Retracted Statement Cannot Simply Be Brushed Aside : CESTAT

The two-member bench of S.K. Mohanty (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and having also made a few payments as per the statement, it cannot lead to self-assessment or self-ascertainment.

The appellant/assessee imported 63 consignments of linen yarn, ramie yarn, and other miscellaneous items from various overseas suppliers, based in China. During the period between 01.08.2014 and 10.11.2016, the appellant filed bills of entry classifying the goods under CTH 53061090 and 53089010. The goods were assessed by the department and ordered for clearance for home consumption in terms of Section 17 of the Customs Act, 1962. On the basis of specific information received, indicating that the appellant indulged in gross undervaluation of the imported goods, the Directorate of Revenue Intelligence (DRI), Zonal Unit, Surat, conducted a detailed investigation into the matter.

The department issued a Show Cause Notice proposing rejection of the declared value of goods in terms of Rule 12 of the Customs Valuation (Determination of Prices of the imported goods) Rules, 2007 (CVR 2007).

The SCN was adjudicated by the Commissioner of Customs, JNCH, Nhava Sheva, by relying on documents, namely, cargo transportation insurance policies, copies of emails, invoices, and statements, etc.

The appellants submitted that other than the contents of the Panchanama, the department has not relied upon any substantial evidence in the form of documents or otherwise to strengthen the case of revenue in support of under-valuation of goods. The statutory requirements have not been complied with by the department as the important aspects regarding the year of manufacture of the computer, model number, and the exact location of the premise where it was kept. The statement was not recorded by the person who operated it, and was not discussed by the lower authorities. There was no whisper in the Panchanama with regard to the description of the CPU, the location in the searched premises where it was installed and the manner in which it was seized. The data obtained from the mail id was contrary to the provisions of Section 138C and, in the absence of the statement recorded from the senders of the e-mails, validity was at stake and cannot be relied upon as tangible evidence to prosecute the appellants.

The appellant submitted that there was no inordinate delay in filing the retraction statement inasmuch as copies of the statements recorded under summon were not furnished by the department immediately after the signing of the summons during the course of investigation. The contents of the statements were made known to the appellant through the RUDs annexed to the SCN dated 05.07.2009. Within reasonable time/nearest opportunity, the retraction letter was filed on 05.09.2019. The retraction made by the appellants needs to be considered as a valuable piece of evidence. The contrary contentions of the department were required to be discarded to achieve the ends of justice.

The department submitted that the Panchanama drawn in this case on 10.11.2016 is the only piece of uncontroverted evidence that has not been disputed by the appellant. The appellant in his statement recorded under summons has stated the detailed modus operandi adopted by the appellant in gross undervaluation of the goods and, for that purpose, has voluntarily made a payment of Rs. 42,00,000 towards the differential duty during the course of investigation. The retraction was made by the appellant almost two and a half years after the first statement and three and a half months after the last statement. This cannot be considered, more so, as the statements were not extracted under threat of arrest.

The CESTAT held that no iota of evidence was submitted by the department regarding the undervaluation of goods. The only credible evidence, according to the department, was the insurance policy taken out by the supplier for the higher value of the goods. The department failed to appreciate that the purpose of the insurance policy was entirely different. The insurance policy had no connectivity with the customs statute, wherein the transaction value alone is to be considered for determination of the duty liability and not otherwise. The corroboration of the data retrieved from the email of the seized computer/CPU lost its evidentiary value as the provisions of Section 138C have not been complied with by the department.

"We find that the department's reliance on retracted statements, documents retrieved from computers without following due procedure as per law, and the arguments on the basis of insurance policies fall flat. Therefore, we are of the considered opinion that the department failed to substantiate the allegations with cogent and legally admissible evidence. Under the circumstances, the benefit should undoubtedly go to the appellants," the tribunal said.

Case Title: Jeen Bhavani International Versus Commissioner of Customs-Nhava Sheva-III

Citation: Customs Appeal No. 85843 of 2020

Dated: 01.08.2022

Counsel For Appellant: Advocate Nisha Bineesh

Counsel For Respondent: Authorized Representative Manoj Das

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