FOB value in export contracts cannot be altered by customs, and FOB-linked drawback or ROSL must follow the declared value.

Customs authorities may reject a declared export value for assessment and redetermine only the assessable value under section 14 and the Valuation Rules, but they cannot alter the contractual FOB transaction value itself. Drawback and ROSL, being FOB-linked under the governing scheme, had to be computed on the declared FOB value and could not be restricted to a notional value fixed by customs. Once the FOB redetermination was found impermissible, the connected confiscation, redemption fine and penalty also could not survive and were set aside.

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Issues: (i) Whether the customs authorities could re-determine the FOB value of export goods under section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007. (ii) Whether drawback and ROSL could be restricted to a value determined by the customs authorities instead of the FOB value declared in the export contract and governing notifications. (iii) Whether confiscation, redemption fine and penalty could survive once the re-determination of FOB value was found impermissible.

Issue (i): Whether the customs authorities could re-determine the FOB value of export goods under section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007.

Analysis: FOB value was treated as the transaction value agreed between the exporter and the overseas buyer. The power under section 14 and the Valuation Rules extends only to rejection of the declared value for assessment purposes and re-determination of assessable value. That power does not authorise a customs officer to alter the contractual FOB value itself or to substitute a different commercial value for the export transaction.

Conclusion: The re-determination of FOB value was impermissible and was set aside in favour of the assessee.

Issue (ii): Whether drawback and ROSL could be restricted to a value determined by the customs authorities instead of the FOB value declared in the export contract and governing notifications.

Analysis: Drawback and ROSL were payable as a percentage of FOB value under the governing statutory scheme and policy framework. The customs authorities had no power to direct that these export incentives be computed on any notional value fixed by them, because the incentives were linked to FOB value and not to the assessable value determined for customs assessment.

Conclusion: The restriction of drawback and ROSL to the value fixed by the customs authorities was unlawful and failed in favour of the assessee.

Issue (iii): Whether confiscation, redemption fine and penalty could survive once the re-determination of FOB value was found impermissible.

Analysis: The confiscation, redemption fine and penalty were founded on the same erroneous premise that the FOB value could be altered by the customs authorities. Once that premise was rejected, the consequential penal and confiscatory measures could not stand independently.

Conclusion: Confiscation, redemption fine and penalty were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order was annulled with consequential relief to the appellant.

Ratio Decidendi: Customs authorities may determine only the assessable value of export goods under section 14 and the Valuation Rules, but they cannot alter the FOB transaction value or compute export incentives contrary to the statutory FOB-linked basis prescribed by the governing notification or policy.

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