LI Network
Published on: October 9, 2023 at 22:45 IST
The Supreme Court of India has reaffirmed the importance of the transaction value as the primary basis for customs valuation.
The court emphasized that other valuation methods should only be considered if there is concrete evidence to doubt the accuracy of the declared transaction value.
The division bench comprising Justice B.V Nagarathna and Justice Ujjal Bhuyan clarified that in cases of alleged undervaluation, the burden of proof rests on the customs department.
The central principle highlighted by the Supreme Court is that if the customs department wishes to allege under-valuation, it must conduct thorough inquiries, gather substantial evidence, and provide information about comparable imports.
If the charge of under-valuation cannot be substantiated by concrete evidence or information about contemporaneous imports of similar goods, the benefit of doubt must favor the importer.
In essence, the charge of under-invoicing must be supported by evidence of prices of contemporaneous imports of similar goods.
The case that led to this ruling involved an appellant challenging the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The appellant contended that the respondents had under-invoiced imported goods to evade customs duty. To support their claim, they relied on export declarations from Hong Kong, asserting that the actual value of the goods exceeded the declared value.
However, the respondents disputed these allegations, insisting that they had accurately declared the goods’ value. They also argued that the statements of key personnel within their firm were not voluntary and should not be relied upon.
The adjudicating authority initially ruled in favor of the appellant, stating that the export declarations from Hong Kong were reliable, and the declared price by the respondents was not the correct transaction value.
The goods were deemed liable for confiscation under relevant sections of the Customs Act, although no confiscation order was issued as the goods had already been cleared.
Upon appeal, the CESTAT set aside the enhancement of the imported goods’ value and the associated penalties, asserting that the appellant had failed to prove under-invoicing.
The Tribunal raised concerns about the unattested photocopies of export declarations and the lack of additional evidence supporting the appellant’s case.
The appellant sought to rely on statements made by key individuals, but the respondents argued that these statements were obtained under coercion and duress. The CESTAT did not give credence to these statements and questioned the reliability of the first set of export declarations as a basis for value enhancement.
The Supreme Court ultimately concurred with the CESTAT’s decision, emphasizing that the customs department and adjudicating authority had wrongly rejected the import invoice prices without sufficient evidence.
The court clarified that a customs officer is not a police officer and that statements made under Section 108 of the Customs Act are admissible in evidence. However, these statements must be recorded in a fair and unbiased manner, free from duress or coercion.
In its ruling, the court cited Section 14 of the Customs Act, which outlines the valuation of goods, with the price at which goods are typically sold or offered for sale in international trade as the primary basis for valuation. While the Central Government can establish rules for determining the price of imported goods, these rules must be applied judiciously.
Case Title: Commissioner of Customs (Imports), Mumbai v. M/s Ganpati Overseas