2025 (10) TMI 925 - AT - Customs

SAARC origin certificate upheld; SAPTA concessional duty benefit must be honoured; electronic records inadmissible under Sections 138C and 65B

CESTAT CHENNAI allowed the appeal, holding the SAARC origin certificate (COO) could not be lightly discarded and the concessional SAPTA duty benefit must ... Gross-undervaluation to evade duty - import of Betel nuts - Mis-declaration of country of origin of the goods - rejection of declared value - duty benefit under Notification No. 105/1999 as amended which pertains to SAARC Preferential Trade Arrangement (SAPTA) - Evidentiary value of the records obtained from the computer as per section 138C of the Customs Act 1962 and 65B of the Evidence Act - Evidentiary value of statements due to non-cross examination. Validity of the COO certificate including criteria for concessional duty benefits under SAPTA. [Customs Tariff (Determination of Origin of Goods under the Agreement on SAARC Preferential Trading Arrangement) Rules, 1995] - HELD THAT:- The Certificate of Origin is a document that serves as a legal declaration which certifies that goods fulfil the origin requirements in accordance with the Rules of Origin (ROO) prescribed under the respective FTA, so that they can benefit from the preferential tariff treatment as per this Agreement. Substantive conditions concerning Rules of Origin are compiled in the COO Certificate and states the Regional Value Content (RVC) + change of Tariff subheading (CTSH). The said Certificate is valid for only one importing operation concerning one or more goods. The issue of Origin Certificates and its control is the responsibility of a Government office in each Party. For the issue of an Origin Certificate, the final producer or exporter of the good shall present the corresponding commercial invoice and a request containing a sworn declaration by the final producer certifying that the goods fulfil the origin criteria as well as the necessary documents supporting such a declaration to the designated authority in the exporting country. As per the OIO the investigation throughout has not raised doubt on the authenticity of the COO certificate issued by Bangladesh. It is not held to be a forged document. However, the Ld. Adjudicating authority after coming to the above conclusion further holds that the allegation was that the certificates were procured fraudulently by misrepresenting the facts before the authorities of Bangladesh only to route the betel nuts of Indonesia origin via Bangladesh and to import into India, so that to avail the SAPTA notification benefit. This could have best been verified with the Bangladesh Authorities - In this case the document is the COO which certifies that goods fulfil the origin requirements in accordance with the ROO prescribed under the respective FTA and is prescribed in terms of the SAPTA and cannot be lightly discarded. There has been a failure on the part of the respondent-revenue to resort to the detailed verification procedure for SAPTA certificates, even after a specific request by the appellant for the same. Hence the COO certificate has to be honoured and impugned order trying to discredit the value addition etc. is defective to this extent. Evidentiary value of the records obtained from the computer as per section 138C of the Customs Act 1962 and 65B of the Evidence Act - HELD THAT:- DRI has retrieved certain electronic documents taken from one Narendra Lodaya and Tapan Paul, which cannot be used against them as the matter did not relate to them and the stated recovery was made without certification as mandated under section 138C of the Customs Act. The documents are the basis of the valuation of the goods and hence the whole demand must fail. The issue relating to the evidentiary value of the records obtained from the computer as per section 138C of the Customs Act 1962 and 65B of the Evidence Act. M/s. Media Graphics Vs Commissioner of Customs, Chennai [2024 (8) TMI 728 - CESTAT CHENNAI], was examined by a Co-ordinate Bench of this Tribunal at Chennai where it was held 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 admissibility of evidence relating to print outs of electronic records as per the record of the witnesses (mahazar / panchanama) drawn during the search and recovery, of electronic evidence, as per the provisions of of 100 or section 101 of the CA 1962 or of a statement incorporating details of the electronic evidence found, under section 108 of the CA 1962, shall have to yield to section 138C of CA 1962 which is a special provision relating to the admissibility of such documents.' The documents/records obtained from computers/electronic devices without the certificate issued by a responsible person as per section 138C(4) of the Customs Act 1962 will not be admissible as evidence. Evidentiary value of statements due to non-cross examination - HELD THAT:- The requirement for cross examination should be seen as a meaningful jurisdictional prerequisite, rather than a mere formality. A bland statement of the persons not appearing for the cross-examination would not suffice to invoke section 138B, in a case where the appellants are