Substantial Compliance with S.138C(4) Customs Act Sufficient for Admissibility of Electronic Evidence: Supreme Court - 2025-08-30

Supreme Court: Acknowledgment by Assessee Can Satisfy Electronic Evidence Certification Under Customs Act

New Delhi: In a significant ruling on the admissibility of electronic evidence, the Supreme Court has held that a formal certificate under Section 138C(4) of the Customs Act, 1962 is not the only way to prove the authenticity of computer printouts. The Court ruled that substantial compliance, demonstrated through signed proceedings and unretracted statements by the assessee acknowledging the documents, can fulfill the legal requirement.

The bench of Justices J.B. Pardiwala and K.V. Viswanathan set aside a decision by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which had dismissed a massive customs duty demand of over ₹9 crore against an importer purely on the grounds of non-submission of the prescribed certificate. The matter has been remanded to the Tribunal for a fresh hearing on other merits.

---

Background of the Case

The case involves M/s Suresh Kumar and Co. Impex Pvt. Ltd., an importer of branded food items. The Directorate of Revenue Intelligence (DRI), acting on intelligence, conducted searches and seized electronic devices. The investigation revealed that the company was allegedly under-declaring the Retail Selling Price (RSP/MRP) of imported goods, resulting in the evasion of customs duties.

The Adjudicating Authority confirmed a demand for differential duties amounting to over ₹9 crore, along with interest and penalties. However, on appeal, the CESTAT overturned this order. The Tribunal concluded that the electronic evidence (computer printouts) relied upon by the DRI was inadmissible because it was not accompanied by a formal certificate as mandated by Section 138C(4) of the Customs Act, 1962, a provision analogous to Section 65B of the Indian Evidence Act.

---

Key Arguments in the Supreme Court

The DRI challenged the CESTAT's order before the Supreme Court, arguing:

• For the Revenue (DRI): Senior Counsel Ms. Nisha Bagchi contended that there was "due compliance in substance" with the law. She presented records of proceedings showing that the company's directors and employees were present when the electronic data was accessed and printed. They had signed each page of the printouts, attesting to their authenticity. Furthermore, in their statements recorded under Section 108 of the Customs Act, they explicitly acknowledged these documents, and these statements were never retracted. The DRI cited the Supreme Court's decision in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal , arguing that the mandatory nature of the certification can be satisfied through other means if authenticity is established.

• For the Respondent (Assessee): Counsel Mr. Ashish Batra defended the CESTAT's order, insisting that a formal certificate is a mandatory prerequisite for admitting electronic evidence. He argued that statements made under Section 108 cannot substitute for this statutory requirement. He requested that if the Court were to disagree, the case should be sent back to the Tribunal to decide on other legal grounds that were not previously considered, such as the non-examination of witnesses under Section 138B of the Act.

---

Supreme Court's Analysis: Substance Over Form

The Supreme Court undertook a detailed analysis of Section 138C of the Customs Act and its parallel provision, Section 65B of the Evidence Act. While reaffirming that the certification requirement is mandatory, the Court adopted a pragmatic approach focused on the purpose of the provision—to ensure the authenticity of electronic records.

The bench extracted key portions from the "Record of Proceedings" which detailed how the assessee's own representatives, including Director Nikhil Asrani, were present when data was extracted from hard disks. These records explicitly state that they signed the printouts "as a token of their authenticity."

The Court made a pivotal observation:

"When we say due compliance, the same should not mean that a particular certificate stricto senso in accordance with Section 138C(4) must necessarily be on record. The various documents on record in the form of record of proceedings and the statements recorded under Section 108 of the Act, 1962 could be said to be due compliance of Section 138C(4)of the Act, 1962."

The Court also noted that the statements acknowledging the documents were never retracted, nor was their authenticity disputed during the show-cause proceedings. This conduct reinforced the reliability of the evidence.

---

Final Decision and Its Implications

The Supreme Court allowed the DRI's appeal, setting aside the CESTAT's order. The bench held that the Tribunal had erred in law by discarding the electronic evidence solely on the technical ground of a missing certificate, especially when substantial compliance was evident from the record.

The case has been restored to the CESTAT for a fresh hearing on all other grounds, including the arguments related to Section 138B of the Customs Act. The Supreme Court clarified that its observations were limited to the issue of compliance with Section 138C(4) and should not influence the Tribunal's decision on the other merits of the case.

This judgment serves as an important precedent, clarifying that while the certification of electronic evidence is mandatory, courts can look at the totality of circumstances—including the assessee's own admissions and conduct—to determine if the requirement has been substantially and satisfactorily met.