Transaction value for project imports cannot be discarded without proof of extra payment, collusion, or other valid grounds.

Declared transaction value for a registered project import could not be rejected or enhanced merely because the foreign supplier procured some items from third-party vendors at a higher price. In the absence of proof of extra payment, collusion, or any other legally recognised ground to discard the contract price, the differential duty demand failed. Once the valuation basis collapsed, the connected confiscation, redemption fine, and penalties also had no independent footing. Prolonged and unexplained delay in finalising provisional assessment further weakened the attempt to sustain enhancement and consequential action.

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Issues: (i) Whether the differential duty demand was sustainable on the ground that the declared transaction value for project imports could be rejected and enhanced. (ii) Whether the penalties and ancillary confiscation-related consequences could be sustained in the facts of the case.

Issue (i): Whether the differential duty demand was sustainable on the ground that the declared transaction value for project imports could be rejected and enhanced.

Analysis: The imported goods were covered by a registered project import contract and the importer paid the contract price agreed with the foreign supplier. The mere fact that the foreign supplier had sourced some items from third-party vendors at a higher price did not, by itself, show that the importer had paid any amount over and above the contract value or that the declared value was unreal. No hidden payment, collusion, or legally sustainable ground for rejection of the declared value was established. The long and unexplained delay in finalising the provisional assessment also weighed against sustaining the enhancement of value and consequential demand.

Conclusion: The differential duty demand was not sustainable and is set aside.

Issue (ii): Whether the penalties and ancillary confiscation-related consequences could be sustained in the facts of the case.

Analysis: The penalty and confiscation-related consequences were founded on the same valuation dispute. Once the declared transaction value could not be rejected and the duty demand failed, the basis for confiscation, redemption fine, and penalties also disappeared. The inordinate delay in finalisation further reinforced that the proceedings could not be upheld against either the importer or the foreign supplier.

Conclusion: The penalties, redemption fine, and related confiscation consequences were not sustainable.

Final Conclusion: The impugned orders could not be sustained on valuation or penalty grounds, and the appeals succeeded with consequential relief.

Ratio Decidendi: In the absence of proof of extra payment, collusion, or other legally recognised grounds for rejection, the transaction value under customs law cannot be discarded merely because a foreign supplier procured part of the goods at a higher price; consequential penal action also cannot survive when the foundational demand fails.

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