to be visited by substantial demand for duty and face severe penalties equal to the duty allegedly evaded. Hence, on balance, the statements cannot be relied upon in the proceedings. The rejection of the COO which also includes the Regional Value Content adopted, was not proper. The document was not subjected to scrutiny in terms of the Agreement and the Rules by the Ld. A. A., for their authenticity with the Bangladesh authorities. Hence the COO cannot be discarded as having been fraudulently obtained and the exemption from payment of duty as per Notification No. 105/1999 dated 10.08.1999 cannot be denied. Further it is the duty of the Proper Officer to assess the goods after examining the probative value of the documents on which reliance is placed - These have been done without following the requisite procedure under section 138C of the Customs Act 1962. Similarly, the statements obtained from Mr. Narendra Lodaya and Mr. Tapan Paul, are found inadmissible in the peculiar facts of this case. These then remove the main basis for the re-valuation of the goods. The revised value adopted in the OIO hence cannot be sustained. All these lacunae in the main evidence adduced in the OIO, reduces their probative value in reaching a conclusion even when the standard of proof is preponderance of probability. Revenue has not been able to discharge its burden and prove the allegations made. Once the case fails on merits, examining the issue of imposition of penalties and the non-confiscation of goods that were not available, delay in adjudication etc does not arise. The impugned order merits to be set aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Certificate of Origin (COO) issued by the exporting State can be rejected by the adjudicating authority on the basis of departmental investigation alleging fraudulent procurement and inadequate value-addition for claiming SAPTA preferential tariff benefits. 2. Whether electronic records and computer-retrieved documents obtained during search and seizure are admissible in adjudication proceedings absent the certificate mandated by section 138C(4) of the Customs Act, 1962 (pari materia to section 65B of the Evidence Act). 3. Whether statements of third persons relied upon by the Department can be treated as admissible evidence where those persons did not appear for cross-examination despite requests by the affected party, in light of section 138B of the Customs Act, 1962. 4. Consequential issues: validity of rejection of declared transaction value, denial of Notification No.105/1999 (SAPTA) benefits, demand of differential duty and interest, confiscation and penalties under sections 114A/114AA - whether these consequences can be sustained if the foundational evidence is inadmissible or COO not lawfully discredited. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of COO and entitlement to SAPTA preferential treatment Legal framework: Rules governing determination of origin under SAPTA and the Customs Tariff Act provisions authorizing concessional duties require presentation of a COO from the competent authority of the exporting Contracting State; Customs may, in cases of reasonable doubt, request additional information from the exporting State and may initiate post-importation verification as prescribed by the Rules. Precedent treatment: Tribunal and High Court precedent establish that the Customs authority has limited scope to sit in judgment over a COO issued by the designated authority of the exporting Contracting State; where COO is issued and not formally verified as fraudulent by the exporting State or competent authority, rejection is impermissible solely on departmental conjecture. Interpretation and reasoning: The adjudicating authority did not find the COO to be forged but concluded it was procured by misrepresentation; however, no formal verification was sought from the exporting State despite an express procedural mechanism in the SAPTA Rules and despite a request by the importer for verification. Fraud, being a serious allegation, requires high-order proof; documentary prima facie certification (the COO) prevails over uncorroborated departmental inferences. The Tribunal held that the Department's failure to pursue the prescribed verification route and reliance on assumptions about value-addition rendered the rejection of the COO unsustainable. Ratio vs. Obiter: Ratio - COO issued by the designated authority under SAPTA cannot be lightly discarded by Customs absent verification from the exporting State or established proof of fraud; Department must follow the verification procedure in the Rules. Obiter - general discussion on the role of value-addition percentages under SAPTA and consequences if properly proven. Conclusion: The COO must be honored in absence of proper verification/disproof by the exporting State; denial of SAPTA benefit on the basis of the impugned findings was defective. Issue 2 - Admissibility of computer/electronic records (section 138C / section 65B parallel) Legal framework: Section 138C of the Customs Act governs admissibility of microfilms, facsimiles and computer print-outs in Customs proceedings and requires a