Admissibility of statements and electronic records in customs valuation-failure to follow statutory procedures leads to order set aside.

Statements recorded under the customs summons power are admissible only if the statutory procedure requiring examination by the adjudicating authority and a subsequent decision on admissibility is followed; where admitted, the affected party must be given opportunity for cross examination - failure to follow this procedure renders such statements irrelevant, and they cannot support re determination of transaction value. Computer printouts and electronic records require statutory authentication and accompanying Panchnama or certificate; absence of such compliance makes them inadmissible. For these reasons the valuation determination and penalty were set aside and the appeal allowed.

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Issues: (i) Whether statements recorded under Section 108 of the Customs Act, 1962 could be relied upon in adjudication proceedings without compliance with Section 138B of the Customs Act, 1962; (ii) Whether printouts of emails/computer printouts could be relied upon without compliance with Section 138C of the Customs Act, 1962.

Issue (i): Whether statements recorded under Section 108 of the Customs Act, 1962 are relevant and admissible in adjudication proceedings absent compliance with Section 138B of the Customs Act, 1962.

Analysis: Section 138B(1)(b) requires that, unless clause (a) applies, a person who made a statement during inquiry must be examined as a witness before the adjudicating authority and the adjudicating authority must form an opinion that the statement should be admitted in evidence in the interests of justice; only thereafter must an opportunity for cross-examination be given. Prior decisions of tribunals and High Courts applying analogous provisions (including section 9D of the Central Excise Act) have held this procedure to be mandatory and that failure to comply renders such statements irrelevant and inadmissible for proving their contents. The impugned order relied on Section 108 statements that were retracted and were not admitted in evidence by following the Section 138B(1)(b) procedure.

Conclusion: The statements recorded under Section 108 of the Customs Act, 1962 could not be relied upon in the adjudication absent compliance with Section 138B of the Customs Act, 1962; this conclusion is in favour of the assessee.

Issue (ii): Whether email printouts and computer-generated material could be relied upon in the absence of compliance with Section 138C of the Customs Act, 1962.

Analysis: Section 138C deems microfilms, facsimile copies and computer printouts to be documents and admissible if conditions in subsection (2) are satisfied and where a certificate under subsection (4) or equivalent compliance is produced to show how the document was generated and that the computer operated properly. The record did not demonstrate compliance with Section 138C(4) nor production of a certificate or Panchnama to support the authenticity of the email printouts; the Section 108 statements relating to those printouts were retracted, further undermining reliance on them.

Conclusion: The email printouts/computer printouts could not be relied upon in the absence of compliance with Section 138C of the Customs Act, 1962; this conclusion is in favour of the assessee.

Final Conclusion: The Commissioner (Appeals) erred in rejecting the declared transaction value under Rule 12 and re-determining it under Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 by relying on Section 108 statements and email printouts without complying with Sections 138B and 138C of the Customs Act, 1962; the impugned order is set aside and the appeal is allowed.

Ratio Decidendi: Statements recorded under inquiry (Section 108 of the Customs Act, 1962) become relevant in adjudication only after the person is examined before the adjudicating authority and the adjudicating authority forms an opinion under Section 138B(1)(b) that the statement should be admitted in evidence, and computer printouts/email reproductions are admissible only upon satisfying the conditions of Section 138C of the Customs Act, 1962 (including requisite certification or equivalent proof of authenticity and proper operation of the computer).

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