2026 (1) TMI 1361 - AT - Customs

Admissibility of statements and electronic records in customs valuation requires witness examination and cross-examination before admission of evidence.

The text addresses admissibility of statements and electronic records in customs adjudication, holding that statements recorded under the power to summon ... Relevancy and admissibility of statements recorded u/s 108 - Admissibility of statements in adjudication u/s 138B - Admissibility of computer printouts, emails and certificates u/s 138C - Proof by electronic records - Right to cross-examination after admission of statement - rejection of declared transaction value and redetermination of value under rule 12 and section 14 - Customs adjudication and appellate review (CESTAT) - HELD THAT:- Section 108 of the Customs Act deals with power to summon persons to give evidence and produce documents. It provides that any Gazetted Officer of customs shall have the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under the Customs Act. In view of the provisions of subsection (2) of section 138B of the Customs Act, the provisions of subsection (1) of the Customs Act shall apply to any proceedings under the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain. In Drolia Electrosteel [2023 (11) TMI 10 - CESTAT NEW DELHI], a Division Bench of the Tribunal examined the provisions of section 9D of the Central Excise Act and after placing reliance upon the decision of the Punjab and Haryana High Court in Jindal Drugs [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT], observed that if the mandatory provisions of section 9D(1)(b) of the Central Excise Act are not followed, the statements cannot be used as evidence in proceedings under Central Excise Act. 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. 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. In this view of the matter, it is not possible to sustain the order dated April 23, 2020 passed by the Principal Commissioner demanding differential duty, confiscating the goods with option to redeem them, and imposing penalties upon the appellants. The impugned order dated April 23, 2020, insofar as it concerns these five appeals, is, accordingly, set aside and all the five appeals are allowed. Issues: (i) Whether statements recorded under section 108 of the Customs Act could be relied upon by the adjudicating authority for rejecting declared transaction value without complying with section 138B; (ii) Whether emails and computer-retrieved invoices relied upon by the adjudicating authority were admissible without compliance with section 138C.Issue (i): Whether the adjudicating authority could rely upon statements recorded under section 108 of the Customs Act to re-determine transaction value without following the procedure in section 138B.Analysis: Section 138B makes statements recorded before gazetted officers relevant in proceedings only in specified circumstances. Where clause (a) does not apply, clause (b) requires that the person who made the statement be examined as a witness before the adjudicating authority and the adjudicating authority form an opinion, for reasons recorded, that the statement should be admitted in the interests of justice. Only after admission can cross-examination be afforded. The impugned order relied on section 108 statements that were retracted and were not admitted in evidence by following the statutory procedure in section 138B. Prior decisions applying identical provisions in analogous statutes establish that the procedure is mandatory and failure to comply precludes reliance on such statements.Conclusion: Statements recorded under section 108 could not be relied upon for re-determining transaction value because the mandatory procedure in section 138B was not complied with; this conclusion is in favour of the assessee.Issue (ii): Whether emails and invoices retrieved from a supplier's email (computer printouts) could be admitted without compliance with section 138C.Analysis: Section 138C permits computer printouts as evidence only if the conditions in subsection (2) and the certification requirements in subsection (4) are satisfied. The record did not show compliance with section 138C, no certificate as contemplated was produced, and no panchnama for email printouts was made. The differential duty calculation relied primarily on unadmitted section 108 statements rather than on properly certified electronic records.Conclusion: Emails and computer-retrieved invoices were not admissible in the absence of compliance with section 138C; this conclusion is in favour of the assessee.Final Conclusion: The impugned order demanding differential duty, confiscating goods with option to redeem, and imposing penalties could not be sustained because mandatory statutory safeguards for admitting investigational statements and electronic records under sections 138B and 138C were not followed; the appeals are allowed.Ratio Decidendi: Where statements recorded during inquiry are relied upon in adjudication, the adjudicating authority must first examine the maker of the statement and form a recorded opinion under section 138B before admitting the statement in evidence, and computer printouts are admissible only upon satisfying section 138C's conditions and certification; failure to follow these mandatory procedures precludes reliance on such material.