The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has delivered a significant ruling on the admissibility of electronic evidence and statements under the Customs Act, 1962. The Tribunal set aside a demand of differential duty and penalties, emphasizing that electronic evidence, such as emails and computer printouts, must comply with statutory provisions under Section 138C of the Customs Act to be admissible. The judgment underscores the importance of corroborative evidence and the right to cross-examination in customs proceedings.
Background & Facts
The Dispute
The appeals arise from an Order-in-Appeal dated 26.10.2018, wherein the Commissioner of Central Excise & Customs (Appeals), Guntur, confirmed a demand of differential duty amounting to Rs. 43,01,233 and imposed penalties on the appellants. The dispute centers around the alleged mis-declaration of the value of two export consignments of iron ore fines shipped by M/s Temple City Developers Pvt Ltd. (TCDPL) under shipping bills dated 25.07.2013 and 12.08.2013. The declared FOB price was USD 70 per dry metric tonne (PDMT), but the Department alleged that the actual price was USD 89 PDMT based on a second contract between overseas entities.
Key Facts
Contract Details: TCDPL entered into a contract dated 16.07.2013 and an addendum dated 27.09.2013 with M/s Pacific Global Resources Pte Ltd., Singapore (PGRPLS) for the export of iron ore fines at USD 70 PDMT.
Shipping Bills: Two consignments were shipped under shipping bills dated 25.07.2013 and 12.08.2013 per vessels 'M.V. Olympus' and 'M.V. Ruby Halo'.
Second Contract: The Department alleged the existence of another contract (BBSPL/RGPLS/034/13-14 dated 16.07.2013) between M/s Rotomac Global Pte Ltd., Singapore (RGPLS) and M/s Bagadiya Brothers (Singapore) Pte Ltd. (BBSPL) for the same iron ore fines at USD 89 PDMT.
Investigation Findings: The Department claimed that PGRPLS was a dummy entity controlled by RGPLS, and the differential amount of USD 17 PDMT was allegedly repatriated to India in cash and paid to the appellants.
Statements Recorded: Statements under Section 108 of the Customs Act were recorded from Shri Pradeep Kumar Mangaraja (Managing Director of TCDPL), Shri Ranjan Kumar Pattanaik, Shri Sabyasachi Pattanaik, and Shri Manoj Kumar Upadyay (Manager of RGPLS).
Procedural History
16.12.2016: Show Cause Notice issued proposing rejection of declared transaction value and demanding differential duty.
Adjudication: The appellants contested the allegations, arguing lack of corroborative evidence and requesting cross-examination of key witnesses, which was denied.
26.10.2018: Commissioner (Appeals) confirmed the demand and penalties.
2019: Appeals filed before CESTAT, Hyderabad (Appeal Nos. C/30602 & 30183-30185/2019).
04.02.2026: Hearing conducted.
07.04.2026: Final Order pronounced allowing the appeals.
Relief Sought
The appellants sought the setting aside of the impugned order, quashing of the demand of differential duty, and the penalties imposed on the grounds of:
Lack of admissible evidence to prove receipt of additional consideration.
Non-compliance with statutory provisions for admitting electronic evidence.
Denial of the right to cross-examination, violating principles of natural justice.
The Legal Issue
The central question before the Tribunal was whether the Department had adduced sufficient and admissible evidence to establish that the appellants had:
Mis-declared the export value under a dummy contract.
Received additional consideration in cash over and above the declared FOB price.
Whether the reliance on statements under Section 108 and electronic evidence without compliance with Section 138C of the Customs Act was legally tenable.
Arguments Presented
For the Appellant
Lack of Corroborative Evidence: The statements relied upon by the Department were not corroborated by independent evidence and were retracted during adjudication.
Denial of Cross-Examination: The Adjudicating Authority denied the appellants' request to cross-examine key witnesses, including Shri Manoj Kumar Upadyay, whose statements formed the basis of the allegations.
Inadmissibility of Electronic Evidence: The Department failed to comply with Section 138C of the Customs Act, which mandates procedural safeguards for admitting electronic evidence. Reliance was placed on SN Agrotech v. Commissioner of Customs, New Delhi [2018 (361) ELT 761 (Tri-Del)].
No Proof of Cash Receipt: There was no evidence to establish that the appellant company received any amount over and above the contracted price of USD 70 PDMT.
Bias of Department: The Department did not take action against other involved parties, such as M/s RGPLS and Shri Manoj Kumar Upadyay, indicating bias.
For the Respondent
Statements as Substantive Evidence: Statements recorded under Section 108 of the Customs Act are admissible as substantive evidence, and retraction at a later stage is an afterthought.
Sufficiency of Evidence: The e-mails and statements were sufficient to establish that the actual contract price was USD 89 PDMT, and the declared FOB price of USD 70 PDMT was a mis-declaration.
