2025 (9) TMI 76 - SC - Customs

Compliance with s.138C(4) Customs Act can be met by s.108 records and responses, aided by ss.65A/65B IT Act

SC held that compliance with s.138C(4) of the Customs Act, 1962 may be satisfied by the record of proceedings and statements recorded under s.108 when ... Demand of differential Customs Duty - Compliance of the provision of Section 138C (4)of the Act, 1962. - Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence - Scope of Sections 65A and 65B of the Indian Evidence Act - failure to declare the actual RSP/MRP at which the goods were being sold to the ultimate consumers. - HELD THAT:- Sub-section 4 of Section 138C makes it abundantly clear that if any statement is to be read into evidence and such documents are computer printouts, then a certificate has to be obtained in accordance with (a), (b) and (c) of sub-section 4 - The Indian Evidence Act also declares that the expressions “Certifying Authority”, “electronic signature”, “Electronic Signature Certificate”, “electronic form”, “electronic records”, “information”, “secure electronic record”, “secure digital signature” and “subscriber” shall have the meanings respectively assigned to them in the Information Technology Act. Considering the Record of Proceedings duly signed by the respondents, including the various statements of the respondents recorded under Section 108 of the Act, 1962, that there was due compliance of Section 138C(4) of the Act, 1962. When it is said due compliance, the same should not mean that a particular certificate stricto senso in accordance with Section 138C(4) must necessarily be on record. The various documents on record in the form of record of proceedings and the statements recorded under Section 108 of the Act, 1962 could be said to be due compliance of Section 138C(4) of the Act, 1962. It is pertinent to note at this stage that at no point of time the statements recorded under Section 108 of the Act, 1962 came to be retracted - Even while giving reply to the show cause notice, the contents of such statements recorded under Section 108 of the Act, 1962 were not disputed. This, of course, would be relevant only insofar as determining whether there has been due compliance of Section 138C(4) of the Act, 1962 is concerned. The evidentiary value of such Section 108 statements in any other proceedings, if any would have to be considered in accordance with law, including the compliance of Section 138B of the Act, 1962. Matter restored back before the Tribunal. The appeals of the Revenue partly allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether electronic documents/computer printouts seized during search proceedings are admissible in proceedings under the Customs Act without a certificate complying with Section 138C(4) of the Customs Act (pari materia to Section 65B(4) of the Indian Evidence Act). 2. Whether the Record of Proceedings (showing extraction/printing and sealing) together with statements recorded under Section 108 of the Customs Act can amount to 'due compliance' with Section 138C(4) when a formal certificate in the strict terms of the provision is not placed on record. 3. Whether the Tribunal erred in excluding electronic evidence solely for alleged non-compliance of Section 138C(4) and thereby failing to examine other contentions raised before it (including issues under Section 138B regarding oral examination/proving of statements). 4. Whether, having regard to the doctrine of impossibility/third-party impediment and the decision construing Section 65B(4), relief from strict literal compliance with the certificate requirement is permissible on the facts. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility of electronic records: legal framework The statutory scheme (Sections 138C of the Customs Act read with Sections 65A and 65B of the Indian Evidence Act) prescribes that computer outputs/electronic records may be treated as documents and admitted in evidence only if conditions in the relevant provision are satisfied and a certificate identifying the record and describing production particulars is produced (Section 138C(4)/65B(4)). The certificate must be purportingly signed by a responsible official and may state matters to the best of that person's knowledge and belief. Issue 1 - Precedent treatment The Tribunal had relied on the Supreme Court's earlier exposition that Section 65B(4) is mandatory and that absent the prescribed certificate electronic evidence is inadmissible. The Tribunal applied that principle to hold that computer printouts extracted from seized devices without the requisite certificate could not be relied upon. The Court recognizes that Section 138C(4) is pari materia to Section 65B(4) and therefore the same legal yardstick governs admissibility. Issue 1 - Interpretation and reasoning The Court affirms that the statutory certificate requirement is clear in mandating identification of the electronic record, manner of production, particulars of devices and matters relevant to the conditions of admissibility. Hence, prima facie, electronic records are admissible only upon compliance with that provision. However, the Court proceeds to consider whether the statutory requirement must be satisfied only by a particular formal document or whether other contemporaneous materials can satisfy the statutory purpose of the certificate. Issue 1 - Ratio vs. Obiter Ratio: The legal principle that electronic records require compliance with Section 138C(4) (or 65B(4)) for admissibility is affirmed as governing law. The Court's further conclusion that the certificate requirement may be satisfied in substance by alternative contemporaneous materials in appropriate factual circumstances (see Issue 2) constitutes the operative ratio on application of the rule to the facts. Issue 