CESTAT sets aside ₹10.22 crore customs demand, holding electronic evidence inadmissible without statutory certification.

May 14, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has set aside a customs duty demand of over ₹10.22 crore raised against Delhi-based importer M/s Uttam Steel Alloys Pvt. Ltd., holding that electronic evidence such as WhatsApp chats, hard disk data and computer printouts could not be relied upon in the absence of the mandatory certification required under the Customs Act. The Tribunal also ruled that customs authorities could not disregard valid Certificates of Origin (COO) without undertaking the verification process prescribed under law.

The dispute arose from an investigation conducted by the Directorate of Revenue Intelligence (DRI), which alleged that Uttam Steel Alloys had improperly availed concessional customs duty benefits under Notification No. 46/2011-Customs by routing Chinese-origin Cold Rolled Stainless Steel (CRSS) coils through countries such as Malaysia, Hong Kong, Indonesia and the UAE. The department claimed that the company had used questionable Certificates of Origin to secure preferential tariff treatment under the ASEAN-India Free Trade Agreement framework and had also undervalued imported goods.

Following searches conducted in May 2023, the DRI seized electronic devices, including a laptop, iPhone and hard disk, and relied heavily on data allegedly extracted from these devices. The investigation further relied on statements recorded from the company’s director, Puneet Kumar, as well as a statement of another individual, Sanjay Jain, recorded in a separate customs case. Based on this material, customs authorities concluded that several imports declared as originating from Malaysia, Indonesia and other countries were actually of Chinese origin and that the declared import values were understated. Consequently, a demand of differential customs duty amounting to ₹10.22 crore was confirmed, along with an equivalent penalty under Section 114A of the Customs Act, 1962.

Challenging the order, the appellants argued that the entire case was built upon inadmissible electronic evidence. They contended that the forensic examination of electronic devices was not properly conducted in their presence and, more importantly, that no certificate under Section 138C(4) of the Customs Act, 1962, or Section 65B of the Indian Evidence Act, 1872, had been furnished. According to the appellants, electronic records such as printouts of WhatsApp conversations, invoices and other digital documents could not be admitted as evidence without strict compliance with statutory requirements.

The Tribunal accepted this contention and held that the Customs Act contains a specific legal framework governing the admissibility of electronic records. Referring to Section 138C of the Customs Act and a series of judicial precedents, including the Supreme Court’s landmark decision in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, the Bench observed that the prescribed certificate is a mandatory condition for the admissibility of electronic evidence.

The Tribunal emphasized that “when law requires a thing to be done in a particular manner it should be done in that manner alone.” It found that the statutory requirements under Section 138C(4) had not been fulfilled because the mandatory certificate identifying the electronic record and certifying the manner of its production had not been produced. As a result, the electronic documents and printouts relied upon by the DRI were held to be inadmissible and unreliable. The Bench further noted that no independent investigation or corroborative evidence had been gathered from the persons named in the alleged electronic records.

The Tribunal also examined the customs department’s conclusion that the imported steel coils were actually of Chinese origin. It noted that the imports were accompanied by Certificates of Origin issued by competent authorities in the exporting countries. Importantly, customs authorities had not initiated any formal verification process with those foreign authorities to establish that the certificates were forged, invalid or incorrectly issued.

Referring to Rule 6 of the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020, the Tribunal observed that where customs officers doubt the authenticity or correctness of a Certificate of Origin, they must seek verification from the designated authority in the exporting country. In the present case, no such verification exercise was undertaken. The Bench therefore held that the certificates could not simply be discarded on suspicion.

The Tribunal observed that “nothing has been placed on record by which it can be said any verification request has been made by the Customs Authorities with concerned Authorities of exporting country to verify the genuineness and correctness of the Certificate of Origin issued by them.” Consequently, it concluded that the department had failed to establish that the imported goods were of Chinese origin.

Another significant issue before the Tribunal concerned allegations of undervaluation. Customs authorities had rejected the declared transaction value and enhanced the assessable value primarily on the basis of proforma invoices allegedly recovered from electronic devices. The Tribunal rejected this approach, observing that a proforma invoice is merely a quotation or offer and does not constitute proof of the actual transaction value. It further noted that the department had not produced evidence showing that the importer paid any amount over and above the value reflected in the commercial invoices and banking records.

The Bench held that there was no contemporaneous import data of identical or similar goods to justify enhancement of value. Since the department’s case rested largely on inadmissible electronic records and unverified proforma invoices, the valuation exercise could not be sustained in law.

The ruling carries wider implications for customs investigations involving electronic evidence and trade agreement benefits. It reinforces the principle that digital evidence must satisfy statutory safeguards before being relied upon in adjudication proceedings. The decision also underscores that customs authorities cannot deny preferential tariff benefits merely on suspicion and must follow the verification mechanism prescribed under trade agreement rules before questioning Certificates of Origin.

By setting aside the foundation of the department’s case relating to electronic evidence, origin determination and valuation, the Tribunal delivered substantial relief to the importer and reaffirmed the importance of procedural safeguards, evidentiary standards and due process in customs enforcement proceedings.

Case Title: M/s Uttam Steel Alloys Pvt. Ltd. v. Commissioner of Customs, Noida and connected appeals