2025 (10) TMI 462 - AT - Customs

Ex parte adjudication set aside; appeal remanded for de novo hearing after denial of cross-examination and unreliable electronic records

M/s. Goldland Overseas Company Versus Commissioner of Customs, Chennai

CESTAT CHENNAI - AT set aside an ex parte adjudication and allowed the appeal by remand, finding denial of the appellant's valuable right to cross-examine ... Ex-parte order - denial of request for cross examination - reliability of statement extracted under threat and duress - deletion of incriminating documents from electronic devices - reliability of contemporaneous import - violation of principles of natural justice - HELD THAT:- It is noticed that this order has been passed ex-parte while the appellant was in the process of challenging the denial of their request for cross examination and had preferred a Writ Petition No. 3793/2023 before the Hon’ble High Court of Madras in this regard which is stated to have been listed last for completion of pleadings, post issuance of notice. Further updates have not been provided by either side. Be that as it may, it is found that the Adjudicating Authority has observed that the denial of permission to cross examine would not serve any worthwhile purpose. The right of the appellant to cross examine is a valuable right and cannot be denied in a perfunctory manner. We have had an occasion to deal with the procedure to be adopted by the Adjudicating Authority while adjudicating such matters in our decision vide M/s. Geetham Steels Pvt. Ltd. & Others Vs. Commissioner of GST and Central Excise [2025 (3) TMI 1098 - CESTAT CHENNAI] - the interest of justice will be served if the matter is remitted for denovo consideration afresh. The appeal is allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the statements recorded under Section 108 of the Customs Act and relied upon by the authority are admissible and can form basis for valuation enhancement and penalties, particularly where voluntariness is contested. 2. Whether documents and pro-forma invoices recovered from third parties (not from the importer) and electronic evidence (including reports of deletion) can be relied upon to reject declared transaction value under Rule 12 and re-determine value under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. 3. Whether the denial of the importer's right to cross-examine officers and third-party witnesses (and to obtain documents relied upon) violated principles of natural justice such that the adjudication and reliance on evidence are vitiated. 4. Whether invocation of the five-year limitation under Section 28(4) of the Customs Act and consequential demand of duty, interest and penalties (including proposals for confiscation and penalties under Sections 112(a), 114A and 114AA) was justified on the material on record. 5. Whether reassessment of previously accepted/undisputed enhanced values can be used as a basis to re-determine values for earlier imports of similar goods (i.e., contemporaneous value approach and use of reassessed values). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Admissibility and Reliance on Statements under Section 108 Legal framework: Statements recorded under Section 108 of the Customs Act are admissible in adjudication but their evidentiary weight depends on voluntariness and corroboration; principles of natural justice and fair procedure apply. Precedent treatment: The Tribunal considered authorities cited by parties but emphasized its own prior guidance on adjudicatory procedure (see referred decision on adjudicatory process). The impugned order's reliance on admissions was scrutinized against requirement of voluntariness and opportunity to test statements. Interpretation and reasoning: The Court noted the appellant's contention that statements were given under duress and that no adequate opportunity to test voluntariness (including cross-examination) was afforded. Given the procedural complaints, the Tribunal treated reliance on Section 108 statements as insufficient to sustain final adverse findings without adherence to fair procedure. Ratio vs. Obiter: Ratio - Statements under Section 108 cannot be the sole determinative basis for valuation/enhancement where voluntariness is contested and opportunity to cross-examine is denied; such reliance engages principles of natural justice. Obiter - observations on coercion allegations and need for cross-examination in specific factual matrix. Conclusions: Statements under Section 108 must be tested by appropriate procedure (including cross-examination where necessary); absence of such process requires fresh adjudication before giving them decisive weight. Issue 2 - Reliance on Third-Party Documents and Electronic Evidence to Reject Declared Value (Rules 12 & 9) Legal framework: Rule 12 empowers rejection of declared transaction value where it bears no relationship to actual value; Rule 9 permits re-determination of value using prescribed methods. Evidence to reject and re-determine must be reliable, contemporaneous and admissible. Precedent treatment: The Tribunal referred to the requirement of examining third parties (statutory provisions such as Sections 138B/139 were noted) when evidence is recovered from other entities and emphasized supply of relied documents to the importer for testing. Interpretation and reasoning: The impugned order relied on documents recovered from unrelated parties and C-DAC electronic reports. The Tribunal observed deficiencies in the adjudicatory process: failure to provide relied documents to the importer, denial of cross-examination, and lack of joint trial/examination of third parties as per statutory scheme. Where valuation under Rules 4-7 could not be applied (admitted by the authority), use of Rule 9 must not be