2026 (1) TMI 440 - AT - Customs

Undervalued import declarations and Customs valuation u/rr 5 vs 4, enhancement upheld; no s.111(m) confiscation or s.112 penalty.

Reasonable doubt arose under the Customs Valuation Rules because the declared import values were substantially below contemporaneous import values, and ... Transaction value - Re-determination of the value - contemporaneous data of imports - reasonable doubt about the truth and accuracy of the transaction value by the proper officer - confiscation, imposition of redemption fine and penalty - HELD THAT:- Since the declared values were far lower than the contemporaneous values, the proper officer had reason to doubt the transaction value. When asked, the appellant agreed that the declared values may be rejected and the goods may be assessed at contemporaneous values of imports. This reply was made online to an online query. The submission of the learned counsel that it was a coerced acceptance is meaningless. The appellant responded online sitting in his office and not with someone holding a gun to his head. He could have as well typed on the system that he does not agree and the Bill of Entry may be reassessed and an order may be issued. Thus, we find that the proper officer had reasonable doubt about the truth and accuracy of the transaction value. Once the transaction value is rejected, the value should be re-determined based on the transaction value of identical goods under Rule 4. If such value is not available, then the transaction value shall be based on the transaction value of similar goods under Rule 5. In this case, the transaction value was determined based on the transaction value of similar goods under Rule 5. It is impossible for the appellant to anticipate if the proper officer would reject his transaction value and if so what value he would fix and accordingly file the Bill of Entry. Since the appellant declared his transaction value correctly in the Bill of Entry, the imported goods were not liable to confiscation under Section 111 (m). Consequently, the redemption fine imposed and the penalty under Section 112 also cannot be sustained. Thus, we uphold the re-determination of the value but set aside the confiscation, redemption fine and penalty imposed under the impugned order. The appeal is partly allowed and the impugned order is modified to the extent indicated above. Issues: (i) Whether the rejection of the declared transaction value and re-determination of assessable value under the Customs Valuation Rules, 2007 based on contemporaneous import data was valid; (ii) Whether confiscation of goods and imposition of redemption fine and penalty under Section 111(m) and Section 112 of the Customs Act, 1962 could be sustained where only the value was re-determined.Issue (i): Rejection of declared transaction value and re-determination under Rule 5 of the Valuation Rules.Analysis: Rule 3 makes transaction value the primary assessable value subject to Rule 12 which permits rejection when the proper officer has reasonable doubt about the truth or accuracy of the declared value. Rule 12 allows the officer to seek further information and, if reasonable doubt persists, to reject the transaction value and proceed sequentially under Rules 4–9. Where declared values are significantly lower than contemporaneous imports, the proper officer is entitled to doubt and to re-determine value using transaction value of similar goods under Rule 5. The acceptance by the importer, given in response to an online query and voluntarily declaring an enhanced value, does not negate the officer's statutory power to examine and reject the declared transaction value when reasonable doubt exists.Conclusion: The rejection of the declared transaction value and re-determination of assessable value under Rule 5 is valid and in favour of the Revenue on the valuation point.Issue (ii): Confiscation and imposition of redemption fine and penalty under Section 111(m) and Section 112 where only value was re-determined.Analysis: Section 111(m) targets goods that do not correspond with the bill of entry in value or other particulars. Confiscation and penalties under Section 112 require that the goods do not correspond to declarations in substance (description, quantity, quality) or that there is mis-declaration beyond mere variation in assessed value. Where the imported goods correspond to the declared description and parameters and the only change is the reassessed value after proper exercise of Rule 12 and Rule 5, confiscation and statutory penalties for non-correspondence are not justified. Thus, confiscation, redemption fine and penalty cannot be sustained solely on account of re-determination of value when goods otherwise match the bill of entry.Conclusion: Confiscation, redemption fine and penalty are not sustainable and the decision on these points is in favour of the Assessee.Final Conclusion: The appeal is partly allowed by upholding the re-determined assessable value while setting aside confiscation, redemption fine and penalty, resulting in a split outcome that affirms valuation but rescinds punitive measures against the importer.Ratio Decidendi: Where a proper officer, having reasonable doubt about declared transaction value based on contemporaneous import data, rejects the transaction value under Rule 12 and re-determines value under Rule 5, the re-determination is valid; however, confiscation and penalties under Section 111(m) and Section 112 cannot be imposed solely because the assessable value is re-determined if the imported goods otherwise correspond to the bill of entry.