Sri Aisvaresvaraya Imports Vs Commissioner of Customs (CESTAT Chennai)
Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled in favor of Sri Aisvaresvaraya Imports, setting aside an order by the Commissioner of Customs that had rejected the declared transaction value of imported goods and enhanced it based on a Chartered Engineer’s report. The central issue before the CESTAT was whether the revenue authorities were justified in rejecting the importer’s declared value without a proper basis.
The case originated when customs officials, during the first check of the imported cargo, reported that the declared value appeared to be “very low.” Subsequently, officers from the Special Intelligence and Investigation Branch (SIIB) examined the same goods in the presence of a Chartered Engineer, who assessed a higher value in his report dated January 17, 2014. Based on this report, the revenue alleged that the importer had misclassified certain items in the Bill of Entry. An Operations Executive of the importer was then asked to provide a statement and purportedly requested for the release of the cargo without a show cause notice or personal hearing due to accruing demurrage charges. The Original Authority promptly issued an order on February 14, 2014, rejecting the declared value and classification of several items, re-determining the value under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, levying a penalty, and ordering confiscation of goods (including some items for which no discussion was recorded). The Commissioner (Appeals) upheld this order, leading to the appeal before the CESTAT.
The CESTAT, relying on the Supreme Court’s judgment in Century Metal Recycling Private Limited Vs Union of India – 2019 (367) ELT 3 (SC), emphasized the primacy of Rule 3 of the Customs Valuation Rules, which mandates the acceptance of the transaction value declared by the importer, subject to Rule 12. Rule 12 provides the procedure when the proper officer has reason to doubt the truth or accuracy of the declared value. The Supreme Court in Century Metal had clarified that such doubt must be reasonable and based on “certain reasons,” and the proper officer must first call upon the importer to furnish further information to justify the declared value. Only if the officer remains unsatisfied after this process can the declared value be rejected, and valuation be done using alternative methods under Rules 4 to 9.
In the present case, the CESTAT observed that the initial doubt about undervaluation raised by the shed officers lacked any basis or expertise. The introduction of the Chartered Engineer appeared to be a subsequent measure to re-determine the value rather than an exercise to first establish reasonable doubt about the declared value. Crucially, the revenue did not allege that the importer and exporter were related, that there was any undisclosed payment, or that extraneous factors influenced the declared value. The CESTAT concluded that the revenue had failed to legally demonstrate why the declared value was unacceptable or how Rule 12 was not fulfilled. The tribunal noted that the “reasons to doubt” should precede any action like declaring the transaction value as low, but in this case, the revenue acted hastily without a proper foundation for their suspicion. The Chartered Engineer’s report was used to directly enhance the value instead of first validating a reasonable doubt about the declared value.
The CESTAT further highlighted that the Century Metal precedent has been consistently followed by various judicial forums and its own benches. Citing several recent orders where this principle was upheld, the CESTAT reiterated that the declared transaction value cannot be rejected arbitrarily. Finding that the authorities below had erred in rejecting the declared value without a valid basis, the CESTAT set aside the impugned order and allowed the appeal, granting the importer consequential benefits as per the law.
FULL TEXT OF THE CESTAT CHENNAI ORDER
