2025 (5) TMI 1039 - AT - Customs

Imposition of penalty under Section 112 - statements recorded under Section 108 - corroborative piece of evidence - under-valuation of spares of Heavy Earth Moving Machinery imported by Indian importers - differential duty - legal presumption under Section 139 of the Customs Act 1962 - HELD THAT - We find that there is nothing to even remotely suggest of an attempt towards the same. While some sundry details are established from the statement of the appellant there is nothing to establish as to how much of the undervalued imports were actually carried out and how the present appellant was concerned therewith. In so far as the details as worked out for levy of differential duty is concerned we note that the order passed by the Co-ordinate Bench of the Tribunal has already discussed and dismissed the same for want of being simply based on un-signed and unattested photocopies which can lead to no legal presumption under Section 139 of the Customs Act 1962. The Co-ordinate Bench vide the detailed order has already dismissed the enhancement of declared value as lacking in legal validity in respect of four computers generated print outs/ invoices that were not proved to be actual transactional invoices and were in a series of negotiating pre-purchase transactions. We also note that the overseas supplier Mr.Lim Eng Bee in his Bail Application before the Additional Chief Metropolitan Magistrate Egmore had submitted that the impugned invoices were neither parallel invoices or actual invoices . Moreover Mr.Lim Eng Bee at the first opportunity before the Additional Chief Metropolitan Magistrate Egmore had pointed out that his statements were neither voluntary nor of his own free will. Thus the said documents relied upon by DRI have no evidentiary substance. We also note certain inconsistencies and loose ends in the statements so recorded relied upon by the Revenue which therefore render them vague and hollow. This piece of evidence cannot therefore be weaved to churn out facts that are reliable relevant and corroborative piece of evidence to make out the case. Further there is nothing on record against the appellant and when the main case has not stood test of judicial scrutiny we are at our wits end to uphold the order of the lower authority qua the present appellant and the same is set aside to the said extent. The appeal filed is allowed.

The core legal questions considered by the Tribunal include:

1. Whether the penalty imposed on the appellant under Section 112(a)(ii) of the Customs Act, 1962, for alleged undervaluation of imported goods, is sustainable in light of the evidence and legal standards.

2. Whether the documents and statements relied upon by the Department, including computer printouts recovered from the overseas supplier's laptop and statements recorded under Section 108 of the Customs Act, are admissible and sufficient to establish undervaluation and complicity of the appellant.

3. Whether the rejection of the declared assessable value and imposition of differential customs duty on the appellant can be upheld, particularly when the main importer's appeal has been allowed by the Tribunal.

4. The evidentiary standards required under the Customs Act, including the applicability of Sections 138C and 139, and the relevance of Supreme Court precedents on electronic evidence and valuation.

Issue-wise Detailed Analysis

1. Validity of Penalty Imposed on the Appellant for Undervaluation

The relevant legal framework includes Section 112(a)(ii) of the Customs Act, 1962, which provides for penalties in cases of undervaluation or misdeclaration, and Section 114AA concerning penalties on persons facilitating undervaluation. The Tribunal also considered the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988, governing transaction value assessment.

The Court noted that the penalty was imposed following an investigation triggered by alleged undervaluation of spares for Heavy Earth Moving Machinery imported by M/s D.D.Impex from M/s E.B.Mc.Sun Pte Ltd., Singapore. The appellant acted as a consignment agent for the overseas supplier and was penalized alongside the importer.

However, the Tribunal highlighted that the main importer's appeal against similar penalties and differential duty was allowed by a coordinate Bench after detailed findings, which discredited the undervaluation allegations. The appellant contended that if the importer's case fails, the consignment agent's liability cannot subsist.

The Tribunal agreed with this contention, emphasizing that the penalty on the appellant lacked independent substantiation and was contingent on the importer's liability, which was negated.

2. Admissibility and Sufficiency of Evidence Relied Upon by the Department

The Department's case heavily relied on documents and statements obtained from the Managing Director of the overseas supplier, Mr. Lim Eng Bee, including computer printouts of commercial invoices recovered from his laptop, and statements recorded under Section 108 of the Customs Act.

The Tribunal scrutinized the evidentiary value of these documents under Section 138C of the Customs Act, which parallels Section 65B of the Indian Evidence Act, governing electronic records. It was noted that the computer printouts were unsigned, unattested photocopies and lacked the mandatory certificate from a responsible person as required under Section 138C(2) for admissibility.

