Transaction value in export valuation prevails over moisture variation, and non-disclosure of relied-upon documents breaches natural justice.

Export valuation under the Customs Act had to be based on transaction value where the dispute concerned only moisture variation and not the genuineness of the sale. The departmental moisture test could not displace the declared value without valid reasons, and duty was required to be worked out on the transaction value. The assessment was also unsustainable because the exporter was not furnished the relied-upon laboratory report and other materials, amounting to a breach of natural justice. The impugned order was set aside and the matter remanded for fresh adjudication after disclosure of the relevant documents and compliance with procedure.

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Issues: (i) whether the export value and duty were to be determined on the basis of the declared transaction value or on the basis of the moisture variation reflected in the departmental test report; and (ii) whether the assessment could be sustained when relied-upon documents were not furnished to the exporter.

Issue (i): whether the export value and duty were to be determined on the basis of the declared transaction value or on the basis of the moisture variation reflected in the departmental test report

Analysis: The dispute was confined to moisture content and not to the contracted price or the genuineness of the export transaction. The value of export goods under Section 14 of the Customs Act is the transaction value, and rejection of such value requires valid and cogent reasons. Where the export duty is ad valorem, the relevant factor is the value actually realised, not the quantity variation arising from moisture adjustments. The circular relied upon also supports finalisation on transaction value where the contractual tolerance is not breached and the sale proceeds match the invoice value.

Conclusion: The transaction value could not be rejected merely on the basis of the departmental moisture test, and the duty was required to be worked out on the transaction value.

Issue (ii): whether the assessment could be sustained when relied-upon documents were not furnished to the exporter

Analysis: The impugned order itself recorded that the exporter was not supplied with the relied-upon laboratory report and other materials used against it. Non-supply of relied-upon documents and failure to follow the prescribed procedure before rejecting the declared moisture amounted to violation of the principles of natural justice. Since the assessment was made without furnishing the foundational material, the order could not be sustained in its present form.

Conclusion: The assessment was vitiated for breach of natural justice and had to be set aside.

Final Conclusion: The appeal succeeded to the extent that the impugned order was set aside and the matter was sent back for fresh adjudication after compliance with the required procedure and disclosure of relied-upon documents.

Ratio Decidendi: In export valuation, transaction value cannot be displaced on the basis of moisture variation alone unless supported by valid reasons and a procedure compliant with natural justice, including supply of the relied-upon material.

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