CESTAT Chennai Quashes Customs Order Over Coerced Statements and Invalid Valuation

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 21.03.2026

CESTAT Chennai Quashes Customs Order Over Coerced Statements and Invalid Valuation

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Chennai Regional Bench, recently delivered a significant judgment on Customs Appeal No. ​ 40724 of 2024 and related appeals. ​ The case revolved around allegations of undervaluation, misdeclaration, and misuse of Importer Exporter Codes (IECs) by the appellant, and other co-appellants. ​ The judgment, pronounced on March 19, 2026, by Hon’ble Justice and Hon’ble Member – Technical, set aside the impugned order passed by the Commissioner of Customs, Chennai-II, and allowed all five appeals. ​

Background of the Case

The case originated from an order dated June 11, 2024, issued by the Commissioner of Customs, Chennai-II, which rejected the declared value of imported goods under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007). ​ The Commissioner re-determined the value under Rule 9 of the CVR, 2007, and imposed penalties and interest under Sections 114A and 114AA of the Customs Act, 1962. ​ The goods were imported through Chennai Port, Nhava Sheva Port, Mumbai, and Kolkata Port, allegedly using dummy IECs controlled by the appellant. ​

The appellant, Mr. Sachdeva, challenged the order, claiming that the statements used against him were obtained under coercion and physical abuse by the Directorate of Revenue Intelligence (DRI) officers. ​ He also argued that the rejection of declared value and re-determination of the value were based on inadmissible evidence. ​

Key Allegations Against the Appellant

1. Undervaluation of Imported Goods: The appellant allegedly declared only 50% of the actual value of imported goods and sent the remaining amount through hawala channels. ​
2. Misuse of Dummy IECs: The appellant was accused of using proxy IECs to import goods and evade customs duties. ​
3. Fabrication of Invoices: The appellant was alleged to have submitted manipulated invoices to customs authorities, which did not match the actual transaction value of the imported goods. ​

Appellant’s Defense

The appellant, represented by Advocate, denied all allegations and presented the following arguments:

1. Coercion and Physical Abuse: The appellant claimed that his statements were obtained under duress, physical assault, and psychological pressure by DRI officers. ​ Medical reports from Tihar Jail and Deen Dayal Upadhyay Hospital corroborated his claims, documenting multiple bruises and injuries. ​
2. Retraction of Statements: The appellant retracted his statements recorded under Section 108 of the Customs Act, stating they were involuntary and obtained through coercion. ​ The retraction was submitted to the Chief Metropolitan Magistrate immediately after the alleged forced statement. ​
3. Inadmissibility of Evidence: The appellant argued that the statements recorded under Section 108 of the Customs Act could not be considered relevant unless the procedure under Section 138B of the Customs Act was followed, which was not done. ​
4. Manipulation of Emails: The appellant contended that the DRI officers used his email account and Wi-Fi connection to send emails and fabricate evidence during his custody. ​

Key Findings of the Tribunal ​

After hearing arguments from both sides, the Tribunal made the following observations:

1. Statements Recorded Under Coercion: The Tribunal found that the appellant’s claims of physical and psychological abuse were supported by medical reports from Tihar Jail and Deen Dayal Upadhyay Hospital. ​ The statements recorded under Section 108 of the Customs Act were deemed involuntary and inadmissible. ​
2. Non-Compliance with Section 138B: The Tribunal emphasized that statements recorded under Section 108 of the Customs Act cannot be considered relevant unless the procedure under Section 138B is followed. ​ This includes examining the person who made the statement as a witness and providing an opportunity for cross-examination. ​
3. E-mails and Attachments: The Tribunal noted that the emails and attachments relied upon by the Commissioner were received while the appellant was in DRI custody, and the laptop was in the possession of DRI officers. ​ The Tribunal found no justification for considering these emails as valid evidence. ​
4. Rejection of Transaction Value: The Tribunal held that the rejection of the declared transaction value under Rule 12 of the CVR, 2007, was not sustainable as it was based on inadmissible evidence. ​
5. Re-determination of Value: The Tribunal found that the re-determination of value under Rule 9 of the CVR, 2007, was based on unreliable evidence, including purported price lists and parallel invoices that lacked authenticity.

Final Judgment

The Tribunal set aside the impugned order dated June 11, 2024, and allowed all five appeals. The demand for differential duty, interest, and penalties imposed on the appellant and co-appellants were quashed. ​ The Tribunal emphasized the importance of adhering to the mandatory provisions of the Customs Act, particularly Sections 108 and 138B, to ensure fair and just adjudication. ​

Significance of the Judgment

This landmark judgment underscores the importance of following due process in customs investigations and adjudications. ​ It highlights the need for transparency, impartiality, and adherence to legal procedures to prevent misuse of authority and ensure justice. The Tribunal’s decision serves as a reminder that evidence obtained through coercion or without following mandatory legal provisions cannot be relied upon in adjudication proceedings. ​

This case also sheds light on the complexities of customs valuation and the importance of maintaining the integrity of the process. ​ It reinforces the principle that transaction values cannot be arbitrarily rejected or re-determined without valid and admissible evidence. ​

Conclusion

The CESTAT Chennai’s judgment in Customs Appeal No. ​ 40724 of 2024 and related appeals is a significant development in the realm of customs law. ​ It not only provides clarity on the admissibility of evidence under the Customs Act but also sets a precedent for ensuring fair and lawful adjudication processes. ​ This case serves as a crucial reference for legal practitioners, importers, and customs authorities in understanding the nuances of customs valuation and the importance of adhering to statutory provisions.

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Source: CESTAT Chennai

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