Undervaluation cannot rest on retracted statements or unreliable foreign customs reports without corroboration or disclosed underlying material.

Enhancement of assessable value for customs purposes could not be sustained where the department relied mainly on retracted statements that were neither shown to be voluntary nor independently corroborated, and on an unsigned U.S. Customs report based on a withheld spreadsheet. The Tribunal held that the report was unreliable because it contained ambiguity, incomplete data and internal contradictions, and that non-supply of the underlying spreadsheet breached natural justice. As the department failed to prove undervaluation with cogent, tangible evidence, the duty demand, interest, confiscation-related findings and penalties were set aside.

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Issues: Whether the enhancement of assessable value, confirmation of customs duty, and imposition of penalties could be sustained on the basis of retracted statements and the U.S. Customs report, especially when the underlying material was not supplied and the evidence was found unreliable.

Analysis: The Tribunal found that the case against the importer rested substantially on the statements of Shri M.M. Gupta, which had been retracted and were not shown to be voluntary or independently corroborated. It also held that the U.S. Customs report was an unsigned photocopy based on a withheld spreadsheet, was not reliable evidence, and suffered from ambiguity, incomplete data, and self-contradictions. The Tribunal further noted that the department had not discharged the burden of proving undervaluation through cogent and tangible evidence and that denial of the spreadsheet violated natural justice. In these circumstances, the demand, interest, and penalties could not be sustained.

Conclusion: The enhancement of value, duty demand, interest, confiscation-related findings, and penalties were not upheld, and the appeal succeeded in favour of the assessee.

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