CESTAT Quashes Customs duty on Silk Fabric Imports, Rules Non-Return of Seized Laptop Violates Natural Justice and Remits Matter [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside an order demanding differential customs duties and penalties on silk fabric imports and ruled that the department's failure to return a seized laptop used as evidence constituted a clear violation of the principles of natural justice.

Francis Goel, the proprietor of M/s Tek Chand International (appellant) was accused of resorting to both under-valuation and over-valuation of silk fabrics imported from China to evade customs and anti-dumping duties. Following an investigation by the Directorate of Revenue Intelligence (DRI), a laptop belonging to the appellant was seized from a residential premises.

The Revenue Department issued a Show CauseNotice (SCN) in February 2009, demanding differential duty amounting to ₹1,88,90,986. The department’s allegations were primarily based on partial data retrieved from the seized laptop and statements recorded from the appellant.

During the adjudication proceedings, the appellant made repeated requests for the return of the laptop and non-relied-upon documents to prepare an adequate defense. Despite these requests, the laptop was never returned, and the adjudicating authority passed an ex-parte order confirming the demands.

The appellant argued that the non-return of the laptop prevented them from furnishing a proper response. It was also argued that the data retrieved from the laptop was inadmissible as the mandatory certificate under Section 138C of the Customs Act, 1962 (pertaining to electronic evidence) was not provided.

The appellant also highlighted that the department selectively relied on only 8 out of 36 pages found in the laptop.

The bench comprising M. Ajit Kumar (Technical Member) and Ajayan T.V. (Judicial Member), observed that it is not for the authority to decide if requested documents were necessary for a defense.

The tribunal highlighted that CBEC Circulars explicitly direct that all un-relied-upon documents must be returned within 15 days of issuing an SCN.

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The tribunal observed that non-return of such records, even if not directly relied upon by the Revenue, constitutes violation of natural justice. The tribunal observed that the appellant's right to an effective defense was severely violated by the department's "unexplained" retention of the evidence.

The tribunal concluded that the matter required a fresh consideration. It directed the authorities to return the laptop and non-relied-upon documents within 30 days. It further directed the authorities to allow the appellant 60 days to file a revised reply and evidence after receiving the items.

The tribunal set aside the original order. The appeal of the appellant was allowed in terms of remand.

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