-
fulfillment of the conditions of the Notification nor penalty could have been imposed upon the appellant. Learned counsel also pointed out that the impugned order is based on statements made by persons under section 108 of the Customs Act regarding the modus operandi, but these statements cannot be considered as relevant for the purpose of proving the facts since the procedure contemplated under section 138B of the Customs Act was not followed. In support of this contention learned counsel placed reliance upon a decision of the Tribunal in M/s. Drolia Electrosteel P. Ltd. vs. Commissioner, Customs, Central Excise & Service Tax, Raipur 7. Learned counsel also submitted that recovery could only be made from the appellant under the provisions of section 28 of the Customs Act, but it has been made in terms stipulated in the bond executed by the MMTC. Learned counsel also submitted that penalty could not have been imposed upon Vipul Jain and Sanjeev Jain.
17. Shri C. Dhanasekharan, learned special counsel appearing for the department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. Learned special counsel
7. Excise Appeal No. 52612 of 2018 decided on 30.10.2023 12 C/50788/2020 & 2 others submitted that the appellant had failed to fulfill the conditions stipulated in the Notification and, therefore, in terms of the bond that was executed, the appellant was obliged to pay the differential duty. Learned special counsel also submitted that penalty was correctly imposed upon the appellant, Vipul Jain and Sanjeev Jain.
18. The submissions advanced by the learned counsel for the appellant and the learned special counsel appearing for the department have been considered.
19. The first issue that arises for consideration is whether the second proviso to the Notification had been omitted during the relevant period from 21.09.2015 to 21.10.2015.
20. The appellant has brought on record Notification No. 33/2015-Cus dated 15.05.2015. At Serial No. 5 (iii) of this Notification, the second proviso to the Notification has been omitted. On omission of the second proviso, the condition that required MMTC to execute a bond with the Assistant Commissioner to the effect that MMTC may either itself or through other exporters export gold equivalent to the imported gold within a period of 120 days from the issue of gold to the exporters was not in existence. The Principal Commissioner is, therefore, not justified in asserting that either the MMTC or the appellant had failed to fulfil the conditions stipulated in the Notification. The appellant may have given an undertaking to the MMTC and the MMTC may have executed a bond with the Assistant Commissioner, but as the second proviso to the Notification had been omitted on 15.05.2015, and the period involved is from 21.09.2015 to 05.10.2015 recovery of duty from the appellant could not have been made. Any demand, therefore, made for non-fulfillment of the 13 C/50788/2020 & 2 others conditions stipulated in the second proviso to the Notification is without any authority of law.
21. The second submission advanced by the learned counsel for the appellant is that the statements made under section 108 of the Customs Act could not have been considered relevant as the procedure contemplated under section 138B of the Customs Act had not been followed also deserves to be accepted.
22. In M/s. Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur 8, 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 as follows:
"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
8. Excise Appeal No. 51148 of 2020 decided on 01.04.2025 14 C/50788/2020 & 2 others 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 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)
23. After examining various judgments of the High Courts and the Tribunal, the Tribunal observed as follows:
"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 15 C/50788/2020 & 2 others 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 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."
24. Same view was taken by this Bench in Drolia Electrosteel. The Tribunal, 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 16 C/50788/2020 & 2 others statement should be admitted in evidence. Of course, the party adversely affected by the 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 selfevident 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 subsection (1) thereof, 17 C/50788/2020 & 2 others 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.
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 18 C/50788/2020 & 2 others 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 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) 19 C/50788/2020 & 2 others
25. In view of the aforesaid decisions of the Tribunal, it has to be held that the statements made under section 108 of the Customs Act, on which reliance has been placed by the Principal Commissioner, could not have been considered as relevant.
26. The Principal Commissioner has also referred to a Circular dated 14.10.2009 which prescribes a detailed procedure for implementing the provisions of the Notification and from this has concluded that the exporter is equally responsible/accountable for compliance of the conditions of the Notification.
27. This Circular dated 14.10.2009 would have no application to the facts of the present appeal for the simple reason that the Circular refers to the second proviso to the Notification which, as noticed above, was omitted by a Notification dated 15.05.2015 and the period involved in this appeal is after 15.05.2015.
28. It would, therefore, not be necessary to examine the contention advanced by the learned counsel for the appellant that recovery could have been made from the appellant only under the provisions of section 28 of the Customs Act and not in terms of the bond since the recovery in the present case has been found to be without authority of law. Penalty, for the aforesaid reasons, could not have been imposed upon the appellant under section 112 of the Customs Act.
29. Penalty has also been imposed upon Vipul Jain and Sanjeev Jain under section 114AA of the Customs Act. This section provides for penalty for use of false and incorrect material. Not only is the finding based on the statements made by persons under section 108 of the Customs Act but even otherwise it has not been pointed out which statement was made Vipul Jain and Sanjeev Jain knowingly or intentionally or they had made 20 C/50788/2020 & 2 others any declaration or statement which was found incorrect in any material particular. In any view of the matter, as the demand could not have been made, the imposition of penalty upon Vipul Jain and Sanjeev Jain cannot be sustained.
30. Such being the position, the order dated 09.01.2020 passed by the Principal Commissioner confirming the duty forgone for failure to abide the conditions of the second proviso to the Notification and imposition of penalty under section 112 of the Customs Act deserves to be set aside and is set aside. The imposition of penalty upon Vipul Jain and Sanjeev Jain under section 114AA of the Customs Act also deserves to be set and is set aside. Customs Appeal No. 50788 of 2020, Customs Appeal No. 50791 of 2020 and Customs Appeal No. 50792 of 2020 are, accordingly, allowed.
(Order pronounced on 05.08.2025) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) Shreya