1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION jmi CUSTOMS APPEAL NO. 29 OF 2009. The Commissioner of Customs (Import), New Customs House, Ballard Estate, Mumbai-400 001. ..Appellant. versus 1.Vivencio Bartiloni Degollacion, C/o. Sea Bulk Offshore LLC, Dubai, 1204 Rushi Towers, Lokhandwala Complex, Andheri West, Mumbai-400 053. 2. Mohammed Ali Aboo Baker Shaikh, Flat No.12, 1st Floor, St. Andrew Apartment, Mohan Road, Agripada, Mumbai-400 011. ..Respondents. .... Mr. Pradeep S. Jetly, for Appellant. Mr. Manoj Sankalecha, i/b. N.D. George, for Respondent no.1. .... CORAM : V.C. DAGA & S.J. KATHAWALLA, JJ. DATE : 29TH JULY 2010. JUDGMENT (Per S.J.Kathawalla, J.) : The Appellant-Revenue has filed the present Appeal under section 130 of the Customs Act, 1962 (the said Act), challenging the order dated 5th August 2008, passed in Appeal 2 No.C/793/07-Mum., by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Mumbai. 2. The above Appeal was admitted by this Court on 15th April 2009 on the following substantial question of law :- “Whether the order of the CESTAT in confirming the findings of the Commissioner of not imposing penalty under section 112(a) & (b) of the Customs Act, 1962, is based on no evidence or partly relevant or partly irrelevant evidence and is otherwise perverse and arbitrary ?” Facts :- 3. Specific information was received by the SIIB (Import) on 23rd May 2006 from an unregistered informer that the supply vessel ‘Sea Bulk Toota’ is indulging in illegal sale of smuggled diesel to barges in and around Mumbai Docks. The SIIB (Import) was also informed that presently the vessel was anchored near Chinai Tekdi, opposite Ferry Wharf and will be delivering around 30,000 to 40,000 litres of diesel to the barges in the night of 23rd May 2006 around 11.00p.m. Based on the information, the SIIB (Import) made necessary arrangements for conducting the search in the night of 23rd May 2006 itself. 4. On the same night, a NGO had approached SIIB (Import) Unit with an information that smuggled diesel was being off-loaded on small barges/fishing crafts near Mora Jetty. The staff of SIIB (Import) alongwith the NGO and their Informers set of to 3 Mora Jetty. After reaching Mora Jetty, the informers of the NGO could not locate the barges and after waiting for sometime, the team of officers alongwith the office-bearers of the NGO and their informers returned back to BPX, Mole station where the Customs team then tried to physically contact their informant who had given the specific information regarding the Vessel ‘Sea Bulk Toota’. After confirming the exact location of the vessel, the officers of SIIB (Import) alongwith the members of the NGO (Panchas) and the office-bearers of the NGO, left towards Chinai Tekdi and reached the spot at about 11.45 p.m. After locating the supply vessel when the team of officers went near it, they noticed a barge anchored alongside the supply vessel. On seeing the Customs party, the barge quickly started to leave the supply vessel after removing the pipe from the supply vessel through which they had been receiving diesel. The Customs team chased the barge and after repeated warnings, apprehended the barge. A closer inspection showed the name of the barge to be ‘ML Anchor’. The Customs staff then boarded the barge and caught hold of the Tandel who gave his name as Viplav Kumar Rai @ Sunil Rai and after questioning, he accepted that he had illegally purchased 40MTs of high speed diesel from the supply vessel ‘Sea Bulk Toota’. 5. Some of the Customs staff were asked to remain on 4 the barge and guard the staff members of the barge alongwith Tandel Mr. Viplav Kumar Rai @ Sunil Rai. The remaining staff boarded the supply vessel ‘Sea Bulk Toota’ with two Panchas. After boarding the supply vessel the Custom officers got hold of the Chief Engineer, who was standing on the Deck and went to the Master of the vessel (Respondent No.1), where both of them were subjected to interrogation. After some time, the Chief Engineer of the vessel, Mr. Errol Tennyson, accepted that he had sold 40MTs of HSD to the barge ‘ML Anchor’ and further admitted that earlier also he used to purchase HSD for his vessel during his Mumbai High voyage and by selling the same illegally to barges he used to make money. 