2025 (5) TMI 1538 - AT - Customs

Admissibility of secondary electronic evidence specifically printout of the Excel Sheet in the absence of statutory compliance of producing a certificate under section 138C of the Customs Act - Reliability of statement made by partner of the appellant under section 108 of the Customs Act - Redetermination of the transaction value under rule 3 read with rule 10 of the 2007 Valuation Rules - Suppression of the actual transaction value and resorting to under-valuation - evasion of payment of duty - Demand of differential duty alongwith interest and penalty - extended period of limitation contemplated under section 28(4) of the Customs Act - HELD THAT - This is for the reason that the printout was taken from a secondary electronic evidence. This issue was examined by a Division Bench of this Tribunal in M/s. Trikoot Iron Steel Casting Ltd. vs. Addittional Director General (Adjn.) Directorate General of GST Intelligence 2024 (10) TMI 672 - CESTAT NEW DELHI in which the provisions of section 36B of the Central Excise Act 1944 came up for consideration. This section is pari material to section 138B of the Customs Act. The aforesaid decisions of the Tribunal which are in the context of the provisions of section 36B of the Central Excise Act hold that a printout generated from a secondary electronic evidence that has been seized cannot be admitted in evidence unless the statutory conditions laid down in section 36B of the Central Excise Act are complied with. The decisions also hold that if the data is not stored in the computer but officers take out a printout from the hard disk drive by connecting it to the computer then a certificate under section 36B of the Central Excise Act is mandatory. Thus the printout was taken from a secondary evidence namely the pen drive. It could not have been considered as evidence in the absence of a certificate under section 138C of the Customs Act. The Principal Commissioner has relied upon the data contained in the Excel Sheet and the statement of Rajiv Dhuper made under section 108 of the Customs Act for rejecting the transaction value under rule 12 of the 2007 Valuation Rules and section 14 of the Customs Act. In view of the above discussion no reliance can be placed on them for rejecting the transaction value under rule 12 of the 2007 Valuation Rules. The redetermination of the transaction value under rule 3 read with rule 10 of the 2007 Valuation Rules is also based on the data contained in the Excel Sheet. Such a re-determination therefore cannot also be sustained. It would therefore not be necessary to examine the contention advanced by the learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of case. The impugned order dated 26.07.2011 passed by the Principal Commissioner that rejects the transaction value and re-determines it therefore cannot be sustained. The demand of interest and imposition of penalty upon the appellant cannot also be sustained. Likewise the imposition of penalty upon Rajiv Dhuper cannot also be sustained. Thus the impugned order dated 26.07.2021 passed by the Principal Commissioner is set aside and both the appeals are allowed.

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

(i) Whether the printout of an Excel Sheet retrieved from a secondary electronic device (pen drive), containing alleged undervaluation data, is admissible evidence in the absence of statutory certification under section 138C of the Customs Act, 1962;

(ii) Whether the statement recorded under section 108 of the Customs Act from the partner of the appellant can be relied upon as evidence under section 138B of the Customs Act without compliance with procedural safeguards;

(iii) Whether the transaction value declared by the appellant can be rejected and re-determined under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (the 2007 Valuation Rules), particularly rules 3, 10 and 12, read with section 14 of the Customs Act, based on the disputed evidence;

(iv) Whether the extended period of limitation under section 28(4) of the Customs Act for demand of differential customs duty could be invoked given the facts of the case;

(v) Whether penalties imposed under sections 111(m), 112(a)(ii), 112(b)(ii), and 114AA of the Customs Act are sustainable.

Issue-wise Detailed Analysis:

1. Admissibility of Excel Sheet Printout as Evidence

Legal Framework and Precedents: The admissibility of electronic evidence is governed by section 138C of the Customs Act, which parallels section 65B of the Indian Evidence Act, 1872. These provisions require that electronic records, including computer printouts, must be accompanied by a certificate from a responsible person attesting to the authenticity, manner of production, and integrity of the data. The Tribunal examined multiple precedents, including a recent Division Bench decision in a related excise matter, which emphasized the mandatory nature of such certification for secondary electronic evidence to be admissible. The Supreme Court rulings in Anvar P.V. vs. P.K. Basheer and Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal were cited to underscore that electronic records cannot be admitted as evidence unless the statutory conditions of section 65B are strictly complied with.

Court's Interpretation and Reasoning: The Tribunal found that the Excel Sheet printout was obtained from a pen drive, which is secondary electronic evidence. The department failed to produce the mandatory certificate under section 138C(4) of the Customs Act. The printout was neither accompanied by any certificate nor was the original electronic device itself produced or admitted in evidence. The Tribunal held that in the absence of such certification, the printout cannot be relied upon as evidence.

Application of Law to Facts: The department's reliance on the Excel Sheet printout to allege undervaluation was found to be legally unsustainable. The Tribunal noted that the printout was not generated in compliance with the statutory safeguards designed to ensure authenticity and prevent tampering.