The Tribunal relied on binding Supreme Court precedents and decisions of coordinate Benches, including the case of Commissioner of Customs, Mumbai Vs. Bussa Overseas Properties Ltd., which held that unsigned and unauthenticated documents cannot support enhancement of transaction value. Similarly, the Tribunal cited a recent decision holding that electronic evidence without proper certification is inadmissible.

Further, the statements of Mr. Lim Eng Bee were found to be unreliable, as he had later claimed that his statements were not voluntary. The Department failed to produce corroborative evidence of any additional payments or undervaluation, such as bank records or contemporaneous import data. The opinion of Mr. Abhijit Ray Burman, who neither prepared nor owned the devices from which the invoices were extracted, was also deemed insufficient to authenticate the documents.

3. Rejection of Declared Value and Demand of Differential Duty

The impugned order rejected the declared assessable value of Rs.47,37,209/- and revalued the goods at Rs.2,65,95,520/-, imposing a differential duty of Rs.77,71,851/-. The Tribunal observed that the original assessments by Customs at the time of importation were accepted without objection and had attained finality, with no appeals filed by the Department against those assessments.

The Tribunal emphasized that to reject a declared value after such a period, strong evidence of suppression or fraud is required, which was absent. The documents relied upon were unvalidated and inadmissible, and no direct evidence of extra payments or undervaluation was produced. The Tribunal held that the demand for differential duty was unsustainable.

4. Role and Liability of the Appellant as Consignment Agent

The appellant's role was limited to marketing and sales promotion for the overseas supplier, for which he received commission. The Tribunal found no credible evidence that the appellant was a conduit or participant in any undervaluation scheme. The statements implicating the appellant were uncorroborated and did not satisfy the evidentiary standards under Section 138B of the Customs Act.

The Tribunal noted that the appellant's testimony was self-inculpatory only to the extent of encouraging the overseas supplier to start business but did not establish involvement in undervaluation. The absence of corroborative evidence and the failure of the main importer's case led to the conclusion that the appellant's penalty was unjustified.

5. Evidentiary Standards and Procedural Compliance

The Tribunal underscored the necessity of compliance with procedural safeguards for evidence under the Customs Act and the Evidence Act. The Department's failure to produce authenticated documents and voluntary statements, and to establish a nexus between the appellant and undervaluation, rendered the case legally untenable.

The Tribunal also highlighted inconsistencies and vague statements relied upon by the Department, which undermined the reliability of the evidence. The absence of any appeal against the original assessments further weakened the Department's position.

Significant Holdings

"We observe that the invoices purportedly extracted from the storage devices of Mr. Lim Eng Bee were not subsequently shown to him nor any statement was obtained from him for the purposes of clarification as to the authenticity of the documents. Instead, the opinion of Mr. Abhijit Ray Burman, who neither prepared the invoices nor owned the devices wherefrom the same were allegedly extracted, was sought for the purposes of clarification. It is seen that the four computer printout invoices relied upon in the impugned order, do not satisfy the requirements of Section 138C(2) of the Act for being treated as a document which is admissible in any proceedings as per Section 138C(1) of the Act. Accordingly, we hold that the said printouts are inadmissible evidence and no demand can be raised or confirmed against the appellant on the basis thereof."

"We observe that the Department has not filed any appeal against the finally assessed bills of entry. ... The said period relates to a time prior to the introduction of the self-assessment regime by the Finance Act, 2011, and the stated declarations against the said goods and shipping documents issued in respect of their importation were found to be in order by the concerned assessing officers."

"There is no direct evidence available on record to establish any additional payment made by the appellant for the subject imported goods to the foreign seller or to anybody else on its behalf. Thus, we hold that the alleged undervaluation of the said goods imported by the appellant is not substantiated and accordingly, we hold that the demand of differential duty on the basis of the alleged undervaluation is not sustainable."

"The uncorroborated and un-substantiated testimony is meaningless and carries no evidentiary value."

"When the main case has not stood test of judicial scrutiny, we are at our wits end to uphold the order of the lower authority qua the present appellant, and the same is set aside to the said extent."

The Tribunal established the core principle that penalties for undervaluation under the Customs Act must be supported by admissible, authenticated, and corroborated evidence meeting statutory requirements. Unsigned, unauthenticated electronic documents and uncorroborated statements cannot form the basis for enhancing transaction value or imposing penalties. The final determination was that the penalty imposed on the appellant was unsustainable and was accordingly set aside, allowing the appeal.

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