No Evidence Of Over-Valuation Of Goods; Transaction Value Wrongly Rejected Under Rule 8 of Customs Valuation Rules: CESTAT

Section 113 of the Customs Act, 1952 provides the list of goods that are liable to be confiscation if they are attempted to be improperly exported.

Section 113 (a) of the Customs Act, 1952 provides that the goods are liable for confiscation if any goods attempted to be exported by sea or air from any place other than a customs port or a customs airport appointed for the loading of such goods.

Rule 8 of the Customs Valuation Rules states that if a proper officer doubts the accuracy of the declared value of export goods, they may request further information from the exporter. If doubts remain after receiving the information, or if the exporter does not respond, the transaction value is deemed undetermined under Rule 3(1).

The Bench of Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that “while calculating transaction value, it is to be ensured that values are consistent with values of goods of similar kind exported to other buyers in those cases.”

The assessee/M/s Universal Offset filed a shipping bill to export some printed banners, declaring a Free on Board (FOB) value of U.S. $7.65 per piece, totalling Rs. 1,45,21,020. Upon inspection, customs officers found that the value of the goods are overvalued. The customs authorities seized the goods, suspecting they were liable for confiscation under Section 113 of the Customs Act, 1962. A show cause notice was issued to the assessee proposing to reject the declared assessable value of Rs.1,45,21,020/- and re-determine it as Rs. 2,75,400/- as per Rule 6 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, but it was not responded by the assessee. Thereafter, the Additional Commissioner passed the order re-determining the value of the export goods, as proposed in the SCN. He also confiscated the goods under Section 113 (a) and allowed their redemption on payment of redemption fine of Rs. 35,000/-, imposed a penalty of Rs. 12,00,000/- on Universal and Rs. 50,00,000/- on Vikas (Owner of Universal). Aggrieved by the decision of Additional Commissioner the assessee filed an appeal to the Commissioner of Customs (Appeals) who rejected the appeal and upheld the order of the Additional Commissioner. The assessee has challenged the order passed by the Commissioner of Customs (Appeals) before the Tribunal.

The assessee contended that the Commissioner (Appeals) failed to appreciate that the FOB value cannot be rejected and re-determined and the FOB value for the past five consignments was accepted by the Assessing Officer and the exporter was free to sale goods at any profit margin. Also, Similar goods were sold in international market at about the same price but the Commissioner (Appeals) gave no findings on this issue. The Commissioner (Appeals) did not consider that five consignments were earlier exported against the same licence and export proceeds were received in full.

The Tribunal found that the customs officer does not and cannot alter the transaction value, but can only reject the transaction value and re-determine the assessable value through some other methods.

The Tribunal observed that it does not appear that any further investigation was conducted by the Customs Officers to see if there was any flow back of the money to the buyer in those cases.

Thus, the Tribunal opined that the transaction value was rejected under Rule 8 and re-determined as per Rule 6 of Customs Valuation Rules. There were no sufficient grounds to reject the transaction value under Rule 8. The cost of manufacture of the goods could be much lower than the export price. What needs to be checked is that the values are consistent on the values of goods like, kind and quality exported to other buyers. There is no information about export to other buyers and the appellant's own exports in the past are also said to be overvalued. This also on record that remittances in respect of the past shipping bills were received and there is no evidence of flow back to the buyer in UAE.

Further, the Tribunal stated that there was no reasonable doubt regarding truth or accuracy of the transaction value in this matter. The transaction value, therefore, was wrongly rejected under Rule 8 of Customs Valuation Rules.

In view of the above, the Tribunal allowed the appeal.

Counsel for Appellant/ Assessee: Priyanka Goel

Counsel for Respondent/ Department: Girijesh Kumar

Case Title: M/s Universal Offset v. Commissioner of Customs (Export)

Case Number: CUSTOMS APPEAL NO. 50871 OF 2021

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