arbitrary or presumptive; contemporaneous data and reassessed values must be produced and tested. Ratio vs. Obiter: Ratio - Third-party documents and electronic reports cannot be determinative unless produced to the importer and tested through proper procedure; re-determination under Rule 9 must be based on admissible, non-arbitrary evidence. Obiter - comments on unreliability of contemporaneous data where not adequately substantiated. Conclusions: The authority's reliance on third-party documents and electronic evidence without affording the importer the opportunity to examine and challenge such material vitiates the basis for rejection and re-determination of value; fresh adjudication is required with full compliance to evidentiary and procedural safeguards. Issue 3 - Denial of Right to Cross-Examine and Principles of Natural Justice Legal framework: Principles of natural justice (audi alteram partem) and statutory provisions governing adjudication mandate opportunity to meet and test evidence, including cross-examination where appropriate; procedural fairness is integral to validity of findings. Precedent treatment: The Tribunal relied on its prior decision concerning adjudicatory processes and procedural safeguards and applied those standards to the present facts. Interpretation and reasoning: The Tribunal held that the right to cross-examine is a valuable right that cannot be denied perfunctorily. Although the adjudicating authority had observed that cross-examination would not serve any worthwhile purpose, the Tribunal disagreed and directed remand for de novo adjudication to ensure compliance with natural justice, supply of all relied documents, and opportunity for cross-examination. Ratio vs. Obiter: Ratio - Denial of the opportunity to cross-examine on material relied upon renders the adjudication procedurally unfair and justifies remand. Obiter - procedural directions on how adjudication should be conducted (reference to prior decision for guidance). Conclusions: The adjudicatory process in the impugned order was procedurally defective for refusal to allow cross-examination and not supplying relied documents; matter remitted for fresh adjudication conforming to natural justice. Issue 4 - Invocation of Section 28(4) (Five-Year Period) and Demands for Duty, Interest and Penalties Legal framework: Section 28(4) permits extended period for assessment/penalty in certain circumstances; demands for duty, interest and penalties must be founded on lawful redetermination of value and proper procedure. Precedent treatment: The appellants challenged invoking extended period; the Tribunal required that invocation be justified on record and procedure complied with before sustaining extended demands. Interpretation and reasoning: The Tribunal observed that the authority failed to justify the invocation of the five-year period adequately in a manner that survived procedural infirmities highlighted (lack of opportunity to test evidence, reliance on third-party material). Given these process failures, sustaining extended period demands is infirm without fresh adjudication. Ratio vs. Obiter: Ratio - Invocation of Section 28(4) and consequent claims for duty/penalty cannot be sustained where the underlying valuation and evidence are procedurally flawed. Obiter - remarks on the need for clear justification on record for invoking extended period. Conclusions: Claims under Section 28(4) and consequential penalties/interest require re-examination in a fresh adjudication that cures procedural defects; current demands cannot stand as adjudicated. Issue 5 - Use of Reassessed/Contemporaneous Values to Re-determine Earlier Imports Legal framework: Customs Valuation Rules permit use of contemporaneous data and comparable transactions to determine value where transaction value is rejected; application must be factually supported and non-arbitrary. Precedent treatment: The Tribunal noted examples in the record where reassessed values were accepted by the importer earlier; however, it stressed the necessity of proving comparability and giving importer an opportunity to test the data. Interpretation and reasoning: Where the importer had accepted reassessed values for particular consignments without protest, those specific re-assessments may constitute relevant contemporaneous data. Nonetheless, extrapolating such reassessed values to earlier imports of similar goods requires transparent methodology and opportunity for the importer to challenge the comparability and correctness of the data. The adjudicating authority's approach (including fixation of unit prices based on lowest contemporaneous values) must be re-examined in fresh proceedings with full disclosure of the data and rationale. Ratio vs. Obiter: Ratio - Reassessed values can inform re-determination of value for other consignments only if comparability is demonstrated and the importer is given chance to contest; otherwise use is impermissible. Obiter - practical guidance on selecting lowest contemporaneous value and on evidentiary requirements. Conclusions: Re-determination based on reassessed/contemporaneous values is permissible in principle but not on the record as it stood; requires fresh adjudication with full disclosure and opportunity to contest methodology and comparability. FINAL DISPOSITION (COURT'S CONCLUSION) The appeal is allowed by way of remand. The matter is directed to be adjudicated de novo by the Adjudicating Authority in accordance with principles of natural justice and the Tribunal's prior observations on adjudicatory procedure: all documents relied upon must be supplied to the importer and the importer must be afforded opportunity to cross-examine and to test the evidence before any final valuation, demand, confiscation or penalty is confirmed.