'Suspicion, Howsoever Grave, Cannot Replace Proof': CESTAT Hyderabad Sets Aside Export Undervaluation Demand

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has held that allegations of export undervaluation and demand of differential duty cannot be sustained in the absence of cogent and admissible evidence establishing receipt of additional consideration, setting aside the order against M/s Temple City Developers Pvt. Ltd. and others.

The Bench comprising Judicial Member Angad Prasad and Technical Member A.K. Jyotishi observed, “While there is no denial that charges of under valuation can be established on the basis of preponderance of probability, but it cannot be based on presumptions and assumptions. Suspicion, how so ever, grave cannot replace proof.”

The case arose from exports of iron ore fines made by the company at a declared FOB value of USD 70 per PDMT. The Department alleged that the actual value was USD 89 per PDMT based on a separate contract between two overseas entities, claiming that the differential amount was received in cash.

Rejecting the allegation, the tribunal noted that there was nothing on record to show the appellant was even a party to the so-called second contract or that it received any amount over and above the declared value in any form. It also pointed out that the export proceeds had come through normal banking channels, in line with the agreed contract price.

Turning to the evidence relied on by the Department, the Tribunal found that emails and computer printouts could not be depended upon in this case, as the mandatory requirements under Section 138C of the Customs Act had not been followed.

It recorded that there was no material to show how such electronic records were retrieved or authenticated, nor any panchanama evidencing their recovery.

The Bench held that “there is lack of mandatory compliance to admit electronic evidence in the form of e-mails, computer print outs etc., in terms of the provisions under Section 138C of Customs Act, 1962.”

The tribunal further noted that while statements recorded under Section 108 of the Customs Act are admissible, they require corroboration through independent evidence, and their reliability is affected where cross-examination is denied or statements are retracted.

In the present case, it found that the Department had relied heavily on such statements without providing cross-examination and without any supporting material.

It observed that "the statements relied upon, in the absence of cross-examination of key persons and lack of any other cogent and admissible corroborative evidence, in the given factual matrix, cannot be a goods evidence to allege that extra or additional consideration has been received by the appellant company, who had exported the consignment”

Finding that the department failed to establish how or to whom the differential amount was paid, the tribunal held that the evidence on record was insufficient and inadmissible to sustain the demand.

Accordingly, the tribunal set aside the impugned order confirming differential duty and penalties, and allowed all appeals.

For Appellant: S.C. Choudhary, Consultant

For Respondent: B. Subhas Chandra Bose, Authorized Representative