2024 (8) TMI 728 - AT - Customs

Department cannot reject previously accepted depreciated values for imported machines without proper justification under Section 138C(4)

M/s. Media Graphics Versus Commissioner of Customs, Chennai II, Shri R. Janardhanan Partner of M/s. Media Graphics Versus Commissioner of Customs, Chennai II, Shri S. Varadharaj Partner of M/s. Media Graphics Versus Commissioner of Customs, Chennai II

CESTAT Chennai set aside a customs valuation order where the department attempted to reject previously accepted depreciated values for six secondhand ... Valuation - SCN sseks to discard the ‘declared value’ and not to reject the depreciated value adopted for assessment as per the ‘Inspection Report and Valuation Certificate’ (Valuation Certificate) given by a CE, that was accepted by the department at the time of import - HELD THAT:- It is found that in ANVAR P.V VERSUS P.K. BASHEER AND OTHERS [2014 (9) TMI 1007 - SUPREME COURT], a three Judge Bench of the Hon’ble Apex Court, held that any documentary evidence sought to be produced from an electronic record under the provisions of the Evidence Act 1872, (Evidence Act) can be proved only in accordance with the procedure prescribed under Section 65B therein. The judgment held that the certificate required under Section 65B(4) is a condition precedent to the admissibility of evidence by way of electronic record. Oral evidence in the place of such certificate will not suffice as Section 65B(4) is a mandatory requirement of the law. The judgment is of relevance to this case as section 138C of the CA 1962 is pari materia to the said section 65B of the Evidence Act. Hence a written certificate under section 138C(4) is a sine qua non for admissibility of such electronic evidence under the CA 1962 also. Consequent to the judgment in ANVAR P.V VERSUS P.K. BASHEER AND OTHERS [2014 (9) TMI 1007 - SUPREME COURT], some confusion arose over the scope and ambit of Section 65B of the Evidence Act as different views were taken in a few subsequent decisions of Constitutional Courts namely, the Hon’ble Apex Court judgments in SHAFHI MOHAMMAD VERSUS THE STATE OF HIMACHAL PRADESH [2018 (1) TMI 1402 - SUPREME COURT] and TOMASO BRUNO & ANR. VERSUS STATE OF U.P. [2015 (1) TMI 1307 - SUPREME COURT] and the Hon’ble Madras High Court judgment in K. RAMAJAYAM VERSUS THE INSPECTOR OF POLICE [2016 (1) TMI 1509 - MADRAS HIGH COURT]. The discordance was placed for a resolution before a three-judge bench of the Hon’ble Supreme Court, in ARJUN PANDITRAO KHOTKAR VERSUS KAILASH KUSHANRAO GORANTYAL AND ORS. [2020 (7) TMI 740 - SUPREME COURT]. The Hon’ble Court, after examining the said judgments clarified the binding legal position. The Hon’ble Court upheld the Anvar P.V. judgment while overruling the Shafhi Mohammed’s judgement and made it clear that the certificate must be mandatorily provided as a condition under Sec 65B(4) for admissibility of electronic evidence. It is found that Section 138C of the CA 1962 provides for the admissibility of micro films, facsimile copies of documents and computer print-outs as evidence in a proceedings under the Act without further proof of production of the original. The section differentiates between the original information (primary evidence) contained in the “computer” itself and copies made there from (secondary evidence). The section would not come into play when original documents are being produced in evidence - the evidence in the form of computer print-outs etc. can be admitted, as in the present proceedings, only subject to fulfilling the conditions under section 138C as evidenced by the certificate issued by a responsible person under sub-section (4) of the said section - it is found that the lack of such a certificate is fatal to revenues case and the portion of the order relying on such evidence is liable to be set aside. It is found that there have been six secondhand machine imported by the appellants. The value for the purpose of assessment as per Rule 3 of CVR 2007, was at the time of import arrived at as per the procedure established under a Boards Circular. The said depreciated value arrived at in the ‘Inspection Report and Valuation Certificate’ of a CE based on the Circular, has not been challenged. Only the declared price, which had earlier been discarded by the department in favour of the depreciated value, has been sought to be rejected once again. No reason for ignoring the CE’s Certificate has been stated in the impugned order. The department cannot blow hot and cold at the same time on its own circular without any explanation. As the issue does not survive on merits the question of demand for duty, imposition of penalties etc. also does not arise. The impugned order is set aside - appeal allowed. Issues Involved:1. Alleged undervaluation of imported second-hand offset printing machines.2. Admissibility of electronic evidence.3. Validity of the assessment based on Chartered Engineer's Certificate.4. Legality of penalties imposed on the firm and its partners.Issue-wise Detailed Analysis:1. Alleged Undervaluation of Imported Second-Hand Offset Printing Machines:The appellant, M/s. Media Graphics, imported second-hand offset printing machines and declared a total assessable value of Rs.1,60,61,285/-. However, the Directorate of Revenue Intelligence (DRI) alleged that the actual value was Rs.3,16,37,782/-, leading to an evasion of customs duty amounting to Rs.41,09,269/-. The Ld. Adjudicating Authority confirmed the differential duty under Section 28 of the Customs Act, 1962 (CA 1962) with interest and imposed penalties under Sections 114A, 112(b), and 114AA on the firm and its partners respectively. The appellants contested this, arguing that the value was determined based on an 'Inspection Report and Valuation Certificate' by a Chartered Engineer (CE) as per Board's Circular No. 25/2015, and that the department had no basis to revise the value without following proper procedures.2. Admissibility of Electronic Evidence:The department relied on electronic evidence such as WhatsApp chats and data from mobile phones and hard disks to support the claim of undervaluation. The appellants argued that these electronic records were not certified as required under Section 138C of CA 1962, making them inadmissible. The Tribunal agreed, citing the Supreme Court's judgment in Anvar P.V. Vs P.K. Basheer, which mandates a certificate under Section 65B of the Evidence Act for electronic evidence to be admissible. The Tribunal found that the lack of such a certificate was fatal to the department's case.3. Validity of the Assessment Based on Chartered Engineer's Certificate:The Tribunal noted that the assessment of the imported machines was initially based on the depreciated value determined by a CE's Certificate, which was accepted by the department at the time of import. The SCN only sought to discard the declared value and not the depreciated value from the CE's Certificate. The Tribunal emphasized that the assessment based on a procedure established by a Board's circular cannot be deemed incorrect unless the CE's Certificate is challenged and conclusively disproved, which was not done in this case.4. Legality of Penalties Imposed on the Firm and Its Partners:Given that the department failed to prove undervaluation and the inadmissibility of the electronic evidence, the Tribunal concluded that the demand for differential duty and the penalties imposed on the firm and its partners could not be sustained. The Tribunal set aside the impugned order, thereby nullifying the penalties.Conclusion:The Tribunal found that the department failed to follow the proper procedures and provide admissible evidence to support the claim of undervaluation. The assessment based on the Chartered Engineer's Certificate was valid, and the penalties imposed were unjustified. Consequently, the Tribunal set aside the impugned order and allowed the appeals, providing the appellants with consequential relief as per law. The appeals were disposed of accordingly.