2025 (5) TMI 1931 - AT - Customs

CESTAT sets aside customs duty demand due to unauthenticated evidence and improper limitation period invocation under section 28

Orion International and Ashutosh Goenka Versus Commissioner of Customs Preventive- New Delhi

CESTAT NEW DELHI set aside the Commissioner (Appeals) order confirming differential customs duty demand based on alleged fake invoices and undervaluation. ... Demand of differential customs duty - fake invoices to the department at the time of import - Statement made under section 108 of the Customs Act - relevant piece of evidence in terms of section 138B of the Customs Act - undervaluation of the imported goods - invocation of the proviso to section 28(1) of the Customs Act - imposition of penalty under section 112 and 114AA - HELD THAT:- It is not clear that as to whether the printouts were taken on 26.10.2009 or 04.11.2009 and in any case there is nothing on record to indicate whether the print outs were taken from the same portable hard disk which was recovered from the premises on 26.10.2009 or from some other hard disk and by whom and in whose presence. A Division Bench of the Tribunal in M/s Trikoot Iron & Steel Casting Ltd. versus Additional Director General (Adjn.) Directorate General of GST Intelligence (Adjudication Cell) [2024 (10) TMI 672 - CESTAT NEW DELHI] examined the provisions of section 36B of the Central Excise Act, 1944 which are pari materia to section 138C of Customs Act. Thus, no reliance could have been placed by the Additional Commissioner or the Commissioner (Appeals) on the statement made by Ashutosh Goenka under section 108 of the Customs Act. Regarding the invocation of the extended period of limitation under the proviso to section 28 (1) of the Customs Act, the show cause notice invokes the proviso by only stating that Orion International had contravened the provisions of Customs Act by way of suppression of fact and willful statement of facts during the relevant period. The Additional Commissioner has not dealt with this issue at all, nor the Commissioner (Appeals) has dealt with this issue at all. We are not inclined to consider the submissions made by the learned authorised representative for the department that the matter may be remitted to the Commissioner (Appeals) to examine it afresh for the reason that it is an old matter arising out of an appeal filed in the year 2014 and against an order of the Commissioner (Appeals) passed in 2014. Thus, for all the reasons stated above, the demand of differential duty could not have been confirmed. Such being the position, the imposition of penalty under section 112 and 114AA upon Ashutosh Goenka is not justified and cannot sustain. The impugned order dated 31.03.2014 passed by the Commissioner (Appeals) deserves to be set aside and is set aside. The two appeals are, accordingly, allowed. Three core legal issues were considered by the Tribunal in this appeal:(i) Whether the printouts of invoices recovered from the portable hard disk seized from the appellant's premises could be relied upon as evidence under section 138C of the Customs Act, 1962;(ii) Whether the statement made by the appellant under section 108 of the Customs Act could be admitted as relevant evidence under section 138B of the Customs Act;(iii) Whether the extended period of limitation under the proviso to section 28(1) of the Customs Act was validly invoked to sustain the demand for differential customs duty.The Tribunal's analysis proceeded issue-wise as follows:1. Reliance on Printouts under Section 138C of the Customs ActThe relevant legal framework governing electronic evidence in customs proceedings is section 138C of the Customs Act, which mandates that computer output evidence must be accompanied by a certificate certifying its authenticity and compliance with prescribed conditions. This provision is pari materia to section 36B of the Central Excise Act, 1944.Precedents cited included Supreme Court rulings in Anvar P.V. and Arjun Panditrao Khotkar, which emphasize strict compliance with procedural safeguards for electronic evidence admissibility. Additionally, Tribunal decisions in Agarvanshi Aluminium, Popular Paints and Chemicals, and Global Extrusion reinforced the necessity of proper certification and chain of custody.In the present case, the portable hard disk and laptop were seized from the appellant's premises, but no panchnama was recorded for the taking of printouts from the hard disk. Furthermore, no certificate under section 138C was produced to authenticate the electronic records. The exact date and circumstances of the printouts' extraction were unclear and uncorroborated.The Tribunal held that in the absence of the mandatory certificate and due process, the printouts could not be relied upon as evidence. The Additional Commissioner's reliance on these printouts to establish undervaluation was therefore impermissible.2. Admissibility of Statement under Section 108 