ALO Law Office- IDT Tax I Arbitration I Litigation
Date:21.01.2026
CESTAT Delhi Sets Aside Customs Undervaluation Order for Non-Compliance with Sections 138B & 138C
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment on January 20, 2026, in the case of Aashna Mercantile Pvt. Ltd. & Others vs. β Principal Commissioner of Customs (Import). β This case revolved around allegations of misdeclaration and undervaluation of imported goods, leading to the imposition of differential duty and penalties under the Customs Act, 1962. β The judgment, which set aside the impugned order dated April 23, 2020, has brought to light critical aspects of the Customs Act, particularly sections 108, 138B, and 138C.
Background of the Case
The appeals were filed by Aashna Mercantile Pvt. β Ltd. and four co-noticeesβAppellantsβchallenging the order passed by the Principal Commissioner of Customs, ICD-TKD, New Delhi. β The order was based on two show-cause notices issued in 2017 and 2018, alleging misdeclaration and undervaluation of imported furniture and furniture parts. β The Principal Commissioner had relied on statements recorded under section 108 of the Customs Act and invoices retrieved from the email of the supplier to confirm the demand for differential duty and impose penalties under sections 112, 114A, and 114AA of the Customs Act.
Key Legal Issues Addressed
The Tribunal focused on two critical legal provisions of the Customs Act:
1. Section 138B: Relevancy of Statements β
Section 138B outlines the conditions under which statements recorded under section 108 of the Customs Act can be considered relevant evidence. β The Tribunal emphasized that such statements are admissible only if:
- The person who made the statement is examined as a witness before the adjudicating authority. β
- The adjudicating authority forms an opinion that the statement should be admitted in evidence in the interest of justice. β
- The person against whom the statement is made is given an opportunity to cross-examine the witness. β
The Tribunal highlighted that these provisions are mandatory and must be strictly followed. β Failure to comply with this procedure renders the statements inadmissible as evidence. β In this case, the appellants had retracted their statements made under section 108, and the adjudicating authority did not follow the mandatory procedure under section 138B. β As a result, the Tribunal ruled that the statements could not be relied upon to reject the transaction value or impose penalties. β
2. Section 138C: Admissibility of Computer Printouts β
Section 138C deals with the admissibility of microfilms, facsimile copies, and computer printouts as evidence. β The provision requires specific conditions to be met, including the issuance of a certificate identifying the document and verifying its authenticity. β The Tribunal noted that the Principal Commissioner had relied on emails and invoices retrieved from the supplier’s email without ensuring compliance with section 138C. β There was no evidence of a Panchnama being drawn for the printouts, nor was there a certificate as required under section 138C. β Consequently, the Tribunal held that the emails and invoices could not be relied upon as evidence. β
Precedents Cited
The Tribunal referred to several landmark judgments to support its decision, including:
- M/s Surya Wires Pvt. β Ltd. vs Principal Commissioner, CGST, Raipur (2025): This case emphasized the mandatory nature of section 138B and the need for cross-examination of witnesses before admitting statements as evidence. β
- Ambika International vs. Union of India (2016): The Punjab and Haryana High Court highlighted the importance of following the procedure under section 9D of the Central Excise Act, which is similar to section 138B of the Customs Act.
- Hi Tech Abrasives Ltd. vs. Commissioner of C. Ex. β & Cus., Raipur (2018): The Chhattisgarh High Court reiterated the mandatory nature of section 9D and the need for strict compliance. β
- Additional Director General (Adjudication) vs. Its My Name Pvt. β Ltd. (2020): The Delhi High Court held that statements recorded under section 108 of the Customs Act must undergo the process outlined in section 138B before being considered relevant. β
- Additional Director General, Adjudication, Directorate of Revenue Intelligence vs. Suresh Kumar and Co. Impex Pvt. β Ltd. & Ors. (2025): The Supreme Court discussed the compliance requirements under section 138C and the evidentiary value of statements recorded under section 108. β
Tribunal’s Final Decision β
After a detailed examination of the legal provisions and precedents, the Tribunal concluded that the Principal Commissioner had failed to comply with the mandatory requirements of sections 138B and 138C of the Customs Act. β The statements recorded under section 108 and the emails retrieved from the supplier’s account were deemed inadmissible as evidence. β Consequently, the Tribunal set aside the impugned order dated April 23, 2020, and allowed all five appeals. β
Implications of the Judgment
This judgment underscores the importance of adhering to procedural requirements under the Customs Act when relying on statements and electronic evidence in adjudication proceedings. β It serves as a reminder to authorities that failure to comply with mandatory provisions can lead to the rejection of evidence and the setting aside of orders. β For importers and businesses, this case highlights the significance of understanding their rights under the law, particularly the right to cross-examine witnesses and challenge the admissibility of evidence. β
Conclusion
The CESTAT’s decision in Aashna Mercantile Pvt. Ltd. & Others vs. β Principal Commissioner of Customs is a landmark ruling that reinforces the importance of procedural compliance in customs adjudication. By setting aside the impugned order, the Tribunal has upheld the principles of natural justice and due process, ensuring that appellants are not penalized based on inadmissible evidence. This case will undoubtedly serve as a precedent for future disputes involving the admissibility of statements and electronic evidence under the Customs Act.
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Source: CESTAT Delhi
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