certificate by a responsible person under sub-section (4) for secondary electronic evidence; this provision is pari materia to section 65B of the Evidence Act which mandates certification for admissibility of electronic records. Precedent treatment: Higher Court clarifications require the certificate under section 65B(4) for admissibility of electronic evidence; Tribunal authority has held that section 138C(4) is a sine qua non and absence of the required certificate renders computer-retrieved documents inadmissible. Interpretation and reasoning: The impugned order's valuation and other findings relied heavily on electronic documents retrieved from certain third parties' devices; those documents lacked the certification mandated under section 138C(4). Given the special provision in the Customs Act and settled law on electronic evidence, such uncategorized printouts are inadmissible. The Tribunal reaffirmed that general provisions cannot override the specific statutory safeguard and that lack of certification is fatal to reliance on such material. Ratio vs. Obiter: Ratio - Electronic records obtained from computers/electronic devices are inadmissible in Customs adjudication unless accompanied by the certificate required by section 138C(4); reliance on such uncertified records vitiates findings based on them. Conclusion: All documentary material relied upon that was retrieved from electronic devices without compliance with section 138C(4) is inadmissible and cannot form the basis for valuation, denial of benefit, or penalties. Issue 3 - Evidentiary value of statements of third persons not cross-examined (section 138B) Legal framework: Section 138B of the Customs Act provides for admissibility of statements made and signed by persons in proceedings; rules on cross-examination and fairness require offering cross-examination when those statements are used against a party to their detriment. Precedent treatment: Tribunal authority recognizes that cross-examination is not an absolute precondition in every circumstance but is necessary where a deponent's statement is adverse to a party and the party requests cross-examination; adjudicating authority must record reasons if cross-examination cannot be permitted or is not feasible. Interpretation and reasoning: The adjudicating authority permitted cross-examination but the third parties did not appear; the record did not adequately show the efforts made to secure their appearance or whether their non-appearance was due to incapacity or obstruction by others. In the circumstances of substantial demands and penalties against the appellants, a bare statement that the witnesses did not appear is insufficient. The Tribunal held that without meaningful offer and opportunity for cross-examination, and without explicated reasons for non-availability, the statements of those persons could not be relied upon. Ratio vs. Obiter: Ratio - When statements of third parties are relied upon to the detriment of an affected party, the adjudicating authority must afford effective opportunity for cross-examination and must record reasons if cross-examination cannot be procured; failure to do so renders such statements unreliable for adjudicatory purposes. Conclusion: Statements of the named third persons are of no probative value in the present facts and cannot support the Department's case. Issue 4 - Rejection of declared value, demands, confiscation and penalties where foundational evidence is inadmissible or COO not discredited Legal framework: Customs Valuation Rules (notably Rule 5 and Rule 12) permit rejection and re-determination of transaction value where declared value is unverifiable or unreliable; imposition of differential duties, interest, confiscation and penalties flow from valid adjudicatory findings supported by admissible evidence. Precedent treatment: Authorities require that valuation determinations and consequential penal measures be supported by admissible evidence and lawful procedural steps; where principal documentary and testimonial bases are inadmissible, consequential demands cannot be sustained. Interpretation and reasoning: The Tribunal found the impugned revaluation rested on uncertified electronic documents and untested statements, and also on discrediting a COO without following prescribed verification. Those lacunae remove the main evidentiary foundation for Rule-5 revaluation and for denial of SAPTA benefit. Consequently, demands for differential duty, interest, confiscation (where goods unavailable), and penalties could not be maintained. Ratio vs. Obiter: Ratio - Where the core evidence supporting revaluation and penalty is inadmissible or where COO has not been lawfully discredited, resultant demands, confiscation and penalties must fail. Obiter - remarks on the need for departmental diligence in following verification procedures and recording reasons for refusal of cross-examination. Conclusion: Rejection of declared value, denial of SAPTA benefit, differential duty, interest, confiscation and penalties were unsustainable on the evidence and legal requirements; impugned order set aside and appellants entitled to consequential relief as per law.