of the Customs ActSection 108 of the Customs Act allows recording of statements during inquiry or investigation, but section 138B imposes stringent conditions for admitting such statements as evidence. Specifically, statements recorded under section 108 are relevant only if the person is examined as a witness before the adjudicating authority, who then forms an opinion to admit the statement, followed by an opportunity for cross-examination.The Tribunal referred to a recent Division Bench decision which analyzed this procedural safeguard in detail, emphasizing that failure to comply with these mandatory steps renders the statements inadmissible. The rationale is to prevent coercion or compulsion during investigations and to ensure fairness in evidence admission.In the instant matter, the appellant contended that his statement was recorded under coercion and was not subjected to examination and cross-examination before the adjudicating authority. The Commissioner (Appeals) and Additional Commissioner failed to comply with the procedural requirements under section 138B.Accordingly, the Tribunal concluded that the statement under section 108 could not be considered as relevant evidence to confirm the differential duty demand.3. Validity of Invocation of Extended Period of Limitation under Section 28(1) ProvisoThe proviso to section 28(1) allows extended limitation for recovery of duty where there is willful misstatement or suppression of facts. The show cause notice invoked this proviso alleging suppression by the appellant during the period 2006-2009.However, the Additional Commissioner and Commissioner (Appeals) did not record any reasoned findings or analysis on the applicability of the extended limitation period. The appellant had raised the limitation bar as a defense, but the authorities failed to address this crucial legal issue.The Tribunal declined to remit the matter for fresh consideration due to the old vintage of the appeal and the absence of any prior adjudicatory findings on limitation.Consequently, the invocation of the extended period of limitation was held to be unjustified and invalid.Additional Findings and Application of Law to FactsThe original order by the Additional Commissioner found that the appellant had maintained two sets of invoices for the imported goods-one set of original invoices reflecting actual higher values, and another set of duplicate invoices with understated values. This was based on data retrieved from the seized hard disk.However, the procedural irregularities in seizure, absence of proper certification of electronic evidence, and failure to comply with evidentiary safeguards for statements under section 108 undermined the evidentiary foundation of the demand.The appellant's contention that the statement was recorded under coercion was not rebutted by any credible evidence from the department. The Commissioner (Appeals) dismissed this contention summarily without detailed reasoning.Regarding jurisdictional issues, the Commissioner (Appeals) referred to a Board notification addressing jurisdiction post the Syed Ali case but did not elaborate on its applicability. The Tribunal did not find this issue determinative in the present appeal.Conclusions on IssuesOn issue (i), the Tribunal concluded that printouts from the hard disk without compliance with section 138C could not be admitted as evidence.On issue (ii), statements under section 108 were inadmissible in the absence of examination and cross-examination before the adjudicating authority as mandated by section 138B.On issue (iii), the extended limitation period under section 28(1) proviso was improperly invoked without any reasoned findings.Therefore, the demand for differential customs duty and the consequential penalties imposed under sections 112 and 114AA could not be sustained.Significant HoldingsThe Tribunal set aside the impugned order of the Commissioner (Appeals) and allowed the appeals. The following extracts encapsulate the core legal reasoning:'In view of the facts stated above and the fact that a certificate under section 138C of the Customs Act was not issued, the printouts could not have been taken into consideration.''The statement of Ashutosh Goenka under section 108 of the Customs Act cannot also be considered as relevant under section 138B of the Customs Act.''The Additional Commissioner has not dealt with the issue of extended period of limitation at all, nor the Commissioner (Appeals) has dealt with this issue at all.''Thus, for all the reasons stated above, the demand of differential duty could not have been confirmed. Such being the position, the imposition of penalty under section 112 and 114AA upon Ashutosh Goenka is not justified and cannot sustain.'These principles reaffirm the mandatory procedural safeguards for electronic evidence and statements in customs adjudication and underscore the necessity of reasoned findings when invoking extended limitation periods.