A statement recorded under Section 108 of the Customs Act is inadmissible as evidence for proving the truth of its contents in adjudication proceedings unless the adjudicating authority follows the mandatory procedure under Section 138B(1)(b) by examining the witness and forming an opinion on its admissibility in the interest of justice.

FINAL ORDER NO. 50969/2026

JUSTICE DILIP GUPTA :

Purshottam Jajodia¹the appellant has filed this appeal to assail that portion of the order dated May 27, 2020 passed by the Principal Commissioner of Customs (Preventive)²the Principal Commissioner that imposes a penalty of Rs. 50 lacs upon him under section 112 of the Customs Act, 1962³the Customs Act.

2. It transpires from the records that proceedings were initiated against one Pushpak Lakhani, an employee of Johnson Watch Co. Pvt. Ltd.⁴Johnson, on a belief that he was engaged in smuggling and supply of high end wrist watches for Johnson. This resulted in searches conducted in October, 20212 at various premises including the premises of the appellant.

3. A show cause notice dated October 27, 2017 was issued to many noticees, including the appellant. In respect of the appellant, it was stated that five watches were seized from his residential premises valued at Rs. 38,000/- as also Rs. 10 lacs. The relevant portion of the show cause notice is reproduced below :

"From the above facts and statements recorded, it is clear that Sh. Pushpak Lakhani, an employee of M/s JWCPL, New Delhi was engaged in an organized racket of smuggling and supply of high-end wrist watches for M/s JWCPL. Such smuggled high-end wrist watches were being smuggled/ illegally procured through various carriers from Hong Kong, Nepal & Dubai and were then sold through the shops/ showrooms of M/s JWCPL and thereby huge amount of customs duties was being evaded. The procurement of high-end wrist watches through illegal means was well within the knowledge, and was being done in connivance with/for the Directors of M/s JWCPL, namely S/Sh. Anil Madan, Ankit Madan, Rajesh Madan and Manish Madan. Sh. Pushpak Lakhani was assisted by Ms. Shikha Pahwa and Sh. Nikhil Malhotra who were also the employees of M/s JWCPL, Sh. Purshottam Jojodia and Shiv Kumar Lakhani @ Pintoo. All these persons were well aware of the smuggled nature of the subject high-end watches." [emphasis supplied]

4. It needs to be noted that prior to the issuance of the show cause notice dated October 27, 2017, earlier a show cause notice dated October 28, 2013 was also issued proposed confiscation of the five watches and Rs. 10 lacs seized from the premises of the appellant. The customs duty to the extent of Rs. 9,041/- was demanded under the provisions of section 28(4) of the Customs Act with penalty under section 112, 114A and 114AA of the Customs Act. The appellant filed a Writ Petition (C) No. 416/2014 before the Delhi High Court against the show cause notice and by a judgment dated July 24, 2014, the Delhi High Court allowed the Writ Petition filed by the appellant and directed for release of the watches and currency unconditionally.

5. The present show cause notice dated October 27, 2017 is based on the statement of the appellant recorded in 2012 under section 108 of the Customs Act.

6. The appellant filed a detailed reply to the show cause notice dated October 27, 2017 and denied the allegations made therein. However, the Principal Commissioner has confirmed the demand proposed in the show cause notice and imposed a penalty of Rs. 50 lacs on the appellant under section 112 of the Customs Act only on the basis of the statement of the appellant recorded in 2012.

7. Dr. G.K. Sarkar, learned counsel appearing for the appellant has made the following submissions :

(i) The issue is about 3364 wris