2026 (2) TMI 444 - AT - Customs

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 ... Relevancy of statements recorded u/s 108 - mandatory procedure u/s 138B for admissibility of recorded statements - requirement of examination by adjudicating authority and opportunity for cross examination - admissibility of computer printouts and electronic records u/s 138C - inadmissibility of evidence without statutory compliance - Whether the statements recorded u/s 108 of the Customs Act can be considered as relevant if the procedure contemplated u/s 138B of the Customs Act has not been followed - 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. Learned authorized representative appearing for the department has, however, placed reliance upon the decision of this Tribunal in Shri T.N. Malhotra, Managing Director vs Pr. Commissioner of Customs, New Delhi [2024 (6) TMI 202 - CESTAT NEW DELHI]. 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. In view of the aforesaid discussions, 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 Commissioner (Appeals) for rejecting the transaction value and re-determining the same. A perusal of the order passed by the Commissioner (Appeals) shows that though a specific ground was taken by the appellant that the provisions of section 138C of the Customs Act had not been complied with, but no finding was recorded by the Commissioner (Appeals) regarding compliance of section 138C of the Customs Act. In the absence of any certificate under section 138C of the Customs Act, no reliance can be placed on the printouts of the email. In the present case, 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 appellant. 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 December 03, 2020 passed by the Commissioner (Appeals) 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 penalty upon the appellant. The impugned order dated December 03, 2020 is, accordingly, set aside and the appeal is allowed. 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).