Admissibility of Electronic Evidence in Customs Valuation: A Critical Analysis of the Composite Impex Ruling

Introduction

In today’s era of rapid technological advancement, mobile messaging applications have emerged as a dominant medium of communication, largely due to their user-friendly interfaces and cross-border compatibility. Increasingly, these platforms are replacing traditional methods of professional correspondence such as emails.

This trend has not gone unnoticed by investigative agencies. There have been several instances where authorities such as the Directorate of Revenue Intelligence (DRI) and the Special Intelligence and Investigation Branch (SIIB) have initiated investigations into cases of alleged undervaluation of goods, relying on data exchanged through these mobile messaging platforms. Consequently, litigation has followed, especially where tax authorities have based their demands on such electronic communications—owing to the significant revenue implications involved.

This scenario raises an important legal question: To what extent can electronic communications be relied upon as evidence to substantiate claims of undervaluation by tax authorities?

The recent ruling in M/s. Composite Impex and Shri Rajiv Dhuper Versus Principal Commissioner of Customs (Import), New Delhi - 2025 (5) TMI 1538 - CESTAT NEW DELHI (“Composite Impex”) provides much-needed judicial clarity on this issue. This article analyzes the decision and its broader implications for the admissibility of electronic evidence under Customs law.

The Composite Impex Case: Background and Issue

In the Composite Impex matter, the customs authorities alleged that the importers had suppressed the actual transaction value of imported automotive windshields. The case was brought under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (“2007 Valuation Rules”), read with Section 14 of the Customs Act, 1962 (“Customs Act”). The authorities redetermined the declared value under Rule 3 of the 2007 Valuation Rules.

The key evidence relied upon was an Excel sheet—allegedly extracted from a pen drive containing WeChat conversations between the supplier and an employee of the appellant—purportedly showing prices different from those declared in the Bills of Entry.

The central issue before the Hon’ble CESTAT was whether this Excel printout could be treated as admissible evidence under the legal framework of Section 138C of the Customs Act.

Section 138C of the Customs Act: Legal Framework

Section 138C lays down the conditions under which electronic records (such as computer printouts) may be treated as admissible evidence in customs proceedings. Specifically:

• A computer-generated document is admissible only if it complies with sub-section (2), and is accompanied by a certificate under sub-section (4) of Section 138C.
• The certificate under Section 138C(4) must contain:
  1. Identification of the document and the method of its production;
  2. Particulars of the device from which it was produced;
  3. Details of the device’s usage during the relevant period;

This certificate must be signed by a person in an official capacity responsible for the device or its management. Complete Section 138C is extracted in the Annexure to the Article.

Ratio Decidendi: Key Findings in Composite Impex

The Hon’ble CESTAT relied on judicial precedents under the erstwhile Section 36B of the Central Excise Act, 1944 and Section 65B of the Indian Evidence Act, 1872—now represented by Section 63 of the Bharatiya Sakshya Adhiniyam, 2023. These provisions are pari materia with Section 138C of the Customs Act.

From these precedents, the following legal tests were distilled:

A. Electronic records as evidence must adhere to the statutory process laid down in the respective provisions.

B. Secondary electronic evidence—such as printouts or copies from optical or magnetic media—shall be considered valid only if statutory conditions are fulfilled.

C. A certificate under Section 138C(4) is mandatory to authenticate such records.

D. Genuineness of the electronic record becomes a question only after compliance with the above requirements. Oral evidence alone is insufficient to establish validity, even when requirements appear fulfilled.

Applying these principles, the Hon’ble CESTAT held that since the Excel printout was derived from a pen drive (i.e., secondary electronic evidence), and the required certificate under Section 138C was not furnished, it could not be treated as valid evidence. Accordingly, the re-determination of value based on such material was held to be unsustainable.

Conclusion

Thus, in the above decision, emphasis was placed on the need for authorities to comply with Section 138C. However, it must be noted that mere submission of certificate alone is sufficient compliance with Section 138C. The manner in which the certificate is drawn and submitted is also relevant. 

There are situations where the authorities attempt to submit certificates under Section 138C, but these often fall short of procedural requirements. The following table summarizes common lapses in such instances:

Such procedural lapses undermine the evidentiary value of the submitted material, rendering it legally unreliable.

Though the Section 138C repeatedly refers to information stored and obtained from “computer”, it is necessary to understand the scope of “computer” as covered under the Section. Under the Explanation to Section 138C, “Computer” has been defined to mean “any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes”. Thus, any device satisfying this definition will be considered to be a computer for the purposes of Section 138C. This definition can also be satisfied by all smartphones and tablets now available in the market. Accordingly, the provisions of the Section will equally apply to information obtained from such devices also.

Further, the mandate under Section 138C is not only for the Customs Department. Even if an assessee wishes to make use of any electronic document obtained from a “computer” the procedures set out in Section 138C must be fulfilled by the assessee, in order to place reliance on that document. 

As modes of communication evolve with technology, legal systems must adapt in how they evaluate and admit evidence derived from such platforms. The Composite Impex case is an important ruling that reaffirms the principle that procedural rigor must be followed before electronic records can be admitted in customs proceedings.

This judgment reinforces the notion that reliance on mobile messaging applications and other digital communications must meet the standards of statutory admissibility. Going forward, both taxpayers and authorities must exercise diligence and adhere strictly to procedural mandates under Section 138C to ensure the credibility of evidence in customs litigation.

^[1]  M/s. S.N. Agrotech, Shri Nikhil Asrani, Shri Aseem Asrani, M/s. Suresh Kumar & Co. (Impex) Pvt. Ltd. Versus C.C., New Delhi - 2018 (4) TMI 856 - CESTAT NEW DELHI

This article is co-authored by Ms. Srinidhi Ganeshan, Partner ([email protected]) and  Ms. Shambhavi Mishra, Principal Associate ([email protected] )