2023 (9) TMI 22 - AT - Customs

Scope and validity of the evidence collected from the emails - rejection of declared value on Bill of Entry - re-determination of transaction value - cross-examination of witnesses - demand of differential duty alongwith interest and penalty - HELD THAT - Rejection of declared value on Bill of Entry is a serious charge and the same could have been rejected on the basis of cogent examination of evidences and justifiable reasons - It is found that the DRI officers conducted search operation in the business premises of M/s Plastic Cottage Trading Co. and M/s Winsor Enterprises. Panchama s both dated 11-4-2017 were prepared in respect of recovery of records/ documents/ files/ print outs of emails and sets of invoices retrieved from emails /computers/ mobile phones and laptop. The issue involved in these cases is mainly confined for determination as to whether the transaction values declared by the importer/ appellant are correct or otherwise. The adjudicating authority observed that the evidence for the actual price was retrieved from the E-mails and invoices retrieved from E-mails. The authenticity of all the said Email printouts was admitted by partners of the appellant in their statements. On the other hand the appellants disputed the veracity and authenticity of the evidences collected through electronic devices. On reading of Section 138C of the Customs Act 1962 it is seen that the Legislature had prescribed the detailed procedure to accept the computer printouts and other electronic devices as evidences. It has been stated that any proceedings under the Act 1962 where it is desired to give a statement in evidence of electronic devices shall be evidences of any matter stated in the certificate - In the present case the provisions of Section 138C of the Act were not complied with to use the computer printouts as evidence. It is noted that the certificate was not prepared during the seizure of the electronic devices as required under the law. In the instant case it is found that the entire case proceeded on the basis of the electronic documents as evidence. But the investigating officers had not taken pain to comply with the provisions of the law to establish the truthfulness of the documents and merely proceeded on the basis of the statements. Hence the evidence of electronic devices as relied upon by the adjudicating authority cannot be accepted. Upon perusal of the judgment of the Hon ble Supreme Court in the case of ANVAR P.V VERSUS P.K. BASHEER AND OTHERS 2014 (9) TMI 1007 - SUPREME COURT it is noted that the Apex Court has categorically laid down the law that unless the requirement of Section 65B of the Evidence Act is satisfied such evidence cannot be admitted in any proceedings - Section 138C of the Customs Act is parimateria to Section 65B of the Evidence Act. Consequently the evidence in the form of computer printouts etc. recovered during the course of investigation can be admitted in the present proceedings only subject to the satisfaction of the subsection (2) of Section 138C ibid. The statements cannot be the sole reason to confirm the charge of undervaluation - It is noted that in the present matter there are no evidences produced by the department that the excess amount over and above the invoice price was paid to suppliers. There is no evidence as to how the Appellant came into possession of cash alleged to be differential amount towards goods imported nor there is any evidence of any cash being handed over to any person representing suppliers in India. Department had failed to produce corroborative evidences regarding the undervaluation of imported goods. Hence the charge of undervaluation of imported goods in the present matter is not sustainable. The duty demand confirmed against the appellant M/s. Plastic Cottage Trading Co. and penalties imposed upon it is not sustainable. For the same reason the penalty imposed on the co-appellants namely Shri Junaid Kudia and Shri Zaid Kudia is also not sustainable. Therefore the impugned order confirming the adjudged demands on the appellants is set aside - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this matter are:

• Whether the declared assessable value of imported consignments was correctly rejected and re-determined by the Commissioner of Customs, leading to confirmation of differential customs duty and imposition of penalties under the Customs Act, 1962.
• Whether the electronic evidence in the form of computer printouts and emails recovered during search operations was admissible and could be relied upon without compliance with statutory procedural safeguards under Section 138C of the Customs Act, 1962.
• Whether the appellants were entitled to cross-examination of key witnesses, particularly the employee from whose email account the disputed invoices were retrieved, in the interest of natural justice.
• Whether the statements recorded from the appellants, which were later retracted, could be relied upon to confirm undervaluation and demand differential customs duty.
• Whether the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, particularly Rule 10(1)(e), were properly applied in re-determining assessable value without evidence of extra payments beyond contracted amounts.
• Whether the adjudicating authority was empowered to re-assess or re-determine the value of goods after the Bills of Entry had been assessed and cleared under Section 47 of the Customs Act, 1962, without any review or appeal against the original assessment.

2. ISSUE-WISE DETAILED ANALYSIS

Admissibility and Reliance on Electronic Evidence (Computer Printouts and Emails)

Relevant legal framework and precedents: Section 138C of the Customs Act, 1962, governs the admissibility of microfilms, facsimile copies, and computer printouts as evidence. This provision parallels Section 65B of the Indian Evidence Act, 1872, which requires a certificate from a responsible official describing the manner of production and authenticity of electronic records. The Supreme Court judgment in Anvar P.V. v. P.K. Basheer clarified that electronic evidence is admissible only if the procedural requirements under Section 65B are strictly complied with.

Court's interpretation and reasoning: The Tribunal observed that the investigating officers failed to comply with the mandatory procedural safeguards under Section 138C. Specifically, no certificate was produced to authenticate the computer printouts and emails seized during the search. The absence of such certification rendered the electronic evidence inadmissible. The Tribunal emphasized the importance of these safeguards to prevent tampering and ensure authenticity.

Key evidence and findings: The electronic documents were printouts of emails and invoices retrieved from laptops and email accounts of employees of the appellant and its sister concern. The appellants disputed the authenticity of these documents. The investigating officers did not record statements or obtain comments from the employee whose email account was the source of the disputed invoices. No certificate under Section 138C was produced.

