The Chennai Regional Bench of the Customs, Excise & Service Tax Appellate Tribunal has delivered a pivotal ruling clarifying that penal action for abetment under the Customs Act cannot be sustained in the absence of an identified or prosecuted actual importer. This judgment reinforces the foundational principle that abetment requires two distinct actors: the principal offender and the abetter. Without establishing who imported the goods improperly, any penalty against alleged abettors is legally unsustainable.
Background & Facts
The Dispute
The dispute arose from an intelligence report by the Directorate of Revenue Intelligence, Chennai Zonal Unit (DRI-CZU), alleging that smuggled cigarettes of foreign origin were being imported under the false declaration of "MALAYSIAN CORE VENEER" in a 40-foot container (IALU 4553829) arriving at Chennai Port on 17.03.2016. The Bill of Lading (No. BLPLPKG1602368 dated 14.08.2016) named M/s. L. Naga Trading as shipper and listed the consignee as M/s. Thivya Agencies, with a contact number belonging to one Shri Sharvesh Bulchandani of Mahalingapuram, Chennai.
Key Facts
- The container was inspected on 18.03.2016 and found to contain cigarettes, not veneer.
- The consignee’s address was visited and found locked; the landlord confirmed the name board had been recently changed.
- A rental agreement was seized but its terms - including duration, subletting rights, or occupancy details - were not examined or disclosed in the adjudication.
- The phone number of Sharvesh Bulchandani was the only direct link to the consignee, yet no call records were obtained.
- The Appellants - Shri B.A. Suresh Kumar (Proprietor, M/s. Arunachalam Shipping) and Shri C. Solomon Selvaraj (Proprietor, M/s. Thivya Agencies) - were named as respondents in the Show Cause Notice (SCN) dated 21.02.2017.
- Suresh Kumar’s statement dated 19.09.2016 implicated Selvaraj, claiming he acted as a commission agent for customs clearance. This statement was later retracted.
- Selvaraj produced evidence of a police complaint filed against Suresh Kumar for misuse of his Import-Export Code (IEC: 0414009703), which remained unchallenged.
- Bank records of both M/s. Thivya Agencies and Selvaraj showed inactive accounts, contradicting Suresh Kumar’s claim of financial transactions.
- No documentary evidence supported Suresh Kumar’s assertion of acting as commission agent or receiving payments.
- The actual importer (shipper or consignor) was never identified or pursued by the Revenue.
Procedural History
- 17.03.2016: Container IALU 4553829 arrived at Chennai Port under IGM No. 2144725.
- 18.03.2016: Inspection revealed smuggled cigarettes.
- 21.02.2017: Show Cause Notice issued to both Appellants proposing confiscation and penalties under Section 112(a) and Section 114AA of the Customs Act, 1962.
- 15.12.2017: Commissioner of Customs, Chennai-III, passed Order-in-Original No. 60310/2017 imposing a penalty of Rs. 35,00,000 on each Appellant.
- 20.04.2026: Hearing before CESTAT Chennai Regional Bench, Court No. III.
- 02.06.2026: Final Order pronounced.
The Parties' Positions
For the Appellants
- Argued that they were not the importers and had no role in the physical importation.
- Highlighted that the Revenue failed to investigate the phone number of Sharvesh Bulchandani or obtain call records.
- Presented police complaint against Suresh Kumar for IEC misuse, suggesting motive for false implication.
- Contended that Suresh Kumar’s statement was uncorroborated, retracted, and should have been subjected to cross-examination.
- Emphasized that bank accounts of both appellants were inactive, negating claims of financial transactions.
For the Respondent
- Relied solely on the statement of Suresh Kumar and the consignee details in the Bill of Lading.
- Did not produce any evidence linking the Appellants to the actual importation.
- Did not identify or prosecute the actual importer.
- Did not examine the rental agreement’s terms or verify the legitimacy of the consignee’s address.
Relief Sought
The Appellants sought quashing of the penalty order dated 15.12.2017, release of the seized goods, and costs.
The Legal Issue
Can a person be penalized under Section 112(a) of the Customs Act, 1962 for abetment of improper importation when the actual importer - the principal offender - remains unidentified and unprosecuted?
Arguments Presented
For the Appellant
The Appellants relied on the legal definition of abetment as requiring two distinct persons: the principal offender and the abettor. They argued that since the Revenue failed to identify or charge the actual importer, the charge of abetment collapsed. They cited the absence of call records, the retracted statement of Suresh Kumar, the police complaint for IEC misuse, and inactive bank accounts as evidence of a flawed investigation. They further contended that cross-examination of Suresh Kumar was mandatory under principles of natural justice, especially when his statement was the sole basis for penalty.
For the Respondent
The Respondent relied on the consignee details in the Bill of Lading and the statement of Suresh Kumar to establish liability. No independent evidence was produced to link the Appellants to the importation. The Revenue did not investigate the phone number, the shipper, or the actual owner of the goods. No attempt was made to verify the rental agreement or establish any transactional link between the Appellants and the smuggled goods.
The Court's Analysis
The Tribunal conducted a rigorous analysis of the legal concept of abetment under Section 112(a) of the Customs Act, 1962. It emphasized that abetment, by its very nature, requires the existence of a principal offender who commits the substantive offence - in this case, improper importation. The Tribunal observed:
"Abetment occurs only when there are at least two persons involved - one committer and the other abetter. Hence, when the actual committer is absent or is not found, then there is no question of abetment since abetter cannot conspire with himself to commit a crime."
The Court noted that the Revenue had not identified the shipper (M/s. L. Naga Trading), the actual importer, or any party who had control over the goods at the time of import. The sole link - the phone number of Sharvesh Bulchandani - was not investigated. No call records were obtained, no inquiry was made into his role, and he was exonerated without any substantive reasoning.
The Tribunal further held that the statement of Suresh Kumar, upon which the entire case rested, was unreliable. It was retracted, uncorroborated, and contradicted by bank records. The failure to allow cross-examination violated the principles of natural justice. The Court remarked:
"It is but natural that a culprit would pull someone into the crime to mitigate the consequences of severity of the punishment against oneself."
Regarding Section 114AA, the Tribunal held it was inapplicable as it was inserted specifically to penalize fraudulent exports where no physical export occurred. It cannot be invoked for import cases.
The Court concluded that the investigation was superficial, biased, and aimed at targeting the Appellants while shielding the actual offender. The absence of the principal offender rendered the charge of abetment legally untenable.
The Verdict
The Appeals are allowed. The Order-in-Original No. 60310/2017 dated 15.12.2017 is set aside. The penalty of Rs. 35,00,000 imposed on each Appellant under Section 112(a) and Section 114AA is cancelled. The seized goods are ordered to be released. No costs are awarded.
What This Means For Similar Cases
Abetment Cannot Exist Without a Principal Offender
- Practitioners must now insist that the Revenue identify and prosecute the actual importer before invoking abetment under Section 112(a).
- Merely naming a consignee or agent without proving their connection to the import act is insufficient.
- Any penalty based on uncorroborated statements of implicated parties without cross-examination is vulnerable to challenge.
Investigation Must Be Thorough and Impartial
- Authorities must pursue all leads, including phone numbers, bank records, and digital footprints.
- Exonerating one party without explanation while penalizing others raises suspicion of bias.
- Failure to examine rental agreements, subletting terms, or ownership of premises renders the investigation incomplete.
Section 114AA Is Not Applicable to Imports
- Practitioners should immediately object to the use of Section 114AA in import-related proceedings.
- This provision is strictly limited to paper exports with no physical movement of goods.
- Any penalty under this section in import cases is legally invalid and subject to immediate quashing.
