CESTAT Rejects Email Printouts Evidence-Based Undervaluation Allegations Against Bags Importer Due to Non-Compliance With S. 138C [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside customs duty demand and penalties against a bags importer after finding that the department relied upon e-mail printouts and electronic records without complying with the mandatory requirements under Section 138C of the Customs Act, 1962.

Bhaijaan Stores, the appellant, was engaged in import of different varieties of bags and PVC leather cloth from China through Mumbai and Nhava Sheva ports. The Directorate of Revenue Intelligence (DRI) initiated investigation alleging undervaluation of imported goods in connivance with overseas suppliers, manufacturers and commission agents.

During investigation, the department conducted searches at the premises of Bhaijaan Stores and Winsor Enterprises. Various documents, computer printouts and e-mail printouts were recovered and relied upon by the department to allege that the importer had declared lower values before customs authorities. Statements of the partners and other persons were also recorded during investigation.

Based on the investigation, the department issued show cause notice demanding differential customs duty along with confiscation and penalties. The adjudicating authority confirmed the demand and imposed penalties on Bhaijaan Stores and its partners Junaid Kudia and Sadik Kudia. The Commissioner (Appeals) also upheld the order.

The appellant’s counsel argued that the entire case was based mainly on statements and electronic evidence in the form of e-mail printouts and computer records. They argued that the statements were recorded under pressure and later retracted. The counsel further argued that the electronic records could not be admitted as evidence because the department failed to comply with Section 138C of the Customs Act, which prescribes mandatory conditions for admissibility of electronic evidence.

The revenue counsel argued that the e-mail printouts recovered during investigation clearly established undervaluation of imported goods and supported the department’s case.

The two-member bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) observed that the same investigation and similar set of evidence had already been examined in connected matters relating to Plastic Cottage Trading Co. and Winsor Enterprises, where the tribunal had held that the allegations of undervaluation were unsustainable.

The tribunal explained that under Section 138C of the Customs Act, electronic records and computer printouts can be admitted as evidence only when the statutory conditions and certification requirements are fulfilled. The tribunal observed that no proper certificate under Section 138C was prepared at the time of seizure of electronic records.

The tribunal also pointed out that retracted statements alone cannot form the basis for confirming undervaluation allegations unless supported by independent corroborative evidence. It observed that the department failed to establish any evidence showing payment of excess money over and above the declared invoice value to overseas suppliers or their agents.

The tribunal set aside the differential duty demand, confiscation and penalties imposed on Bhaijaan Stores and its partners and allowed the appeals with consequential relief.

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