6. After this, it was decided to search the barge thoroughly. During the search of the barge, it was found that the barge had purchased around 40,000 litres of diesel which was found to be stored in the hatch of the barge; which as admitted by the Chief Engineer of the supply vessel, was sold to barge ‘ML Anchor’ from the supply vessel ‘Sea Bulk Toota’ . During the search of the barge US $ 18600.00 were recovered from a gunny bag of rice in which it had been concealed and was to be given to the Chief Engineer of the vessel ‘Sea Bulk Toota’ for the diesel received by the barge but which could not be given due to the raid 5 by Customs party. 7. After this, the team of Custom Officers alongwith the Panchas escorted the Tandel of the barge Mr. Viplav Kumar Rai to the supply vessel ‘Sea Bulk Toota’ and while two officers stood to guard near the Tandel of the barge, the remaining staff alongwith the Panchas commenced the search of the supply vessel which resulted in the recovery of unaccounted foreign currency of US$ 27050 from the cabin of the Chief Engineer Mr. Errol Tennyson. The currency had been concealed among readymade garments in a black coloured Zipper bag in the cabin of Mr. Errol Tennyson. Preliminary interrogation of Chief Engineer Mr. Errol Tennyson revealed that this money was the sale proceeds of the sale of diesel on earlier occasions. All the foreign currency amounting to US$ 45,650.00 equivalent to Rs.20,55,000/- (approx.), the barge ‘M.L. Anchor’ alongwith 40,000 litres of diesel and the vessel ‘Sea Bulk Toota’ alongwith 1,35,000 litres of diesel (as declared by Chief Engineer Mr. Errol Tennyson) were taken over and seized under the provisions of the said Act read with the Foreign Exchange Management Act, 1999 (FEMA). Total quantity of the diesel seized was 1,75,000 litres valued at Rs.36,75,000/- (CIF) and having estimated Market Value of Rs.70,00,000/-, the value of the barge ‘M.L. Anchor’ was around Rs.10,00,000/- (as 6 declared by Tandel Mr. Viplav Kumar Rai) and of the vessel ‘Sea Bulk Toota’ was around Rs.3 crores (as verbally declared by the Captain of the vessel). 8. After recording the statements, the said vessel was seized by Special Investigation and Intelligence Branch (Import) under a seizure notice bearing No. F .CO. SG/INF-02/ AKS/ 2006 SIIB(I) dated 21st May 2006 and was subsequently released upon the personal Bond of Rs.8,85,67,061/- being furnished by the owner and a bank guarantee dated 8th June 2006 for Rs. 2,20,33,440/-. 9. The Commissioner of Customs (Import) issued a Show Cause Notice dated 15th November 2006 under section 124 of the said Act, inter-alia calling upon the Respondent No.1-Captain to show cause as to why penalty under section 112(a) & (b) of the said Act should not be imposed for his act of omission and commission in relation to the seized goods and for the smuggling of earlier goods which are not available and which was cleared illegally without payment of Customs Duty, and likewise, calling upon Respondent No.2 to show cause as to why penalty under section 112(a) of the said Act should not be imposed. 10. The Commissioner of Customs (Import) adjudicated 7 the Show Cause Notice vide Order-in-Original dated 15th May 2007. By the said order, it was held that from the evidence adduced before the Commissioner except for creating suspicion against Respondent Nos. 1 and 2, no direct evidence involving Respondent No.1 or Respondent No.2 qua the offence of smuggling diesel, is established. In view thereof, the Commissioner did not impose any penalty on Respondent Nos. 1 and 2. 11. The Committee of the Chief Commissioner under the powers vested in it under section 129 D(1) of the said Act called for and examined the records of the proceedings leading to Order- in-Original dated 15th May 2007. The Committee held that the Order-in-Original is not legal and proper and directed that an application be made to CESTAT for the correct determination of - (i) Whether in the facts and circumstances of the case, the order of the Commissioner is correct, legal and proper ? (ii) Non-imposition of the penalty on the Respondent Nos. 1 and 2 under section 112 of the said Act is correct, legal and proper ? 