Admissibility of statements under section 108 and electronic printouts in valuation proceedings rejected due to lack of certification and chain of custody, leading to successful appeals

Admissibility of statements recorded under section 108 and of electronic printouts was examined, with emphasis on mandatory procedural safeguards for admission and certification of electronic evidence; the impugned reliance on uncertified printouts shown to respondents, without proof of how or by whom printouts were taken or certified, failed the required evidentiary and chain-of-custody standards, and thus could not support findings of undervaluation or consequent duty and penalty demands. For these reasons the reassessment of declared value and confirmation of differential duty and penalties based on those printouts could not be sustained, and the appeals were allowed.

---

---

Issues: (i) Whether statements recorded under section 108 of the Customs Act could be relied upon in adjudication proceedings without following the procedure prescribed by section 138B; (ii) Whether computer printouts/extracted electronic records relied upon by the Department satisfied the conditions of section 138C and could be admitted without the statutory certificate or clear contemporaneous proof of printout/production.

Issue (i): Whether statements under section 108 were admissible and could be relied upon without examination of the makers before the adjudicating authority and formation of an opinion as required by section 138B.

Analysis: Section 138B(1)(b) makes statements recorded during inquiry relevant in adjudication only after the person who made the statement is examined as a witness before the adjudicating authority and the authority forms an opinion, for reasons recorded, that the statement should be admitted in the interests of justice. Precedents and analogous provisions (section 9D of the Central Excise Act) establish this procedure as mandatory. Where the statutory steps are not followed, reliance on such investigative statements is impermissible and the affected party is entitled to cross-examine only after the statement is admitted in evidence.

Conclusion: Statements recorded under section 108 could not be relied upon because the mandatory procedure under section 138B was not complied with; conclusions based on those statements are unsustainable.

Issue (ii): Whether the electronic records/printouts used to establish undervaluation met the conditions of section 138C and were admissible without a statutory certificate or clear contemporaneous proof of production.

Analysis: Section 138C deems computer printouts admissible only if conditions in subsection (2) and the certification requirements in subsection (4) are satisfied. The Panchnamas did not record taking of printouts in the presence of witnesses nor was there a statutory certificate establishing production and the manner of production. The record did not clearly show how or in whose presence printouts were produced; showing printouts alone in statements did not discharge the requirements of section 138C(2) and (4). Recent authoritative decisions permit reliance on documentary proof of compliance only where statutory conditions or equivalent contemporaneous evidence exist.

Conclusion: The electronic printouts/forensic extracts could not be admitted or relied upon in the absence of compliance with section 138C; therefore the documentary basis for re-determination of value was not established.

Final Conclusion: The findings of undervaluation, re-determination of transaction value under the Valuation Rules, and the consequent demands and penalties that rested on the impugned statements and printouts could not be sustained; the impugned order is set aside and the appeals are allowed.

Ratio Decidendi: Statements recorded during investigation under section 108 acquire relevance in adjudication only after (a) the maker is examined as a witness before the adjudicating authority and (b) the authority records an opinion admitting the statement in the interests of justice under section 138B; computer printouts and extracted electronic records are admissible under section 138C only upon satisfaction of subsection (2) and evidentiary certification under subsection (4) or equivalent contemporaneous proof of production and chain of custody.

---