Misdeclaration and customs valuation enhancement fail when expert evidence is weak and undisclosed material is used for reassessment.

Misdeclaration of imported textile goods was not established where the expert's opinion on brushing was weakened in cross-examination and the docks examination described the goods as stock lot polyester knitted fabrics, leaving no reliable factual basis for the charge. Enhancement of assessable value was also unsustainable because the show cause notice relied on market enquiry, while the adjudication instead used undisclosed NIDB data without supplying its basis to the importer; the resulting redetermination lacked proper legal and evidentiary foundation, including for Rule 8 valuation. Accordingly, the demand, interest, redemption fine, and penalties could not be sustained and the impugned orders were set aside.

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Issues: (i) whether the imported goods were misdeclared in description; (ii) whether the enhancement of assessable value was sustainable.

Issue (i): whether the imported goods were misdeclared in description.

Analysis: The finding of misdeclaration rested principally on the textile expert's report stating that the goods had brushing on one side. However, in cross-examination the expert admitted that he did not know the process of brushing and could only assume that brushed fabric may cost more because extra work is involved. The show cause notice itself recorded that the docks officers had examined the goods as stock lot polyester knitted fabrics. In these circumstances, the evidentiary basis for holding that the goods were misdeclared was not established.

Conclusion: The finding of misdeclaration was set aside and is in favour of the assessee.

Issue (ii): whether the enhancement of assessable value was sustainable.

Analysis: The show cause notice proposed enhancement only on the basis of market enquiry. Although the traders were cross-examined in the de novo proceedings and did not support the departmental case, the adjudicating authority discarded that material and relied upon NIDB data, without supplying the relevant details to the importer. Since the notice did not refer to NIDB data and the importer was not given the basis on which valuation was redetermined, the enhancement lacked a proper legal and factual foundation, including for application of Rule 8 of the Customs Valuation (Determination of Prices of Imported Goods) Rules, 1988.

Conclusion: The enhancement of value was unsustainable and is in favour of the assessee.

Final Conclusion: The demand, interest, redemption fine, and penalties could not be sustained, and the impugned orders were set aside.

Ratio Decidendi: A valuation enhancement cannot be sustained when it rests on material not disclosed in the show cause notice and on evidence that is neither supported on cross-examination nor independently proved; a finding of misdeclaration also cannot stand on mere assumption without reliable factual foundation.

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