2026-VIL-968-CESTAT-DEL-CU
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CUSTOMS CESTAT Cases

Customs - Relevance of statements recorded under Section 108 of the Customs Act, 1962 without compliance with Section 138B procedure - During inquiry into alleged evasion of duty by a SEZ unit, statements were recorded from several employees under Section 108 of the Customs Act. These statements were subsequently used by the Commissioner as primary evidence to conclude that the unit had not undertaken any manufacturing activity and had diverted duty-free imported goods to the domestic market - Whether statements recorded under Section 108 of the Customs Act can be relied upon as evidence in customs proceedings when the procedure contemplated under Section 138B of the Customs Act has not been followed – HELD – The Section 138B requires that statements recorded during inquiry shall be relevant for proving the truth of facts only when the person who made the statement is examined as a witness before the adjudicating authority and the adjudicating authority forms an opinion that the statement should be admitted in evidence in the interests of justice. An opportunity of cross-examination must be provided to the person against whom such statement has been made. These provisions are mandatory and failure to comply with the procedure means no reliance can be placed on statements recorded under Section 108. The rationale behind these precautions is that statements recorded during inquiry by officers have every chance of being recorded under coercion or compulsion, and the mandatory procedure is designed to neutralize this possibility. In the present case, since the prescribed procedure was not followed before the Commissioner, the reliance placed on such statements was unjustified and the findings based thereon cannot be sustained - The order of the Commissioner relying on statements recorded under Section 108 without following Section 138B procedure is set aside and all related appeals are allowed
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