January 24, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, has set aside customs duty demands, penalties and redemption fines imposed on a timber importer and its partner, holding that allegations of undervaluation cannot rest solely on third-party emails and retracted statements without independent corroborative evidence.
The Bench comprising Dr. Ajaya Krishna Vishvesha (Judicial Member) and Satendra Vikram Singh (Technical Member) ruled that private emails and documents recovered from third parties do not constitute conclusive proof of undervaluation unless supported by material evidence recovered from the importer itself. The Tribunal also observed that statements retracted during cross-examination lose substantial evidentiary value, and that mere matching of container numbers or quantities in third-party records does not automatically establish undervaluation.
The dispute arose from imports of timber made during 2009–2010 through Kandla and Mundra ports. Following a Directorate of Revenue Intelligence investigation into several timber importers, the department alleged that declared import values were deliberately understated to evade customs duty. The case against the appellants relied primarily on emails recovered from third parties, statements of alleged intermediaries, and assumptions of cash payments outside formal banking channels.
Based on these materials, show cause notices were issued proposing rejection of declared transaction values, re-determination of assessable value, demand of differential duty, confiscation of goods, and imposition of penalties under Sections 111(m), 112(a), 114A and 114AA of the Customs Act, 1962. The adjudicating authority confirmed the demands, ordered confiscation with redemption fines, and imposed penalties. While the Commissioner (Appeals) reduced certain penalties, the findings on undervaluation were upheld, leading to the present appeals.
The appellants argued that no incriminating documents were recovered from their premises and that the entire case was built on third-party material to which they were not a party. They also pointed out that the statements relied upon were subsequently retracted, and that the declared transaction values had already been examined and, in some cases, enhanced by customs authorities at the time of import. It was further contended that, in the absence of suppression or wilful misstatement, invocation of the extended limitation period and penal provisions was unjustified.
The department relied on alleged admissions in statements and on the fact that differential duty and reduced penalties had been paid during investigation.
After reviewing the record, the Tribunal noted that identical allegations arising from the same investigation had been rejected in earlier CESTAT decisions, which had attained finality after dismissal of departmental appeals by the Supreme Court. Reiterating that transaction value under Section 14 of the Customs Act must be accepted unless the department conclusively proves influence by non-commercial considerations, the Bench held that the present case lacked such proof.
Finding that the allegations of undervaluation were based entirely on third-party emails and retracted statements, without any independent corroborative evidence from the importer, the Tribunal held that confiscation under Section 111(m) was unsustainable. Consequently, all duty demands, penalties and redemption fines were set aside, and the appeals were allowed in full.
Jay Jalaram Saw Mill v. Commissioner of Customs – Mundra, Final Order No. 10045–10046/2026 (CESTAT Ahmedabad)
