Customs Tribunal Overturns Duty Demand in KDS Exports Case

Lack of Certification and Questions on Data Authenticity Lead to Reversal of Customs Adjudication  

In a significant judgment, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi Principal Bench, has set aside the duty demands and penalties imposed on KDS Exports and others by the Commissioner of Customs (ICD), New Delhi. The judgment, delivered by Dr. Rachna Gupta and Mr. P.V. Subba Rao, focused on the evidentiary value of electronic data retrieved during an investigation, which was deemed unreliable due to procedural lapses.

The case revolved around the import of artificial flowers from China between 2002 and 2006. During this period, the proper officer had assessed the Bills of Entry based on contemporaneous international trade values, rejecting the invoice values submitted by the importers. However, the Directorate of Revenue Intelligence (DRI) later alleged undervaluation based on data retrieved from unsealed CPUs seized during the investigation.

The Tribunal noted the absence of a certification under Section 139C of the Customs Act, 1962, which is crucial for the admissibility of electronic data as evidence. Furthermore, the CPUs were unsealed for 47 days, raising doubts about the authenticity of the data retrieved. The Tribunal concluded that the values determined by the proper officer during the assessment, based on contemporaneous trade values, were appropriate and sustainable.

The judgment emphasized that the Customs Act during the relevant period required assessment based on the price at which goods were ordinarily sold in the course of international trade. The Tribunal found no provision allowing the DRI to reject the values assessed by the proper officer and substitute them with values from allegedly real invoices.

The Tribunal's decision is a significant win for the appellants, including KDS Exports, Gokul Overseas, Krish Enterprises, and others, and highlights the importance of procedural correctness and evidence authenticity in customs adjudication.

Bottom Line:

Customs Law - Re-determination of value based on data retrieved from unsealed and forensically analyzed CPU during investigation cannot be sustained due to lack of certification under Section 139C of the Customs Act, 1962 and questions surrounding authenticity of retrieved data.

Statutory provision(s): Section 14, Section 139C, Section 110, Section 111 of the Customs Act, 1962

KDS Exports v. Commissioner of Customs (ICD) New Delhi, (CESTAT)(New Delhi)(Principal Bench) : Law Finder Doc Id # 2804954