CESTAT members differ on whether Customs must examine Section 108 statement-makers before relying on their statements

The appeal concerned two Bills of Entry filed four days apart at Tuticorin and Chennai in the names of different importers. The first covered a Suzuki Hayabusa 1300 cc engine and chassis; the second covered substantially all the motorcycle’s remaining parts.

Physical examination and a joint inspection found matching manufacturer’s markings and concluded that the consignments together constituted one Suzuki GSX 1300 R motorcycle; a foreign number plate was found on the Chennai goods.

The Commissioner clubbed and reclassified the consignments as a motorcycle under CTH 8711 50 00, rejected the declared values, redetermined them, confirmed differential duty and interest, ordered confiscation with redemption fine, and imposed penalties under Section 114AA.

The importer appealed, challenging, among other matters, clubbing, valuation, joint and several liability, confiscation, penalties and reliance on Section 108 statements.

Whether the two consignments could be clubbed and reclassified as a complete motorcycle under Rule 2(a) of the General Rules for the Interpretation of the Import Tariff.

Whether rejection of the declared transaction value under Rule 10A and redetermination under Rule 8 of the Customs Valuation Rules, 1988 were sustainable.

Whether duty could be demanded jointly and severally from the Appellant and Jayakanth, and who was the importer liable for the Tuticorin goods.

Whether the goods were liable to confiscation under Sections 111(d) and 111(m), and whether redemption fine was justified.

Whether the penalties imposed on the Appellant under Section 114AA were sustainable.

What effect non-compliance with Section 138B had on the Section 108 statements.

Whether the DRI officers and the common adjudicating authority had jurisdiction to issue the notice and adjudicate the matter.

Rule 2(a) permits classification of an incomplete or unassembled article as the complete article where it has the latter’s essential character; Sony India applies the ordinary rule that goods are classified as presented, while Phoenix International permits separate consignments to be treated as one import where their division is a contrivance to evade duty or restrictions.

Under Rules 10A and 8 of the Customs Valuation Rules, 1988, a declared value may be rejected where its truth or accuracy is doubtful, but residual valuation must rest on reasonable material and not be arbitrary.

Sections 2(26) and 28 of the Customs Act identify the importer liable for duty; the Tribunal held that liability under Section 28 attaches to the importer, while the identity of the importer may be determined from the transaction’s substance rather than solely from the Bill of Entry.

Sections 111(d) and 111(m) provide for confiscation of goods imported contrary to restrictions or misdeclared, and Section 114AA requires knowing or intentional use or creation of a materially false or incorrect document.

On Section 138B, the Judicial Member held that a Section 108 statement is admissible but cannot prove the truth of its contents unless Section 138B(1)(a) or (b) is satisfied; he considered examination of the maker and a reasoned decision on admission necessary under clause (b).

The Technical Member disagreed that examination-in-chief was an invariably mandatory precondition, reasoning that Section 138B(2) applies “so far as may be” and that reliance turns on the statutory scheme, fairness and prejudice in the circumstances.

The Technical Member also relied on Canon India regarding DRI officers’ authority under Section 28 and Kiran Global Chem regarding appointment of a common adjudicating authority.

The Members agreed that the objective evidence independently established a single, contemporaneous import: the consignments arrived within four days from the same supplier, contained complementary parts of one motorcycle, bore matching markings, and were confirmed by expert inspection to constitute a complete vehicle.

The foreign number plate also supported the finding that the vehicle had previously been registered, making the spare-parts description insufficient to avoid the applicable restriction. These facts distinguished the case from the ordinary “as presented” rule in Sony India and supported clubbing under Phoenix International.

The Judicial Member excluded the Section 108 statements as substantive proof because the Section 138B procedure had not been followed, but found the physical and documentary evidence sufficient without them.

The Technical Member disagreed with that evidentiary reasoning, noting that cross-examination had not been sought and no prejudice or involuntariness had been shown; he nevertheless concurred in the ultimate conclusion, which rested independently on the objective evidence.

The declared values were rejected because they related to goods described as spare parts rather than the motorcycle found to have been imported; the inspection and valuation reports supplied a basis for residual valuation under Rule 8.

For duty liability, the Tribunal treated the Appellant as the owner and real importer of the Tuticorin goods, relying on their connection to the motorcycle parts imported by his own concern and their lack of any independent use.

The same evidence supported confiscation and the finding that the materially false declarations were knowingly or intentionally made for Section 114AA purposes.

The joint and several duty direction against the Appellant and Jayakanth was set aside; the Appellant alone was held liable for the duty on the Tuticorin goods as the importer.

Confiscation under Sections 111(d) and 111(m) and redemption fine were upheld; if the goods remained unredeemed, the fines were reduced to Rs. 40,000 for Chennai and Rs. 60,000 for Tuticorin.

The Section 114AA penalties were upheld but reduced to Rs. 50,000 for each import.

The DRI and common-adjudicating-authority objections were rejected in the Technical Member’s separate opinion.

The Members agreed on the disposition, though they differed on the interpretation and application of Section 138B.