Application of law to facts: The Tribunal held that without compliance with Section 138C, the electronic evidence could not be admitted or relied upon. The reliance placed by the adjudicating authority on such evidence was therefore erroneous and unsustainable.

Treatment of competing arguments: The Revenue contended that the statements of the appellant's partners admitted the authenticity of the emails and invoices, and thus the documents were admissible. The Tribunal rejected this argument, noting that the Supreme Court judgment in Anvar P.V. was not cited in the Revenue's supporting decision and that mere admission in statements could not substitute the statutory certification requirement.

Conclusion: The electronic evidence relied upon by the Revenue was inadmissible due to non-compliance with Section 138C, vitiating the basis for rejection of declared values and confirmation of differential duty.

Right to Cross-Examination of Witnesses

Relevant legal framework and precedents: Principles of natural justice require that a party be given the opportunity to cross-examine witnesses whose statements are used against it. The Tribunal referred to judgments emphasizing the necessity of cross-examination in quasi-judicial proceedings.

Court's interpretation and reasoning: The appellant sought cross-examination of the employee from whose email account the disputed invoices were retrieved. The adjudicating authority denied this request, citing non-appearance despite summons. The Tribunal found that denial of cross-examination was improper and violated natural justice.

Key evidence and findings: The employee did not appear despite summons, but the appellant's right to cross-examine was a natural justice component that should have been accommodated or appropriately dealt with.

Application of law to facts: The Tribunal agreed with the appellant that cross-examination is essential, especially when the entire case rested on documents retrieved from that employee's email account.

Treatment of competing arguments: The Revenue argued that summons were issued and non-appearance justified denial of cross-examination. The Tribunal noted this but still found the denial improper in the context of natural justice.

Conclusion: Denial of cross-examination of key witnesses was a procedural irregularity undermining the adjudication.

Reliability of Statements and Retraction

Relevant legal framework and precedents: Statements recorded under duress or pressure and subsequently retracted cannot be the sole basis for confirming charges. The Tribunal relied on principles that retracted confessional statements require corroboration.

Court's interpretation and reasoning: The adjudicating authority ignored the retraction of statements by the appellant's partners. The Tribunal held this approach incorrect, emphasizing that statements alone, especially if retracted, cannot sustain a charge of undervaluation.

Key evidence and findings: Statements of partners admitting undervaluation were recorded but later retracted. No corroborative evidence was produced by the Revenue to establish payment of differential amounts or actual undervaluation.

Application of law to facts: The Tribunal found the statements insufficient to confirm the demand, absent corroboration.

Treatment of competing arguments: The Revenue relied on the statements as evidence. The Tribunal rejected this reliance without corroboration and in light of retractions.

Conclusion: The statements could not be the sole basis for confirming undervaluation and demand.

Application of Customs Valuation Rules and Evidence of Extra Payments

Relevant legal framework and precedents: Rule 10(1)(e) of the Customs Valuation Rules, 2007, requires inclusion of all payments made as a condition of sale in the assessable value. The burden lies on the Revenue to prove any extra payments beyond the contract price.

Court's interpretation and reasoning: The Tribunal noted absence of any evidence that extra payments were made to sellers or third parties. The DRI failed to investigate overseas suppliers or obtain corroborative invoices from ports of discharge. The second set of invoices retrieved from emails was admitted to be discrepant and not actual invoices.

Key evidence and findings: No documentary or other evidence was produced to show payment of amounts over and above declared invoice prices. The declared values had been accepted by Customs at the time of import based on NIDB data.

Application of law to facts: Without evidence of extra payments, re-determination of assessable value under Rule 10(1)(e) was not justified.

Treatment of competing arguments: The Revenue relied on the second set of invoices and statements. The Tribunal found these insufficient and unreliable.

Conclusion: The charge of undervaluation based on Rule 10(1)(e) was not sustainable.

Finality of Assessed Bills of Entry and Power to Re-Determine Value

Relevant legal framework and precedents: Section 47 of the Customs Act, 1962, provides that once Bills of Entry are assessed and cleared, such assessment attains finality unless reviewed or appealed against. Subsequent re-determination without review or appeal is impermissible.

Court's interpretation and reasoning: The Tribunal observed that the Bills of Entry for the disputed consignments had been assessed and cleared without any appeal or review. The impugned order's re-determination of value was therefore unsustainable.

Key evidence and findings: No review or appeal was filed against the original assessment orders.

Application of law to facts: The Tribunal held that the assessments had attained finality and could not be challenged by the impugned order.

Treatment of competing arguments: The Revenue sought to re-determine value based on investigation findings. The Tribunal rejected this on legal grounds.

Conclusion: Re-determination of value post finality of assessment was impermissible.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"The provisions of Section 138C of the Customs Act, 1962, are mandatory for admissibility of electronic evidence and non-compliance renders such evidence inadmissible."

"Electronic records cannot be admitted as evidence unless accompanied by a certificate as prescribed under Section 138C(4), akin to Section 65B of the Evidence Act, 1872."

"Statements recorded under duress and subsequently retracted cannot be the sole basis for confirming undervaluation and demand of differential duty."

"Cross-examination of witnesses whose statements are used against the appellant is a fundamental component of natural justice and denial thereof is improper in quasi-judicial proceedings."

"Once Bills of Entry are assessed and cleared under Section 47 of the Customs Act and no review or appeal is filed, such assessments attain finality and cannot be re-determined in subsequent proceedings."

"In the absence of evidence of extra payments beyond the contract price, re-determination of assessable value under Rule 10(1)(e) of the Customs Valuation Rules is not sustainable."

Accordingly, the Tribunal set aside the impugned order confirming differential duty and penalties against the appellants, allowing the appeals with consequential relief as per law.