Un-Retracted Section 108 Statement Is Binding: Delhi High Court Declines to Reopen ₹3.5 Crore Cigarette Smuggling Valuation

“Once Seizure Is Established, Burden Shifts Under Section 123” – Delhi High Court delivered a decisive ruling reaffirming the limited scope of interference under Section 130 of the Customs Act, 1962. The Division Bench of Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul held that where three authorities have concurrently upheld seizure, confiscation and valuation, the High Court cannot re-appreciate facts in the absence of perversity or legal infirmity.

The case arose from the seizure of 25,01,200 foreign-origin cigarette sticks valued at ₹3,50,16,800, which were ordered to be absolutely confiscated under Section 111(d) of the Customs Act, along with imposition of penalty of ₹25 lakh under Section 112(b)(i). The appellant challenged the valuation at ₹14 per stick and questioned the legality of seizure and denial of cross-examination.

The Court dismissed the appeal, holding that no substantial question of law arose.

DRI Seizure and Absolute Confiscation

On the night of 20/21 December 2018, officers of the Directorate of Revenue Intelligence intercepted a vehicle unloading cartons of foreign-origin cigarettes into a godown in Delhi. A detailed Panchnama recorded recovery of 150 cartons from the vehicle and 33 cartons from the godown.

The appellant was present at the spot and his statement was recorded under Section 108 of the Customs Act. Based on the investigation, a show cause notice was issued invoking Sections 111(d), 112(b)(i), 123 of the Customs Act, provisions of the Legal Metrology Act, 2009, and the Cigarettes and Other Tobacco Products Act, 2003.

The Adjudicating Authority ordered:

“I order for absolute confiscation of smuggled 25,01,200 sticks of foreign original cigarettes… having market value of Rs.3,50,16,800/- under Section 111(d) of the Customs Act, 1962.”

The order was upheld by the Commissioner (Appeals) and later by CESTAT.

“Statement Under Section 108 Has Binding Effect If Not Retracted”

A crucial aspect before the High Court was the evidentiary value of statements recorded under Section 108 of the Customs Act. The appellant argued that seizure and valuation were not properly proved and that cross-examination was denied.

Rejecting the contention, the Court observed:

“The statement recorded under Section 108 of the Customs Act of the appellant so also the other witnesses, at no point of time, was retracted and the same has a binding effect in law.”

The Bench emphasized that such statements, when not retracted, can legitimately form the basis of confiscation and penalty. The Court further noted that the right of cross-examination is not absolute and unless prejudice is shown, denial of cross-examination does not vitiate proceedings.

“Once Show Cause Notice Discloses Market Value, Burden Shifts on Appellant”

The appellant’s principal grievance was that valuation at ₹14 per stick was arbitrary and unsupported by material. The Court, however, noted that the show cause notice clearly disclosed the total market value of ₹3,50,16,800 based on a market survey.

The Bench held:

“Once the respondent has issued a show cause notice on the point of the cost of a cigarette stick based on the market value, the burden shifts on the appellant to demonstrate that the evaluation… was incorrect or improper.”

The Court observed that instead of producing contrary material or documentary evidence to rebut the valuation, the appellant remained “in complete denial mode.” In such circumstances, authorities were justified in sustaining the valuation.

Section 123 Customs Act: Statutory Burden and Adverse Inference

The Court reaffirmed the effect of Section 123 of the Customs Act, which shifts the burden of proof in cases involving notified goods of foreign origin.

Once seizure was proved through Panchnama and contemporaneous documentation, the burden shifted to the appellant to establish lawful import. Failure to discharge this statutory burden entitled authorities to draw adverse inference.

The Court found no infirmity in the conclusion that the goods were smuggled and liable to confiscation.

“Section 130 Confines Us to Substantial Questions of Law”

The Bench underscored the limited jurisdiction of the High Court under Section 130 of the Customs Act.

“Having regard to the statutory mandate prescribed under Section 130… the present appeal can be said to be maintainable only in case if there involves any question of law.”

Where there are concurrent findings by the Adjudicating Authority, Commissioner (Appeals), and CESTAT, the High Court will not re-examine factual determinations unless they are perverse or contrary to law.

The Court concluded that the appellant’s pleas were “vague and non-specific” and that no substantial question of law arose regarding valuation, seizure, or penalty.

The Delhi High Court dismissed the appeal, reaffirming that un-retracted Section 108 statements carry binding evidentiary value, that burden shifts under Section 123 once foreign-origin goods are seized, and that valuation findings based on disclosed material cannot be reopened in an appeal under Section 130 without demonstrating legal infirmity.

The judgment stands as a firm reminder that appellate scrutiny under the Customs Act is confined to questions of law, not factual re-appreciation of concurrent findings.

Date of Decision: 13 February 2026