Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 269

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Dilip Gupta, President, Hemambika R. Priya, Technical Member
S M Trading – Appellant
Versus
Principal Commissioner of Customs (Import) – Respondent
CUSTOMS APPEAL NO. 50491 OF 2021 | CUSTOMS APPEAL NO. 50321 OF 2021 | CUSTOMS APPEAL NO. 50492 OF 2021 | CUSTOMS APPEAL NO. 50226 OF 2021 | CUSTOMS APPEAL NO. 50225 OF 2021 | CUSTOMS APPEAL NO. 50227 OF 2021

Advocates:
For the Appellants/Petitioners: Mr. Gurdeep Singh, Mr. Akshay Kumar, Mr. Bharat Bhushan, Mr. Nikhil Mohan Goyal, Mr. Rajesh Singh, Mr. Shiv Shankar, Mr. M.K. Shukla, Mr. A.K. Seth, Mr. Chinmaya Seth, Ms. Khushboo Seth, Ms. Garima Thirani
For the Respondents: Mr. Nikhil Mohan Goyal, Mr. Rajesh Singh, Mr. Shiv Shankar, Mr. M.K. Shukla

Statements made under section 108 of the Customs Act require strict adherence to procedural safeguards for admissibility; failure to comply renders them non-evidential in adjudication.

Headnote:(A) Customs Act, 1962 - Sections 108, 138B, and 138C - Appeal against orders of confiscation and penalties for mis-declaration and undervaluation - The tribunal’s reliance on statements recorded under section 108 was flawed without adherence to the procedural mandates established in sections 138B and 138C regarding admissibility of such evidence. (Paras 1, 4, 21)

(B) The tribunal highlighted that the appellant's statements under section 108 were retracted and thus non-evidential without the proper examination before the adjudicating authority necessary for a fair legal process. (Paras 10, 11)

Facts of the case:
Multiple appeals were filed contesting the confiscation of imported goods and associated penalties levied by the Principal Commissioner for undervaluation, based on investigated mis-declarations found in emails and recorded statements, many of which were claimed to have been recorded under duress.

Findings of Court:
The tribunal concluded that the requisite legal procedures for admitting witness statements into evidence were not applied, making reliance on such statements improper and leading to the allowances of all appeals.

Issues: The primary questions involved whether the criteria for admissibility established in the Customs Act were properly followed and the implications of relying on potentially coerced statements during investigations.

Ratio Decidendi: The tribunal ruled that adherence to statutory procedures in evaluating statements from appellants is crucial to uphold the integrity of legal processes, thereby rendering the findings against the appellants unsustainable.

Result: Appeals allowed.

Table of Content
1. appeals against confiscation due to undervaluation lead to scrutiny of statements. (Para 1 , 2 , 3)
2. allegations hinging on email printouts require procedural soundness for evidential admission. (Para 4 , 19)
3. necessary adjudicative procedures for evaluating witness statements must be followed. (Para 5 , 6 , 8)
4. court delineates foundational procedural safeguards for using statements as evidence. (Para 10 , 11 , 12)
5. failure to adhere to statutory evidence procedures renders findings unsustainable. (Para 21 , 22)

JUSTICE DILIP GUPTA: Customs Appeal No. 50491 of 2021 has been filed by S.M.

Trading to assail that portion of the order dated October 28, 2020 passed by the Principal Commissioner of Customs that orders confiscation of the imported goods with an option to redeem the same on payment of fine. The declared value of the goods has been rejected under rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the 2007 Valuation Rules read with section 14 of the Customs Act, 1962 and re-determined under rule 3. Penalties under sections 112(a), 114A and 114AA of the , the Customs Act have also been imposed upon S.M. Trading.

2. Customs Appeal No. 50321 of 2021 has been filed by V.M. Trading to assail that portion of the order dated October 28, 2020 passed by the Principal Commissioner of Customs that orders confiscation of the imported goods with an option to redeem the same on payment of fine. The declared value of the goods has been rejected under rule 12 of the 2007 Valuation Rules read with section 14 of the Customs Act and re- determined under rule 3. Penalty under section 112(a) of the Customs Act has also been imposed upon V.M. Trading.

3. Customs Appeal No. 50492 of 2021 has been filed by Rakesh Kumar; Customs Appeal No. 50226 of 2021 has been filed by Rajiv Shewaramani; Customs Appeal No. 50225 of 2021 has been filed by Hemendra Rai; and Customs Appeal No. 50227 of 2021 has been filed by Aditya Gupta to assail that portion of the order dated October 28, 2020 passed by the Principal Commissioner of Customs that imposes penalties upon them under sections 112(b)(ii) and 114AA of the Customs Act.

4. An investigation was conducted by the Directorate of Revenue Intelligence regarding undervaluation in imports of furniture and furniture parts. It was believed that large number of importers had formed a cartel and indulged in large scale evasion of customs duty by undervaluation and mis-declaration of the goods. The allegations of mis-declaration and undervaluation of furniture and furniture parts was based mainly on the printouts of emails and statements of persons recorded under section 108 of the Customs Act.

5. The appeals were heard on two issues relating to the applicability of section 138B and section 138C of the Customs Act.

Section 138B of the Customs Act

6. The Principal Commissioner has relied upon statements made by the appellants under section 108 of the Customs Act to record a finding regarding mis-declaration and under-valuation of the goods, but these statements were retracted by the appellants in their replies.

7. 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.

8. Section 138B of the Customs Act deals with relevancy of statements under certain circumstances and it is reproduced below:

“138B. Relevancy of statements under certain circumstances.

(1) A statement made and signed by a person before any Gazetted Officer of customs during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, —

(a) when the per

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