No Need for Mathematical Precision: The Department is not required to prove its case with mathematical precision, as held in Collector of Customs, Madras v. D. Bhoormull [1983 (13) ELT 1546 (SC)].
Case Laws on Retraction: Retraction of statements alleging duress or torture, if made months later, does not invalidate the statements, as held in MD Akhtar v. Commissioner of Central Excise, Customs & Service Tax [2015 (323) ELT 136 (Patna)] and Romesh Chandra Mehta v. State of West Bengal [1999 (110) ELT 324 (SC)].
The Court's Analysis
The Tribunal conducted a detailed analysis of the evidence and legal principles governing the admissibility of statements and electronic evidence under the Customs Act, 1962.
"The crux of the issue is whether the appellants had exported iron ore at lower FOB value in terms of a dummy contract and also received higher consideration over and above the contracted value in cash from the buyer of the consignment."
Existence of Buyer: The Tribunal noted that there was no concrete evidence to establish that M/s PGRPLS was a dummy company. The appellants had exported the consignments to PGRPLS and received payments through proper banking channels, as evidenced by the Bank Realization Certificate (BRC).
Lack of Corroboration: The statements relied upon by the Department lacked corroboration through independent evidence. The Tribunal observed that the Department failed to examine key persons, such as Shri Nihar Satpathy, who negotiated the contract with PGRPLS.
Retraction of Statements: While the Tribunal agreed that retraction of statements at a late stage could be an afterthought, it noted that the Adjudicating Authority did not provide detailed reasons for rejecting the retractions.
Inadmissibility of Electronic Evidence: The Tribunal held that the Department failed to comply with Section 138C of the Customs Act, which prescribes procedural safeguards for admitting electronic evidence. There was no panchanama or recovery proceedings to establish how the e-mails and documents were obtained. The Tribunal relied on SN Agrotech v. Commissioner of Customs, New Delhi [2018 (361) ELT 761 (Tri-Del)] and distinguished the judgment in Additional Director General, Adjudication v. S.K. and Company Pvt Ltd. [2025 (9) TMI 76 (SC)], where compliance with Section 138C(4) was established.
"We find that it is the settled position that unless there is a compliance with the provisions under Section 138C of Customs Act, reliance cannot be placed on e-mails or other electronic evidence."
Denial of Cross-Examination: The Tribunal emphasized that the denial of cross-examination of key witnesses, such as Shri Manoj Kumar Upadyay, vitiated the proceedings. It relied on Commissioner of Central Excise, Delhi-II v. Balajee Perfumes [2017 (358) ELT 87 (Del)], wherein the Delhi High Court held that denial of cross-examination renders statements unreliable in the absence of corroboration.
Lack of Evidence on Cash Receipt: The Tribunal noted that there was no evidence to establish how the differential amount was paid, to whom, and by whom. The appellant company had received payments only as per the contracted price of USD 70 PDMT.
No Reassessment of Shipping Bills: The Department did not reopen or reassess the shipping bills before demanding differential duty, despite finalizing them based on the BRC and other documents submitted by the appellant.
The Verdict
The Tribunal allowed the appeals and set aside the impugned order dated 26.10.2018. The key holdings were:
The Department failed to establish that the appellants received additional consideration over and above the declared FOB price of USD 70 PDMT.
The reliance on statements under Section 108 and electronic evidence without compliance with Section 138C of the Customs Act was inadmissible.
The denial of cross-examination of key witnesses violated principles of natural justice and rendered the evidence unreliable.
The demand of differential duty of Rs. 43,01,233 and the penalties imposed on the appellants were quashed.
What This Means For Similar Cases
Compliance with Section 138C Is Mandatory for Electronic Evidence
Practitioners must ensure that electronic evidence, such as e-mails and computer printouts, is admitted in compliance with Section 138C of the Customs Act. Failure to follow procedural safeguards, such as panchanama for recovery of documents, renders such evidence inadmissible.
The judgment reinforces that electronic evidence cannot be relied upon solely based on statements or printouts without establishing its authenticity and compliance with statutory provisions.
Right to Cross-Examination Is Non-Negotiable
The denial of cross-examination of key witnesses, whose statements form the basis of allegations, vitiates the proceedings and violates principles of natural justice.
Courts and tribunals are likely to set aside orders where cross-examination is denied without valid reasons, especially when the case hinges on the testimony of witnesses.
Corroboration of Statements Is Essential
Statements recorded under Section 108 of the Customs Act require corroboration through independent evidence. Suspicion or grave allegations cannot replace proof.
The judgment highlights that retracted statements, especially when made at a late stage, must be corroborated by reliable independent material to be admissible as substantive evidence.
