CESTAT Delhi Sets Aside Undervaluation Finding in Furniture Imports

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 27.01.2026

CESTAT Delhi Sets Aside Undervaluation Finding in Furniture Imports

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) recently delivered a significant judgment in the case of Ajanta Overseas vs. Principal Commissioner of Customs (Import), which has far-reaching implications for the interpretation and application of Sections 138B and 138C of the Customs Act, 1962. This blog aims to provide a detailed analysis of the case, the legal provisions involved, and the final decision.

Background of the Case

The case arose from an appeal filed by Ajanta Overseas against the order dated December 3, 2020, passed by the Commissioner of Customs (Appeals). ​ The Commissioner had rejected the declared value of imported goods under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and re-determined the value under Rule 3. ​ The rejection was based on allegations of undervaluation and misdeclaration of furniture and furniture parts imported by the appellant. ​

The allegations stemmed from an investigation conducted by the Directorate of Revenue Intelligence (DRI), which claimed that several importers had formed a cartel to evade customs duty. ​ The evidence relied upon by the Commissioner (Appeals) included printouts of emails and statements recorded under Section 108 of the Customs Act. ​

Key Legal Provisions Examined

Section 108 of the Customs Act ​

Section 108 empowers Gazetted Officers of Customs to summon individuals to provide evidence or produce documents during an inquiry. ​ Statements recorded under this section are often used as evidence in adjudication proceedings. ​

Section 138B of the Customs Act ​

Section 138B outlines the conditions under which statements recorded under Section 108 can be considered relevant and admissible as evidence. ​ It mandates that:

1. The person who made the statement must be examined as a witness before the adjudicating authority. ​
2. The adjudicating authority must form an opinion that the statement should be admitted in evidence in the interest of justice. ​
3. The person against whom the statement is made must be given an opportunity to cross-examine the witness. ​

Failure to comply with these mandatory provisions renders the statements inadmissible as evidence. ​

Section 138C of the Customs Act ​

Section 138C deals with the admissibility of microfilms, facsimile copies, and computer printouts as evidence. ​ It specifies conditions under which such documents can be deemed admissible, including the requirement of a certificate identifying the document and describing how it was produced. ​

Key Issues in the Case

The appeal was heard on two primary issues:

1. Whether the statements recorded under Section 108 of the Customs Act could be considered relevant if the procedure under Section 138B was not followed. ​
2. Whether the printouts of emails could be relied upon in the absence of compliance with Section 138C of the Customs Act. ​

Tribunal’s Observations

Section 138B Compliance ​

The Tribunal emphasized that the provisions of Section 138B are mandatory. It noted that the Commissioner (Appeals) had relied on statements recorded under Section 108, but these statements were retracted by the appellant. ​ The Tribunal referred to several precedents, including M/s Surya Wires Pvt. ​ Ltd. vs Principal Commissioner, CGST, Raipur and Ambika International vs. Union of India, which highlighted the importance of following the procedure under Section 138B. ​ The Tribunal reiterated that statements recorded during investigations have a high likelihood of being made under coercion or compulsion, and the safeguards provided under Section 138B are designed to ensure fairness and justice. ​

Section 138C Compliance ​

The Tribunal also examined the provisions of Section 138C, which require specific conditions to be met for computer printouts and other electronic evidence to be admissible. ​ In this case, the Commissioner (Appeals) failed to record any findings regarding compliance with Section 138C. ​ The Tribunal noted that there was no certificate under Section 138C to validate the printouts of the emails, nor was there any evidence of a Panchnama being drawn regarding these printouts. ​ As a result, the Tribunal held that the printouts could not be relied upon. ​

Final Decision

The Tribunal concluded that the Commissioner (Appeals) had erred in relying on the statements recorded under Section 108 and the email printouts without ensuring compliance with Sections 138B and 138C of the Customs Act. Consequently, the Tribunal set aside the impugned order dated December 3, 2020, and allowed the appeal filed by Ajanta Overseas. ​

Key Takeaways

1. Mandatory Compliance with Section 138B: The judgment underscores the importance of adhering to the procedure outlined in Section 138B for admitting statements recorded under Section 108 as evidence. ​ Failure to comply with these provisions renders such statements inadmissible. ​
2. Admissibility of Electronic Evidence: Section 138C provides specific conditions for the admissibility of electronic evidence, such as computer printouts. ​ Without proper certification and compliance with the section, such evidence cannot be relied upon. ​
3. Safeguards Against Coercion: The Tribunal highlighted the rationale behind the mandatory provisions of Sections 138B and 138C, emphasizing the need to prevent the use of statements or evidence obtained under coercion or compulsion. ​
4. Precedents Matter: The Tribunal relied heavily on previous judgments, including Ambika International vs. Union of India and M/s Surya Wires Pvt. ​ Ltd., to reinforce its decision. This demonstrates the importance of judicial precedents in interpreting statutory provisions.

Conclusion

The decision in Ajanta Overseas vs. ​ Principal Commissioner of Customs (Import) serves as a reminder of the importance of adhering to procedural safeguards in customs and excise adjudication proceedings. It highlights the need for strict compliance with Sections 138B and 138C of the Customs Act to ensure that evidence is admissible and that justice is served. This case will undoubtedly serve as a benchmark for future cases involving similar issues.

Source: CESTAT Delhi

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