FOB transaction value cannot be rewritten by Customs; consequential confiscation, penalties, and export incentive adjustments fail.

Customs valuation law permits determination of assessable value for assessment purposes, but it does not authorise Customs to rewrite the contractually agreed FOB transaction value of exported goods. Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 govern valuation for customs purposes only; a stranger to the export contract cannot alter the price agreed between buyer and seller. Where the FOB re-determination is unsustainable, consequential confiscation, redemption fine, penalties, and re-working of duty drawback or other export incentives based on that altered value also fall away.

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Issues: (i) whether the FOB value declared for export goods could be rejected and re-determined by Customs officers under the valuation framework; (ii) whether the consequent confiscation, redemption fine, penalties and re-working of export incentives could survive once the FOB value re-determination was found unsustainable.

Issue (i): whether the FOB value declared for export goods could be rejected and re-determined by Customs officers under the valuation framework.

Analysis: FOB value was treated as the transaction value agreed between the buyer and the seller. Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 were held to govern determination of assessable value for customs purposes, not to authorise alteration of the underlying contract price. The power of Customs officers extends to rejection of declared value for assessment purposes where permitted by law, but not to rewriting the FOB transaction value itself. A stranger to the contract has no authority to modify the price agreed between the parties.

Conclusion: The re-determination of FOB value was without authority of law and was not sustainable.

Issue (ii): whether the consequent confiscation, redemption fine, penalties and re-working of export incentives could survive once the FOB value re-determination was found unsustainable.

Analysis: The confiscation, redemption fine, penalties and re-determination of duty drawback and other export incentives flowed entirely from the altered FOB value. Since drawback and export incentives were payable with reference to the FOB value actually realised, and the declared FOB value remained unaffected by any customs re-valuation, the foundation for the adverse consequences disappeared. The impugned order rested on an unsustainable premise and could not be maintained.

Conclusion: The consequential confiscation, fine, penalties and re-determination of export incentives were set aside.

Final Conclusion: The appeals succeeded and the impugned order was annulled, with consequential relief flowing to the appellants.

Ratio Decidendi: Customs authorities may determine assessable value for assessment purposes under the valuation law, but they cannot alter the contractually agreed FOB transaction value of exported goods; once that premise fails, all consequences founded on the re-determined value fail as well.

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