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    ICDS applicability limited to mercantile accounting; excludes cash-accounting and individuals/HUFs not subject to tax audit.
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    Composition scheme eligibility denied where stock on appointed day was purchased inter state, imported, or received from outside State.
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    Composition scheme ineligibility: manufacturers of ice cream, pan masala and tobacco and certain suppliers cannot opt.
    Section 10(2) excludes five categories from the composition scheme: suppliers of services (except restaurant services), suppliers of non taxable goods, inter State suppliers, persons supplying through electronic commerce operators, and manufacturers of notified goods. Rule 5 adds further ineligible classes. A notification further specifies that manufacturers of ice cream, pan masala, and all tobacco and manufactured tobacco substitutes are not eligible for composition levy.
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    Composition scheme lapse triggers transition to regular tax liability and requires issuing tax invoices and filing withdrawal notice promptly.
    Crossing the aggregate turnover threshold causes the composition option to lapse from the day the threshold is exceeded; the person is liable to pay tax under section 9 from that day and must issue tax invoices for every taxable supply made thereafter. The person must also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event.
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    Composition scheme eligibility may be available for suppliers using e-commerce operators while TDS/TCS provisions remain inoperative.
    Eligibility for the composition scheme is negated for suppliers making supplies through an electronic commerce operator required to collect tax at source; however, because the TDS/TCS provisions are not yet operative and ECOs are not required to collect tax, suppliers using ECOs may currently opt for the composition scheme until the collection provisions are brought into force, and an administrative clarification from the government is recommended to remove uncertainty.

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      Due Compliance with Section 138C(4) of the Customs Act, 1962 for Admissibility of Electronic Records (Computer Printouts) in Customs Proceedings

      27 January, 2026

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      This note presents a concise research digest of the judicial decision, summarising the key issues, findings, and outcome. The judgment is analysed in the context of its factual background, issues framed, and conclusions reached by the Court.

      2025 (9) TMI 76 - Supreme Court

      Case Snapshot

      A set of statutory appeals under Section 130E of the Customs Act, 1962 arose from an order of the appellate tribunal which had set aside a customs adjudication primarily on the ground that electronic evidence relied upon by the department was inadmissible due to alleged non-compliance with Section 138C(4) of the Customs Act, 1962.

      The core controversy concerned what constitutes due compliance with the certificate requirement under Section 138C(4) when computer printouts and electronic records are sought to be tendered in evidence in proceedings under the Customs Act, 1962. The Court held that, on the facts, there was due compliance in substance, and therefore the tribunals approach was erroneous. The matter was remanded to the tribunal for decision on grounds other than Section 138C(4).

      Material Facts

      The respondents (referred to as the importers/assessees) were engaged in importing branded food items and selling them in the domestic market. The department carried out searches of business and residential premises and collected material, including electronic records retrieved from electronic devices.

      The departments case was that, while filing Bills of Entry for the imported goods, the importers failed to declare the actual RSP/MRP at which goods were being sold to ultimate consumers. It was alleged that a lower RSP/MRP was declared, resulting in evasion/short payment of customs duty.

      A show cause notice was issued proposing recovery of differential duty (a substantial demand), along with interest and penalty, and proposing confiscation of imported goods. The adjudicating authority confirmed the proposals by an order-in-original and imposed interest and penalties.

      On appeal, the appellate tribunal allowed the assessees appeals and set aside the adjudication order. The tribunals principal basis was that the electronic documents (computer printouts and related electronic records) relied upon by the department could not be admitted in evidence due to non-compliance with Section 138C(4) of the Customs Act, 1962. The tribunal also noted that contentions were raised regarding Section 138B of the Customs Act, 1962, but it did not decide those issues as it allowed the appeals solely on Section 138C(4).

      In further appeal by the revenue, the record placed before the Court included contemporaneous records of proceedings relating to extraction and printing of electronic data from external storage devices and electronic devices, bearing signatures of persons associated with the assessees, and statements recorded under Section 108 of the Customs Act, 1962 acknowledging the printouts and their authenticity/presence during printing. It was also material that such statements were not retracted and were not disputed in the reply to the show cause notice, to the extent relevant for the Section 138C(4) compliance issue.

      Issue Involved

      Whether the appellate tribunal erred in holding that the department failed to comply with Section 138C(4) of the Customs Act, 1962 for admitting and relying upon computer printouts/electronic records, and whether, on the facts, the available record of proceedings and Section 108 statements could amount to due compliance with Section 138C(4) even in the absence of a certificate in the strict format.

      Decision

      The Court partly allowed the revenues appeals. The tribunals order was set aside. The assessees appeals before the tribunal were restored and remanded for rehearing on grounds other than Section 138C(4) of the Customs Act, 1962.