12. The Revenue filed an Appeal under section 129 D(4) of the said Act before the CESTAT, which Appeal was dismissed 8 vide its order dated 5th August 2008. 13. Being aggrieved by the order of the CESTAT dated 5th August 2008, the Appellant filed the above Appeal which as stated above, was admitted on 15th April 2009 on the question of law set out in paragraph 2 above. Submissions :- 14. Mr. Jetly, learned Advocate appearing for the Appellant has submitted that the order dated 5th August 2008 passed by the CESTAT is arbitrary, perverse and lacks any vestige of fairness and is therefore, liable to be set aside. The CESTAT has ignored the evidence on record, more particularly, the statement of Mr. Tennyson, Chief Engineer of the supply vessel ‘Sea Bulk Toota’, wherein he states that the Captain of the vessel i.e. Respondent No.1 was also involved with him in the illegal sale of diesel and both were sharing the profits. Mr. Jetly submitted that the Respondent No.1 has in his statement admitted the knowledge of illegal sale of diesel for profit. The Respondent No.1-Captain has also admitted the purchase of diesel from vessels coming from U.A.E. and supply of 40 MTs of diesel to the barge 'M.L.Anchor'. 15. Mr. Jetly has further submitted that the CESTAT has ignored the statement of Mr. Viplav Kumar Rai Tandel of the barge 'M.L.Anchor', wherein he has mentioned that it was not possible 9 that such a big fraud could occur without the knowledge of the Respondent No.1-Captain. The CESTAT has also ignored the statement of Mr. Reuben James S. Cruz, the third mate of the supply vessel ‘Sea Bulk Toota’ to the effect that he was standing alongside Respondent No.1-Captain and the Chief Engineer Mr. Tennyson, when he saw the barge ‘M.L. Anchor’ come along the side of the vessel. When he asked Respondent No.1-Captain as to why the barge has come alongside the vessel, he was told by Respondent No.1-Captain to go to his cabin and take rest. 16. Mr. Jetly has further submitted that CESTAT has ignored the statement of Mr. Viplav Kumar Rai Tandel of the barge ‘M.L. Anchor’, wherein he has admitted that he used to receive calls from Respondent No.2 inquiring about the location of the barge. Mr. Jetly has, therefore, submitted that the order dated 5th August 2008 passed by the CESTAT not imposing any penalty on Respondent Nos. 1 and 2 is arbitrary, perverse and liable to be set aside. Per Contra :- 17. Mr. Sankalecha, the learned Advocate appearing for Respondent no.1-Captain submitted that the CESTAT has after considering the entire evidence recorded and dealt with by the Adjudicating Authority, noted in its order that according to the 10 Adjudicating Authority, the Chief Engineer has kept the Master and the Owners in the dark for his personal gain. It is submitted that in the absence of any direct evidence implicating Respondent No. 1-Captain, the mere statement of the Chief Engineer that the Respondent No.1-Captain was aware of the happenings and was also sharing the profits, is not sufficient to make him liable for penal action under section 112(a) of the said Act. Mr. Sanklecha further submitted that even the statement made by the Tandel of the barge that it was not possible that such a big fraud could occur on the vessel without the knowledge of Respondent No.1-Captain and the statement of the third mate that he had asked Respondent No.1-Captain as to why the barge had come alongside the vessel and he was told to go to his cabin and take rest, would also not be sufficient to implicate the Respondent No.1-Captain in the crime. The submission made by the Revenue that the Respondent No.1- Captain has in his statement admitted the knowledge of illegal sale of diesel for profit and has admitted purchase of diesel from vessel coming from U.A.E. and supply of 40 Mts of diesel to the barge ‘M.L. Anchor’, is belied by the statement of the Respondent No.1- Captain itself, as recorded by the Customs Authorities. 