2026 (1) TMI 1099 - AT - Customs

Misdeclared valuation of imported furniture overturned after electronic records and statutory statements deemed inadmissible, appeals allowed

Admissibility of statements recorded during statutory examinations was examined: statements relied on by the adjudicator were retracted and there was no ... Mis-declaration and undervaluation of furniture and furniture parts, based on the printouts of emails and statements of persons recorded u/s 108 - Relevancy of statements recorded - Mandatory procedure for admissibility of statements in adjudication - Admissibility of computer printouts and electronic records - Adjudicating authority's duty to examine witnesses and form opinion before admitting statements - Opportunity for cross-examination - Redetermination of transaction value - applicability of section 138B and section 138C - 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. The finding regarding under-valuation of furniture and furniture parts is based on the printouts of original invoices recovered from the email and various statements made under section 108 of the Customs Act. A perusal of the order passed by the Principal Commissioner shows that no finding has been recorded regarding compliance of section 138C of the Customs Act. In the absence of any certificate having been issued under section 138C of the Customs Act, no reliance can be placed on the printouts of emails. 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, the compliance of section 138C of the Customs Act had not been satisfied. It is not possible to sustain the order dated October 28, 2020 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 October 28, 2020, insofar as it concerns these six appeals, is set aside and all the six appeals are allowed. Issues: (i) Whether statements recorded under section 108 of the Customs Act can be relied upon in adjudication proceedings without compliance with section 138B; (ii) Whether computer printouts and email printouts relied upon by the Department were admissible without compliance with section 138C.Issue (i): Whether the statements recorded under section 108 are admissible in adjudication proceedings absent compliance with section 138B(1)(b).Analysis: Section 138B(1)(b) conditions relevance of statements recorded before Gazetted Officers on (a) examination of the person as a witness before the adjudicating authority and (b) formation of an opinion by the adjudicating authority that the statement should be admitted in evidence in the interests of justice, after which opportunity for cross-examination must be provided. Precedents applying the closely analogous provision in the Central Excise Act and decisions of various High Courts and Tribunals require strict, mandatory compliance with this procedure. Statements retracted by the declarants cannot be treated as reliable absent the mandated procedure and the adjudicating authority's recorded opinion admitting them in evidence.Conclusion: Statements recorded under section 108 cannot be relied upon in adjudication proceedings without compliance with section 138B; this conclusion is in favour of the assessee.Issue (ii): Whether email printouts and computer-generated documents are admissible without compliance with section 138C(4).Analysis: Section 138C deems microfilms, facsimile copies and computer printouts to be documents and admissible if the conditions in subsection (2) are satisfied and, where applicable, a certificate under subsection (4) identifying the document and describing production by the computer is produced or equivalent compliance is shown. The impugned order contains no recorded compliance with section 138C and no certificate or Panchnama for the email printouts; consequently the statutory conditions for deeming computer printouts admissible were not satisfied.Conclusion: Email and computer printouts could not be relied upon in the absence of compliance with section 138C; this conclusion is in favour of the assessee.Final Conclusion: Because the Department failed to comply with the mandatory procedural requirements of sections 138B and 138C, the re-determination of transaction value under Rule 3 and the penalties and confiscation imposed in the impugned order could not be sustained; the appeals are allowed.Ratio Decidendi: Statements recorded under section 108 attain relevance in adjudication only upon compliance with section 138B(1)(b) (examination before the adjudicating authority and recorded opinion admitting the statement) and computer printouts/email reproductions are admissible only upon satisfying the conditions of section 138C including the requirements of subsection (4) or equivalent demonstrable compliance.