Delhi CESTAT Says No to Fresh Export Valuation by Customs, Transaction Value to Prevail

· The tribunal ruled that unless there is documentary evidence that the FOB value declared in the Shipping Bill is not correct and the true FOB value is something else as per the documents, the declared FOB value has to be accepted. The Customs Act and Rules cannot be applied to re-determine the FOB value.

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no stranger to contract of sale including the Customs officer has any right to re-determine the Free on Board (FOB) value.

The bench of Justice Mr. Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that FOB value of goods is the transaction value of the goods between the exporter and the overseas buyer.

The bench stated that Section 14 of the Customs Act and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 empower the proper officer to determine the value, i.e., the assessable value to determine duty under the Customs Tariff Act, 1975 or under any other law. They do not empower the proper officer to re-determine the transaction value which is a product of negotiation between the buyer and the seller.

The tribunal ruled that unless there is documentary evidence that the FOB value declared in the Shipping Bill is not correct and the true FOB value is something else as per the documents, the declared FOB value has to be accepted. The Customs Act and Rules cannot be applied to re-determine the FOB value.

The exporter filed the shipping bill to export Oil Filters declaring Free on Board (FOB) value of Rs.1,36,75,185. It paid IGST of Rs. 24,61,534 and did not claim any rebate of State levies, but claimed 3% Merchandise Exports Incentive Scheme (MEIS). The consignment was examined by the customs officers and the goods were alleged to have been over-valued to claim higher IGST refund/MEIS.

It was detained through a memorandum. Statement of Shri Amit Kumar Sharma, the authorized representative of the appellant was recorded and the department conducted a market survey based on which it re-determined the FOB value of the export goods as Rs. 8,06,600 against the declared value of Rs. 1,36,75,185.

On request of the exporter, the consignment was released provisionally on execution of bond and bank guarantee and it was allowed to be exported. Thereafter, the Additional Commissioner passed an order dated 26.04.2019 rejecting the FOB value and re-determining it under Rule 6 and Rule 8 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962.

He confiscated the goods under Section 113 (i) of the Customs Act and allowed their redemption on payment of a fine of Rs. 8,00,000. He also imposed a penalty of Rs. 12,00,000 under Section 114 (iii) of the Act and the penalty of Rs. 12,00,000/- under Section 114AA of the Act on the appellant. The order of the Additional Commissioner was upheld by the Commissioner (Appeals).

The tribunal held that the re-determination of the FOB value by the Additional Commissioner is without any authority of law and it has been wrongly upheld by the Commissioner (Appeals) in the order.

The tribunal stated that the export goods are liable to confiscation under Section 113(i) if the goods are not as per declaration in the Shipping Bill in respect of value or any other parameter. The value required to be declared by the exporter is only the transaction value.

The tribunal noted that the exporter has no obligation whatsoever to do the impossible task of anticipating if the proper officer would accept the declared transaction value or would re-determine it and if so, what would be the re- determined value and file the Shipping Bill accordingly.

The tribunal quashed the finding that the goods were liable to confiscation under Section 113(i), redemption fine and the penalties under Section 114 and 114AA.

Case Details

Case Title: M/s Kritika Enterprises Versus Commissioner of Customs (Appeals)

Case No.: Customs Appeal No. 51722 Of 2022

Date: 09.04.2025

Counsel For Appellant: B. Venugopal

Counsel For Respondent: Shashi Kant Sharma