1 - Conclusion Section 138C(4) remains the statutory benchmark for admissibility of electronic records; compliance is necessary, but the form of proof may be assessed in light of factual realities (see Issue 2). Issue 2 - Whether Records of Proceedings and Section 108 statements suffice as compliance with Section 138C(4) Legal framework Section 138C(4) requires a certificate identifying the electronic record, describing production, giving particulars of devices, and dealing with matters relevant to the conditions in sub-section (2), signed by a responsible official. Section 108 statements are statutory confessions/acknowledgements recorded during investigation and Records of Proceedings chronicle the process of extraction, sealing and witness signatures. Precedent treatment The Court considered prior decisions recognizing the mandatory character of the certificate provision but also the later three-Judge exposition that the statutory requirement must be applied with practical realism where a party has done everything reasonably possible to obtain a certificate from a third party beyond its control. Interpretation and reasoning On the facts, the Record of Proceedings contemporaneously documents: seizure, sealing, extraction/printing of data from specified external hard disks, witness presence, signatures on each printed page and re-sealing. The assessees' statements under Section 108 repeatedly acknowledge presence at the proceedings, authenticity of the printed pages, and agreement with the Records of Proceedings; none of these statements were retracted or disputed in replies to the show cause notice. The Court holds that such materials, together, satisfy the statutory purpose of establishing (i) identification of the document and manner of its production, (ii) particulars of the device involved and (iii) attestation by responsible persons of the chain of extraction/printing-thereby amounting to 'due compliance' in substance with Section 138C(4), even if a formal certificate in the strictest draftsmanship is not on record. Ratio vs. Obiter Ratio: Where contemporaneous Records of Proceedings and statutory statements by persons present at extraction/printing establish identification, manner of production, device particulars and attestation, they may constitute compliance with Section 138C(4) for admissibility purposes. Obiter: The Court's recognition that the evidentiary value of Section 108 statements in other contexts will be governed by other provisions (e.g., Section 138B) and general law. Conclusion On the facts, the records of extraction and Section 108 acknowledgements supplied the substance of the certificate required by Section 138C(4); the Tribunal's exclusion of electronic documents solely for lack of a formal certificate was therefore unsustainable. Issue 3 - Whether the Tribunal erred in deciding only Section 138C(4) and not other grounds (e.g., Section 138B) and whether remand is required Legal framework The Tribunal declined to consider other contentions (including procedures under Section 138B concerning examination and proof of statements) because it resolved the appeals on the Section 138C(4) point. Interpretation and reasoning The Court holds that, having found sufficiency of compliance with Section 138C(4) on the record, the remaining factual and legal contentions which were not considered by the Tribunal must be permitted to be adjudicated afresh by the Tribunal. The appropriate remedy is to set aside the Tribunal's order (to the extent it allowed the assessees' appeals) and remand the appeals to the Tribunal for rehearing on all other grounds on their merits without being influenced by the present observations. Ratio vs. Obiter Ratio: Where a tribunal decides an appeal on a single legal ground by excluding central material, and the appellate court finds that exclusion incorrect, the matter should be remanded for full consideration of all contested issues. Obiter: None beyond procedural direction. Conclusion The appeals are remitted to the Tribunal to rehear all other grounds (including compliance with Section 138B and substantive valuation issues), with directions that the Tribunal decide the appeals on merits uninfluenced by earlier observations limited to the Section 138C(4) issue. Issue 4 - Application of impossibility/third-party impediment doctrine to the certificate requirement Legal framework The Court applied the maxims impotentia excusat legem and lex non cogit ad impossibilia as interpreted in authority construing Section 65B(4), recognizing that mandatory statutory obligations may be tempered where a party has done everything possible to obtain compliance from a third party beyond its control. Interpretation and reasoning The Court observed that the factual matrix may justify relief from the strict form of the certificate requirement and that the question of relief depends on facts. Applying that approach, the contemporaneous records and acknowledgements supplied the statutory purpose; no separate finding of impossibility was required on these facts. Ratio vs. Obiter Ratio: The statutory certificate requirement is mandatory in general, but relief from literal form may be justified where the party has done everything reasonably possible and the substance of the requirement is otherwise satisfied by contemporaneous record and attestation. Obiter: The Court's general remarks about judicial discretion in civil versus criminal contexts follow existing authority. Conclusion Relief from strict formal compliance is fact-sensitive; in the present case the record disclosed sufficient steps and attestations to satisfy the statutory purpose without a separately formatted certificate, thereby permitting admissibility of the electronic extracts but requiring remand to determine remaining issues on merit.