Treatment of Competing Arguments: The appellant contended that the Excel Sheet was unreliable and not corroborated by other evidence, and that the department failed to comply with statutory requirements for admissibility. The department argued that the Excel Sheet was incriminating and reflected actual payments. The Tribunal sided with the appellant on the issue of admissibility, emphasizing statutory compliance over the content of the evidence.

Conclusion: The printout of the Excel Sheet is inadmissible in the absence of the certificate under section 138C and cannot form the basis for rejecting the declared transaction value.

2. Reliance on Statement Recorded Under Section 108 of the Customs Act

Legal Framework and Precedents: Section 108 enables recording of statements during inquiry, but section 138B mandates procedural safeguards before such statements can be admitted as evidence. The Tribunal referred to a Division Bench decision which held that statements recorded under section 108 are admissible only if the person is examined as a witness before the adjudicating authority, and the authority forms an opinion that such admission is in the interests of justice. Further, the person must be given an opportunity for cross-examination to neutralize any coercion or compulsion during the inquiry.

Court's Interpretation and Reasoning: The Tribunal noted that the statement of the partner admitting the Excel Sheet as an account summary was recorded under section 108 without compliance with section 138B safeguards. The statement was allegedly made under threat and was retracted shortly thereafter. The Tribunal held that such statement cannot be relied upon as evidence without the mandatory procedural steps.

Application of Law to Facts: The reliance on the statement to corroborate the Excel Sheet and reject the declared transaction value was found to be improper. The procedural safeguards were not followed, rendering the statement inadmissible.

Treatment of Competing Arguments: The appellant argued the statement was coerced and retracted, while the department relied on it as an admission of undervaluation. The Tribunal favored the appellant's position based on statutory procedural requirements.

Conclusion: The statement recorded under section 108 cannot be admitted as evidence without compliance with section 138B, and therefore cannot support the rejection of declared value.

3. Rejection and Re-determination of Transaction Value Under the Customs Valuation Rules

Legal Framework and Precedents: Rule 12 of the 2007 Valuation Rules permits rejection of declared transaction value if it is not acceptable. Rule 3 provides for determination of value based on price actually paid or payable. Section 14 of the Customs Act empowers the authority to reject declared value and re-determine assessable value.

Court's Interpretation and Reasoning: The Principal Commissioner rejected the declared value based primarily on the Excel Sheet and the partner's statement. However, since both pieces of evidence were held inadmissible, the basis for rejection was unsustainable. The Tribunal observed that the declared transaction value was supported by proper banking payment evidence and commercial invoices, which were not challenged by admissible evidence.

Application of Law to Facts: Without admissible evidence of undervaluation, the declared transaction value stands. The department failed to prove suppression or misdeclaration by reliable means.

Treatment of Competing Arguments: The appellant maintained the declared value was correct and supported by payment through banking channels. The department relied on inadmissible electronic evidence and statements. The Tribunal favored the appellant's submissions.

Conclusion: The rejection of declared transaction value and re-determination under rule 3 cannot be sustained.

4. Invocation of Extended Period of Limitation Under Section 28(4) of the Customs Act

Legal Framework: Section 28(4) allows extended limitation of five years for demand of customs duty where duty has been evaded by reason of fraud, collusion, willful misstatement or suppression of facts.

Court's Interpretation and Reasoning: The Principal Commissioner invoked the extended period based on alleged willful suppression of actual transaction value. However, since the evidence of suppression was inadmissible, the basis for invoking extended limitation is undermined.

Application of Law to Facts: The Tribunal found it unnecessary to decide on this issue given the inadmissibility of evidence on suppression and undervaluation.

Conclusion: The extended period invocation cannot be sustained without admissible evidence of suppression or fraud.

5. Imposition of Penalties

Legal Framework: Penalties under sections 111(m), 112(a)(ii), 112(b)(ii), and 114AA are imposed for undervaluation, suppression, and related offences under the Customs Act.

Court's Interpretation and Reasoning: Since the foundational findings of undervaluation and suppression are not sustainable due to inadmissibility of evidence, the penalties imposed on the appellant and the partner cannot be upheld.

Conclusion: Penalties imposed are quashed.

Significant Holdings:

"The printout of the Excel Sheet taken from a secondary electronic device (pen drive) cannot be admitted in evidence in the absence of a certificate under section 138C of the Customs Act."

"Statements recorded under section 108 of the Customs Act are admissible only if the person is examined as a witness before the adjudicating authority and the authority forms an opinion that admission is in the interests of justice, with opportunity for cross-examination."

"In the absence of admissible evidence of undervaluation or suppression, the declared transaction value cannot be rejected or re-determined under the Customs Valuation Rules."

"Penalties imposed on the basis of inadmissible evidence of suppression and undervaluation cannot be sustained."

"The invocation of the extended period of limitation under section 28(4) cannot be upheld without credible evidence of willful suppression or fraud."

The Tribunal set aside the impugned order dated 26.07.2021 passed by the Principal Commissioner, allowed the appeals, and held that the demand of differential customs duty, interest, and penalties cannot be sustained in the absence of admissible evidence. The declared transaction value stands accepted.

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