18. It is submitted that the CESTAT has therefore, after taking note of the entire evidence pertaining to the case of the 11 Respondent No.1-Captain correctly taken a view that the findings reached by the Adjudicating Authority in dropping the proceedings initiated against the Respondent No.1-Captain, are correct and are well-reasoned and do not require any interference. It is, therefore, submitted that the Appeal filed by the Revenue be dismissed against Respondent No.1-Captain. Conclusion :- 19. We have gone through the detailed order of the Adjudicating Authority, which inter-alia contains the entire evidence recorded in the matter pertaining to the illegal sale of high speed diesel from the ‘Sea Bulk Toota’ to the barge ‘M.L. Anchor’. We have also perused the impugned order passed by the CESTAT dated 5th August 2008. We have also considered the submissions advanced by the learned Advocates appearing for the Revenue as well as Respondent No.1-Captain. 20. The Adjudicating Authority has after appreciating the entire evidence, noted that the Respondent No.1-Captain has nowhere admitted his knowledge about the Chief Engineer indulging in smuggling of diesel and has also denied any share in such earnings. The Revenue has, therefore, in its show cause notice not properly extracted the gist of the statements of Respondent No.1-Captain. It is further recorded that none of the 12 other noticees like Viplav Kumar Rai, Abdul Subhan Abdul Rahim Shaikh, Ashok Sasthe, etc. have taken the name of the Respondent No.1- Captain as being involved in the smuggling. His telephonic records do not show any interaction between himself and any of the other noticees. Further, though the Chief Engineer has mentioned that he was sharing the profits out of sale proceeds of smuggled diesel with his Captain, no foreign currency or Indian currency was recovered either from the person or the cabin of the Captain. In view of the fact that no one except the Chief Engineer had implicated the Captain and the allegation of the Chief Engineer regarding the Captain’s complicity, have not been corroborated/verified by any other means, at the most a suspicion remains regarding the role of the Captain, but this cannot be a ground for imposing penal liability. The Adjudicating Authority has, therefore, after appreciating the evidence held that the evidence against the Respondent No.1-Captain at the most raises suspicion regarding his role but there is no direct evidence against the Respondent No.1-Captain for imposing any penal liability on him. 21. The CESTAT has after going through the records, conferred with the findings of the Adjudicating Authority and has proceeded to hold that in their considered view the findings 13 reached by the Adjudicating Authority in dropping the proceedings initiated against the Respondent No.1-Captain, are correct and are well-reasoned and do not require any interference. 22. In our view, Mr. Sankalecha, learned Advocate appearing for the Respondent No.1-Captain is correct in his submission that mere statement of the Chief Engineer or the statements of the third mate and Tandel can by no stretch of imagination, be considered as enough evidence to implicate the Respondent No.1-Captain as being party to the crime and imposing penalty on him under section 112 of the said Act. 23. As regards Respondent No.2, the Adjudicating Authority as well as the CESTAT has held that none of the noticees have stated or implicated him in financing the purchase or sale of illegal diesel. Except for the statement that Respondent No.2 was in touch with Mr. Viplav Kumar Rai, Mr. Tennyson, Mr. Ashok Sasthe, there is no other evidence to implicate him in the crime. 24. We, therefore, hold that there is no direct evidence against Respondent No.1-Captain and/or Respondent No.2 to implicate them in the crime. The statements relied upon by the appellants of Mr. Tennyson, Mr. Viplav Kumar Rai and Mr. Reuben James S. Cruz, at the most raises some suspicion against the Respondent Nos.1 and 2. This is certainly not enough evidence to 14 reach a conclusive finding that the respondents were involved in the crime. 25. We, therefore, hold that the order dated 5th August 2008, passed by the CESTAT cannot be said to be arbitrary or perverse and thus, needs no interference. The question of law raised in this Appeal is, therefore, answered in the negative and the Appeal is dismissed. However, there will be no order as to costs. [ S.J. KATHAWALLA, J. ] [V.C. DAGA, J.]