Artificially inflated FOB values for DEPB credit sustained confiscation and penalty under customs law

Declared FOB values were found to be artificially inflated to obtain higher DEPB credit, because test reports and market inquiries showed the export goods were worth less than the values declared. Foreign remittance alone did not validate the inflated declarations, and the applicable circular required DEPB credit to be computed on present market value where artificial inflation was established. On that basis, the Tribunal treated the goods as liable to confiscation under the Customs Act and sustained the penalties for breach of the export incentive conditions.

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Issues: Whether export goods were over-valued to artificially inflate FOB value for obtaining higher DEPB benefit, and whether confiscation and penalty under the Customs Act were sustainable.

Analysis: The export incentive scheme entitled credit on FOB value, but the record showed that the declared values were far above the market value established by test reports and market inquiries. The declared foreign remittance did not by itself validate the declared FOB value, since the scheme could be misused by inflating export values. The applicable circular required DEPB credit to be worked out on present market value where artificial inflation was proved. The Tribunal relied on the settled position that export goods with inflated values, in breach of the conditions governing export incentives, attract the consequences under the Customs Act, including treatment as prohibited goods for the purpose of confiscation and liability to penalty.

Conclusion: The Tribunal held that the declared values were artificially inflated to secure higher DEPB credit and upheld the confiscation and penalties.

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