Declared value of imported rough diamonds cannot be rejected without reliable contemporaneous evidence; confiscation and penalty also fell away.
Declared transaction value of imported rough diamonds could not be rejected on successive expert panel reports and investigative statements alone, because the first departmental panel had accepted the invoice value and no contemporaneous evidence showed fabricated invoices, a fake transaction, or a related-party arrangement; the declared value was therefore accepted. Absolute confiscation under the Customs Act was unsustainable once overvaluation was not proved, and the rough-diamond circular supported re-export where the Kimberley Process Certificate was produced within the relevant time; re-export was allowed. Penalty could not be sustained where the goods were customs-duty exempt and no valid misdeclaration was established; the penalties were set aside.
Issues: (i) whether the declared transaction value of the imported rough diamonds could be rejected on the basis of successive expert panel reports and statements recorded during investigation; (ii) whether absolute confiscation of the goods under the Customs Act was sustainable and whether re-export could be permitted; and (iii) whether penalty was imposable when the goods were exempt from customs duty.
Issue (i): whether the declared transaction value of the imported rough diamonds could be rejected on the basis of successive expert panel reports and statements recorded during investigation?
Analysis: The declared value was supported by the first expert panel constituted by the department itself, which found the invoice value to be correct. The later panel reports were not preferred because no convincing reason was shown for discarding the first report, the later panels were not shown to be superior in expertise, and their methodology and versions were inconsistent. In the absence of contemporaneous evidence showing fabricated invoices, a fake transaction, or any relationship between importer and exporter, the transaction value could not be rejected merely on opinion evidence or investigative statements. The statutory valuation framework required reliable evidence before disturbing the declared value.
Conclusion: The declared value was accepted and the allegation of overvaluation failed, in favour of the assessee.
Issue (ii): whether absolute confiscation of the goods under the Customs Act was sustainable and whether re-export could be permitted?
Analysis: Confiscation under section 111(m) could not survive once overvaluation was not proved. As to section 111(d), the governing circular dealing with rough diamonds contemplated re-export where the Kimberley Process Certificate was not produced within the specified time. The certificate was in fact produced, and once the declared value was accepted, the certificate could not be treated as invalid. The circular did not justify absolute confiscation in the facts proved, and the appellant's request for re-export was consistent with the administrative scheme.
Conclusion: Absolute confiscation was set aside and re-export was permitted, in favour of the assessee.
Issue (iii): whether penalty was imposable when the goods were exempt from customs duty?
Analysis: The goods were exempt from customs duty and no sustainable misdeclaration was established. In such a situation, penalty under section 112 could not be supported, especially when the foundation for alleging overvaluation itself had failed.
Conclusion: The penalties were unsustainable and were set aside, in favour of the assessee.
Final Conclusion: The appeals succeeded in full, with the declared value accepted, confiscation annulled, re-export allowed, and penalties deleted.
Ratio Decidendi: A declared import value cannot be displaced by departmental opinion or successive panel reports unless supported by reliable contemporaneous evidence showing that the invoice value is false or unacceptable under the statutory valuation rules.