Diamond import valuation and confiscation: gross overvaluation justified rejection of declared value, but marginal discrepancies did not.

Gross overvaluation of rough diamond imports, supported by contemporaneous correspondence, revised import documents, foreign supplier amendments and corroborated statements, justified rejection of the declared transaction value and adoption of the expert panel valuation. Because the imports then failed to comply with the statutory and Kimberley Process conditions, the rough diamond consignments were treated as prohibited goods, absolute confiscation was upheld and penalties were substantially sustained. By contrast, where cut and polished diamonds showed only a marginal valuation difference and the import was supported by a bill of entry and a proper documentary trail, the declared value was not displaced and confiscation and penalty were found unsustainable.

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Issues: (i) Whether the declared value of the rough diamond consignments could be rejected and re-determined on the basis of the expert panel valuation, (ii) whether the rough diamond consignments were liable to absolute confiscation and the connected penalties were sustainable, and (iii) whether the cut and polished diamond consignment was liable to confiscation and penalty.

Issue (i): Whether the declared value of the rough diamond consignments could be rejected and re-determined on the basis of the expert panel valuation.

Analysis: The declared value was found to be wholly inconsistent with the surrounding circumstances, including the contemporaneous fax messages, the later request for amendment of the import documents, the revised documents issued by the foreign suppliers, and the statements of the persons involved. The KPC scheme treated the certificate as a document containing material particulars, including value, and the Court held that a gross and uniform overvaluation across multiple consignments could not be treated as a genuine mistake. The transaction value was therefore not accepted, and the valuation adopted by the expert panel was treated as reliable for customs purposes.

Conclusion: The declared value of the rough diamonds was rightly rejected and re-determined.

Issue (ii): Whether the rough diamond consignments were liable to absolute confiscation and the connected penalties were sustainable.

Analysis: Once the declared value was rejected, the imports were found to be contrary to the statutory and policy conditions governing rough diamonds, including the requirement of a valid Kimberley Process Certificate. The Court held that non-compliance with those conditions rendered the goods prohibited within the meaning of the Customs Act. The plea for re-export under the Board circular was rejected because that facility applied only where the goods were otherwise in order, which was not the case here. On the evidence of coordinated conduct by the importers, exporters and intermediaries, the Court also held that the persons concerned had knowingly participated in the import of overvalued goods and had rendered them liable to confiscation and penalty.

Conclusion: The rough diamond consignments were liable to absolute confiscation and the penalties were substantially sustained.

Issue (iii): Whether the cut and polished diamond consignment was liable to confiscation and penalty.

Analysis: In respect of the cut and polished diamonds, the difference between the declared value and the expert panel valuation was marginal, and the import had been supported by a bill of entry and a valid documentary trail. The Court found insufficient independent material, apart from the statements relied upon by the department, to displace the declared value or to justify confiscation and penalty. On that footing, the benefit of doubt was given to the importer.

Conclusion: The confiscation and penalties relating to the cut and polished diamond consignment were not sustainable.

Final Conclusion: The appeals failed in relation to the rough diamond consignments, where valuation rejection, absolute confiscation and penalties were upheld, but succeeded in relation to the cut and polished diamond consignment, where the impugned order was set aside.

Ratio Decidendi: Where a gross overvaluation in diamond imports is proved by contemporaneous conduct, revised documentation, and corroborated statements, the declared transaction value may be rejected, the goods treated as prohibited for want of compliance with import conditions, and absolute confiscation with penalty sustained; but marginal valuation differences unsupported by independent evidence do not justify confiscation or penalty.

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