2026 (1) TMI 1098 - AT - Customs

Admissibility of customs statements and electronic records undermined; valuation rejection and penalties set aside on evidentiary noncompliance

Applicability of statutory safeguards for admissibility of investigation statements and electronic records was examined, with the consequence that ... Applicability of section 138B and section 138C - Relevancy of statements u/s 138B - Admissibility of computer printouts and electronic records u/s 138C - Mandatory procedure for admitting investigation statements​​​​​​​ - Adjudication proceedings requirement of examination of witness and judicial opinion before admitting statements - Opportunity for cross-examination​​​​​​​ - Rejection and re-determination of declared value under rule 12 and rule 3 of - Penalties under section 112(a)(ii) and section 114AA of the Customs Act - HELD THAT:- In Shri T.N. Malhotra, Managing Director vs Pr. Commissioner of Customs, New Delhi [2024 (6) TMI 202 - CESTAT NEW. In this decision, the Bench examined the provisions of section 108 of the Customs Act, but it appears that the provisions of section 138B of the Customs Act were not brought to the notice of the Division Bench. As a result, the Bench examined whether the statements made were voluntary or under pressure. It is for this reason that the Bench relied upon the statements. Thus, it has to be held that the statements of persons recorded under section 108 of the Customs Act could not have been relied upon by the Principal Commissioner for rejecting the transaction value and re-determining the same. No finding has been recorded regarding the requirement of a certificate under section 138C of the Customs Act. The statements made under section 108 of the Customs Act were retracted by the appellants. There is nothing on the record to show that Panchnama was drawn regarding the printouts of the email. The statements made under section 108 of the Customs Act were also retracted by the appellants. Thus, compliance of section 138C of the Customs Act had not been satisfied. In this view of the matter, it is not possible to sustain the order dated February 12, 2024 passed by the Principal Commissioner that rejects the declared value of the goods under rule 12 of the 2007 Valuation Rules and re-determines it under rule 3. Nor is it possible to sustain the imposition of penalties upon the appellants. The impugned order dated February 12, 2024, insofar as it concerns these four appeals, is set aside and all the four appeals are allowed. Issues: (i) Whether statements recorded under section 108 of the Customs Act could be relied upon in adjudication proceedings without following the procedure mandated by section 138B(1)(b) of the Customs Act; (ii) Whether electronic records/printouts and statements relied upon satisfied the requirements of section 138C(4) of the Customs Act so as to be admissible.Issue (i): Whether statements recorded under section 108 of the Customs Act were admissible and could be relied upon for rejecting declared value and re-determining value without first examining the maker as witness before the adjudicating authority and forming an opinion under section 138B(1)(b).Analysis: The statutory scheme requires that statements recorded before Gazetted Officers under section 108 acquire relevance in adjudication only if the person who made the statement is examined as a witness before the adjudicating authority and the adjudicating authority forms an opinion that the statement should be admitted in evidence in the interests of justice. Authorities applying analogous provisions have held the procedure to be mandatory and that failure to follow it renders such statements irrelevant and inadmissible for adjudicatory findings; cross-examination is available only after the statement is admitted in evidence by the adjudicating authority. The impugned order relied on section 108 statements which were retracted and where the mandated procedure under section 138B(1)(b) was not followed.Conclusion: Statements recorded under section 108 could not be relied upon in the absence of compliance with the procedure in section 138B(1)(b); reliance on such statements is not permissible and is against the appellants.Issue (ii): Whether the electronic records/printouts and other documentary material relied upon satisfied the certification and other requirements under section 138C so as to be admissible in evidence.Analysis: Section 138C prescribes conditions for admissibility of computer printouts and permits admission upon compliance with subsection (2) and production of a certificate under subsection (4) or equivalent compliance. The record in this matter did not show compliance with the requirements of section 138C(4) (no certificate or panchnama for printouts) and statements under section 108 relied upon were retracted; therefore the statutory prerequisites for admission under section 138C were not satisfied.Conclusion: The requirements of section 138C were not complied with; the electronic printouts and related material could not be treated as admissible evidence for re-determination of value.Final Conclusion: Non-compliance with the mandatory evidentiary procedures in sections 138B and 138C undermined the basis for rejecting declared transaction value and for imposing penalties; accordingly the impugned adjudication cannot be sustained and is set aside.Ratio Decidendi: Statements recorded under section 108 are admissible in adjudication only after the maker is examined as a witness before the adjudicating authority and the authority records an opinion under section 138B(1)(b) admitting the statement in the interests of justice; electronic records/printouts require compliance with section 138C(2) and evidentiary certification under section 138C(4) before they can be treated as admissible evidence.