Export valuation disputes require proof of under-invoicing under Section 14 before confiscation or penalty can stand.

Export undervaluation must be assessed under the statutory valuation criteria in Section 14 of the Customs Act, 1962, and not by comparing export price with domestic sale price alone. The note states that confiscation and penalty cannot be sustained unless the department proves, on evidence, the correct export value and the extent of any under-invoicing. It also notes that sample supplies may affect the agreed price and must be considered in valuation. On the stated record, the finding of violation and penalty was unsustainable, and the matter was remanded for fresh adjudication on valuation and penalty.

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Issues: Whether the export goods were under-valued and whether the confiscation and penalty action could be sustained without examining the valuation criteria under Section 14 of the Customs Act, 1962 and without establishing the extent of under-invoicing.

Analysis: The adjudicating authority suspected undervaluation by comparing the export price with the domestic sale price, but did not examine the export valuation question in the light of Section 14 of the Customs Act, 1962. The order also did not record a finding as to the correct export value or determine the degree of under-invoicing on evidence, although such determination was necessary before invoking confiscation and penalty provisions. The export was stated to be in the nature of sample supplies, a circumstance relevant to the agreed price, and the burden remained on the department to prove under-valuation with supporting evidence.

Conclusion: The finding of violation and the penalty could not be sustained on the existing record. The matter was set aside and remanded for fresh adjudication after considering Section 14 of the Customs Act, 1962 and determining, on evidence, whether any under-invoicing existed and to what extent.

Final Conclusion: The appeal succeeded to the extent that the impugned order was annulled and the dispute was sent back for fresh decision on valuation and penalty.

Ratio Decidendi: In export valuation disputes, undervaluation must be tested with reference to the statutory valuation criteria and proved by evidence, including the extent of any under-invoicing, before confiscation or penalty can be upheld.

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