      The Court expressly clarified that the tribunal must rehear the appeals on their own merits, without being influenced by the Courts observations, and that the Courts observations were confined only to the issue of Section 138C(4) of the Customs Act, 1962.

      Key Observations

      1. Textual requirement under Section 138C(4) of the Customs Act, 1962

      Section 138C(4) of the Customs Act, 1962 requires that where it is desired to give a statement in evidence by virtue of Section 138C, a certificate should (a) identify the document and describe the manner of its production, (b) give particulars of the device involved to show production by a computer, and (c) deal with matters related to the conditions mentioned in Section 138C(2). The certificate must purport to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or management of the relevant activities.

      2. Statutory linkage with the Indian Evidence Act framework for electronic evidence

      The Court considered Sections 65A and 65B of the Indian Evidence Act, which provide that the contents of electronic records may be proved in accordance with Section 65B, and that a computer output is deemed to be a document admissible in proceedings if Section 65B conditions are satisfied.

      The Court treated Section 65B(4) of the Indian Evidence Act as pari materia to Section 138C(4) of the Customs Act, 1962, and therefore drew interpretive support from the approach to Section 65B(4) as discussed by the Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal and Others (citations not stated here for compliance reasons).

      3. Mandatory character and the impossibility maxims

      While recognising that the certificate requirement is mandatory in principle, the Court referred to the established maxims impotentia excusat legem and lex non cogit ad impossibilia to explain that the law does not compel the impossible. The Court noted that the application of these principles depends on facts and circumstances, including whether a party has done everything possible to comply and whether obtaining the certificate depends on factors beyond its control.

      4. Due compliance need not mean a strict-format certificate in every case

      On the facts, the Court held that there was due compliance with Section 138C(4) of the Customs Act, 1962. The Court reasoned that due compliance should not be understood to mean that a particular certificate stricto sensu in the exact format must necessarily be on record in every case. Instead, the contemporaneous records of proceedings concerning extraction/printing of data, coupled with statements recorded under Section 108 of the Customs Act, 1962 acknowledging the printouts and their authenticity/presence during printing, were held sufficient to constitute due compliance in substance for the limited purpose of Section 138C(4).

      5. Non-retraction and non-dispute as reinforcing factors (limited to Section 138C(4))

      The Court emphasised that the Section 108 statements were not retracted at any point, and even in the reply to the show cause notice, the contents of such statements were not disputed. The Court treated this as relevant to the question of due compliance with Section 138C(4). However, the Court cautioned that this was only for the limited purpose of assessing Section 138C(4) compliance.

      6. Evidentiary value in other contexts and the role of Section 138B

      The Court specifically observed that the evidentiary value of Section 108 statements in any other proceedings would have to be considered in accordance with law, including compliance with Section 138B of the Customs Act, 1962. The remand direction preserved the tribunals role to consider other grounds (including those not examined earlier) on their own merits.

      7. Certificate format not determinative where authenticity is not in dispute

      The Court also relied on the proposition that a certificate not given in a prescribed format would not per se make it invalid, particularly when authenticity of the marked documents is not in dispute. This observation supported the conclusion that the tribunal was not justified in rejecting the electronic material solely on a rigid view of the certificate requirement, given the nature of the record and acknowledgments available.

      Practical Relevance

      1. For customs investigations and adjudication

      The decision indicates that, in proceedings under the Customs Act, 1962, the certificate requirement under Section 138C(4) is central, but compliance may, in appropriate factual settings, be assessed substantively rather than by insisting on a single formal document labelled as a certificate. For departmental practice, contemporaneous documentation of extraction/printing processes and clear identification of devices and outputs assume importance.

      2. For assessees contesting electronic evidence

      Where the challenge is founded on Section 138C(4), the decision suggests that acknowledgments recorded during proceedings and statements under Section 108 may be treated as relevant to whether the statutory conditions have been met in substance. At the same time, the decision preserves the possibility of contesting evidentiary value on other statutory grounds where applicable, including the procedural requirements tied to statements under Section 138B.

      3. For appellate strategy and remand outcomes

      Tribunals may be required to avoid disposing of appeals solely on a narrow evidentiary objection when the record may show substantive compliance, and to adjudicate remaining grounds. Remand in such cases underscores that the Section 138C(4) issue may not be outcome-determinative once due compliance is found, shifting focus to other merits/issues raised but not previously decided.

      4. Interface with Sections 65A and 65B of the Indian Evidence Act

      By treating Section 138C(4) of the Customs Act, 1962 as pari materia to Section 65B(4) of the Indian Evidence Act, the decision reinforces a harmonised approach to electronic evidence in fiscal adjudication. Practitioners should therefore assess both the statutory wording of Section 138C(4) and the generally accepted interpretive approach to Section 65B(4) when framing objections or supporting admissibility of electronic records.

       


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      2025 (9) TMI 76 - Supreme Court

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