Export transaction value must govern DEPB entitlement where market comparisons fail to displace the declared FOB value.

The declared FOB value could not be rejected merely on departmental enquiries, because the Revenue failed to prove that the comparison goods were identical in quality to the exported goods. Statements from the supplier and local artisans, market enquiries and references to other exports were insufficient to displace the export transaction value, especially where the goods were chrome plated combination pliers with PVC sleeves and export proceeds were fully realised. The exporter was not required to fix FOB value at prevailing market price, and DEPB entitlement had to be assessed with reference to the export transaction value under Section 14 of the Customs Act, 1962. Accordingly, rejection of value, restriction of DEPB benefit, confiscation and penalties were unsustainable.

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Issues: Whether the declared FOB value and prevailing market value of the exported goods could be rejected on the basis of the departmental enquiries and, if not, whether the restriction of DEPB benefit, confiscation and penalties were sustainable.

Analysis: The majority held that the evidence relied upon by the Revenue did not establish that the export goods were identical in quality to the goods used for comparison. The statements of the supplier and the local artisans, the market enquiries at Jaipur and the references to other exports were not sufficient to displace the declared value, particularly when the goods exported were shown to be chrome plated combination pliers with PVC sleeves and the export proceeds had been fully realized. It was further held that the exporter was not bound to fix the FOB value at the prevailing market price and that the DEPB entitlement had to be tested with reference to the export transaction value under Section 14 of the Customs Act, 1962, not merely by adopting an alleged market value derived from incomplete comparisons.

Conclusion: The declared FOB value and PMV were not liable to be rejected, the restriction of DEPB benefit was unsustainable, and the confiscation and penalties could not stand.

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