S. 108 Statements Inadmissible Without Compliance With S. 138B Safeguards: CESTAT Quashes Customs Valuation Order

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside an order passed by the Principal Commissioner of Customs rejecting the declared transaction value of imported goods and imposing penalties, holding that statements recorded under Section 108 of the Customs Act cannot be relied upon unless the mandatory procedure under Sections 138B and 138C of the Customs Act is strictly followed. The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the adjudicating authority had recorded a finding of compliance based solely on statements recorded under Section 108. However, those statements had been retracted, and no independent evidence such as a proper panchnama or statutory certification under Section 138C(4) was produced. The dispute related to the import of furniture and furniture parts, where the customs authorities rejected the declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, read with Section 14 of the Customs Act, 1962. The value was subsequently re-determined under Rule 3, and penalties were imposed under Sections 112(a)(ii) and 114AA of the Customs Act. The Principal Commissioner relied heavily on statements recorded from the appellants under Section 108 of the Customs Act to conclude that the imports were mis-declared and undervalued. These statements, however, were later retracted by the appellants in their replies to the show cause notice. The Tribunal examined whether the statements recorded under Section 108 could be treated as relevant evidence without following the procedure prescribed under Section 138B of the Customs Act. It noted that Section 138B mandates a two-step process when such statements are sought to be relied upon in adjudication proceedings. First, the person who made the statement must be examined as a witness before the adjudicating authority. Second, the authority must record an opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. Only after this determination can the affected party be granted an opportunity of cross-examination. The Tribunal observed that none of these mandatory steps were followed in the present case. Relying on a consistent line of judicial precedents, including decisions of the Punjab and Haryana High Court, Chhattisgarh High Court, and the Delhi High Court, the Bench reiterated that compliance with Section 138B is mandatory and not merely procedural. It further noted that statements recorded during investigation have the potential to be obtained under coercion or compulsion, which is precisely why Parliament introduced statutory safeguards before such statements can be relied upon. The Revenue placed reliance on an earlier CESTAT decision to justify the use of Section 108 statements. However, the Tribunal distinguished that ruling, observing that the provisions of Section 138B had not been brought to the notice of the Bench in that case. As a result, the evidentiary requirements under the Customs Act were not examined in that decision. The Tribunal therefore declined to follow that precedent and reaffirmed the binding nature of the statutory safeguards. The Tribunal also examined whether the requirements of Section 138C of the Customs Act, dealing with admissibility of electronic records and computer printouts, had been satisfied. Referring to the Supreme Court’s ruling in Suresh Kumar and Co. Impex Pvt. Ltd., the Tribunal observed that while strict formal certificates may not always be required, some form of reliable and unretracted evidence must exist to establish compliance. In the present case, the Tribunal found that such compliance was entirely absent. The Tribunal held that the declared value of the goods could not have been rejected and re-determined. Consequently, the imposition of penalties under Sections 112 and 114AA was also found to be unsustainable. Case Details Case Title: Aditya Gupta Versus Principal Commissioner of Customs (Import) Case No.: CUSTOMS APPEAL NO. 50293 OF 2024 Date: 20.01.2026 Counsel For Appellant: A.K. Seth Counsel For Respondent: Nikhil Mohan Goyal Click Here To Read Order Read More: Service Tax Demand Invalid If Classification Goes Beyond SCN: CESTAT

S. 108 Statements Inadmissible Without Compliance With S. 138B Safeguards: CESTAT Quashes Customs Valuation Order

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