Bangalore DRI | Retraction of Statement, Unverified Electronic Invoices Can’t Justify Customs Undervaluation Demand: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench has set aside the differential duty demand, holding that a retracted statement recorded under Section 108 of the Customs Act and unverified electronic invoices cannot form the sole basis for alleging undervaluation. The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the soft copies of invoices downloaded from the laptop of the Appellant are not admissible as evidences as the proprietor of the Appellant has retracted his statement while giving reply to the show cause notice. The dispute arose from intelligence developed by the Directorate of Revenue Intelligence (DRI), Bengaluru Zonal Unit, alleging undervaluation of architectural gypsum moulding products imported from Malaysia. Following searches in December 2013, officials seized documents and a laptop. Authorities rejected the declared transaction value and confirmed the differential duty of ₹21,74,678 under Section 28(4) of the Customs Act, 1962; confiscation of goods valued at over ₹1.32 crore; redemption fine of ₹2 lakh and penalties under Sections 114A and 114AA The first appellate authority had upheld the order, leading to the present appeal. The Tribunal framed multiple issues, but the central question was whether undervaluation could be sustained on the basis of a statement recorded in English from a proprietor who claimed limited education and subsequently retracted the statement; and soft copies of invoices recovered from a seized laptop, without strict compliance with Section 138C governing electronic evidence. The Tribunal noted that the statement was recorded in English from a person who had studied only up to the third standard in an Urdu-medium school. It held that there was no proof that the contents were explained in a language understood by the deponent. A handwritten endorsement in English stating that the statement was “correctly typed” was insufficient to establish voluntariness. The bench concluded that such a statement could not be legally relied upon. The department relied on two soft-copy invoices allegedly retrieved from the seized laptop to show higher pricing. However, the Tribunal found serious flaws including that one invoice was dated after the relevant imports; Invoice dates did not match those declared in the Bills of Entry; the statement admitting these documents had been retracted; and compliance with Section 138C of the Customs Act was not properly established. The Tribunal held that once the Section 108 statement was retracted, the electronic documents could not automatically be treated as admissible evidence without independent statutory compliance. Although Rule 12 of the Customs Valuation Rules, 2007 allows authorities to question declared value based on higher contemporaneous imports, the Tribunal found worksheets provided only Bill of Entry numbers and importer names for most items. Product descriptions and comparability details were missing. Commercial factors such as quantity, quality, discounts, and contractual terms were not examined. Except for two specific items where limited description was provided, the department failed to establish valid comparability. The importer had produced local sale invoices showing resale prices in India. The Tribunal criticized the lower authorities for assuming, without evidence, that goods may have been sold at a loss. It held that resale evidence supporting the declared value cannot be ignored without proper examination, especially when the department fails to rebut it. The Tribunal ruled in favour of the importer and held that the declared transaction value could not be rejected on the material relied upon. The differential duty demand of ₹21.74 lakh was unsustainable. Confiscation, redemption fine, and penalties were liable to be set aside. Case Details Case Title: M/s. Junaid Interior Design Versus Commissioner of Customs Citation: JURISHOUR-197-CESTAT-2026(Chen) Case No.: Customs Appeal No. 40040 of 2017 Date: 03.03.2026 Counsel For Appellant: M. Punnagai, Advocate Counsel For Respondent: Anandalakshmi Ganeshram, Authorised Representative Click Here To Read Order Read More: Excise Duty Payable Once Electricity Generated Out Of Duty-Free Furnace Oil Moved From EOU To DTA unit: CESTAT

Bangalore DRI | Retraction of Statement, Unverified Electronic Invoices Can’t Justify Customs Undervaluation Demand: CESTAT

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