TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1816
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....made of cotton and Men's Pullover Knitted made of Cotton to Dubai, UAE. On the basis of some information, officers of the Customs Preventive put the goods on hold and examined them on 17.10.2023 under a Panchnama and found the goods were as per the packing list, invoice and shipping bills but it appeared to the officers that they were overvalued. Hence, they were detained under a detention memo dated 17.10.2023 under section 110 of the Customs Act, 1962 [Act] and investigation was conducted. They also drew samples of the garments and sent them for testing to the Central Revenue Control Laboratory [CRCL] 3. On verification by the jurisdictional GST officers, both the respondent and it's supplier M/s. Mahajan Fabrics Pvt. Ltd. were found to existing and operating at their registered premises. 4. However, as the officers felt that the goods were prima facie overvalued, they conducted a market enquiry and re-determined their value as per rule 6 of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 [Valuation Rules] . The market enquiry was conducted in the presence of the owner of the Respondent and the G card holder of its Customs broker. 5. On tests b....
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....sing penalty under section 114AA as no fraudulent exports were shown on papers. 8. The Commissioner (Appeals) decided as follows: (a) Since the goods were detained under a detention memo and were not seized under section 110, they could not be confiscated under section 113. Confiscation cannot be an action independent of seizure. Since there was no seizure and only a detention through a Detention Memo, the confiscation under section 113 was not correct. Seizure must be done only on reason to believe which is duly documented. (b) Since the confiscation fails, the penalty under section 114 AA 'which is contingent upon the confiscation' also fails. (c) Since the market enquiry was only on a verbal statement and no other corroborative evidence, the re-determination of the value was not sustainable. Further, the Bank Realisation Certificates [BRC] were obtained by the respondent covering the full value of the goods as declared in the Shipping Bills. No evidence was produced by the department to show that the invoices were fake or fabricated or that any other relationship existed between the exporter and the overseas buyer which influenced the price. ....
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.... 1973 and hence such goods would be liable to confiscation under section 113. v) The Commissioner (Appeals) erred in relying on the BRCs as the receipt of BRCs does not validate the declared value. vi) The Commissioner (Appeals) erred in not discussing the composition of the fabric as revealed during test by CRCL and the consequential change in the serial number in Drawback and ROSCTL. vii) The impugned order may be set aside the appeal may be allowed. Submissions on behalf of the Respondent 12. Shri Prem Ranjan Kumar, learned counsel for the Respondent vehemently supported the impugned order and submitted as follows: i) To re-determine the value, the declared value must, in the first place, be rejected under rule 8 of the Valuation Rules. This rule requires the officer to first have a reason to doubt the truth or accuracy of the declared value and if he entertains such a doubt, he should call for further information and on receiving such information, if he still has a reasonable doubt, he can reject the transaction value. The Joint Commissioner or the proper officer did not follow this procedure to reject the transaction value and hence th....
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....d rejects it and re-determines the value following some other method. In such a case, while the transaction value (FOB value) between the buyer and the seller will not change, value under section 14 will not be the transaction value but it will be some other value determined by the officer. It would be profitable to read section 14 of the Act and the Export Valuation Rules to fully examine the scope of this re-determination of the value. These read as follows. Section 14. Valuation of goods. (1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf: Provided that such transaction val....
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....version of Indian currency into foreign currency or foreign currency into Indian currency; (b) "foreign currency" and ''Indian currency" have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999). Valuation Rules 1. Short title, commencement and application.- (1) These rules may be called the Customs Valuation (Determination of Value of Export Goods) Rules, 2007. (2) They shall come into force on the 10th day of October, 2007. (3) They shall apply to the export goods. 2. Definitions. - (1) In these rules, unless the context otherwise requires, - (a) "goods of like kind and quality" means export goods which are identical or similar in physical characteristics, quality and reputation as the goods being valued, and perform the same functions or are commercially inter-changeable with the goods being valued, produced by the same person or a different person; and (b) "transaction value" means the value of export goods within the meaning of sub-section (1) of section 14 of the Customs Act, 1962 (52 of 196....
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.... goods with which they are being compared, (iv) difference in domestic freight and insurance charges depending on the place of exportation. 5. Computed value method. - If the value cannot be determined under rule 4, it shall be based on a computed value, which shall include the following:- (a) cost of production, manufacture or processing of export goods; (b) charges, if any, for the design or brand; (c) an amount towards profit. 6. Residual method. - (1) Subject to the provisions of rule 3, where the value of the export goods cannot be determined under the provisions of rules 4 and 5, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules provided that local market price of the export goods may not be the only basis for determining the value of export goods. 7. Declaration by the exporter.- The exporter shall furnish a declaration relating to the value of export goods in the manner specified in this behalf. 8. Rejection of declared value.- (1) When the proper officer has reason to doubt the truth or accuracy ....
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....cer and NOT THE EXPORTER who can reject the transaction value and re-determine it following some other method. It would be impossible for the exporter to anticipate if the proper officer would reject his transaction value and if so, what value the proper officer would fix and following which method and accordingly file the Shipping Bill. All that the exporter can do is truthfully declare the transaction value in the Shipping Bills. 19. Once the exporter declares the transaction value, if the proper officer wants to re-determine it and fix some other value, he must, in the first place, reject the transaction value under rule 8. This rejection itself has to be in two stages- in the first place, if he has some reason to doubt, he can call for further information from the exporter and if no such information is received or after receiving the information if the proper officer still has reasonable doubt about the truth and accuracy of the declared transaction value, he can reject it. In this case, the initial doubt of the proper officer was based on his opinion that the goods were of low value. If he had such a doubt, he should have, in the first place, called for additional informati....
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.... allowed - (a) *** (b) in respect of any goods the market-price of which is less than the amount of drawback due thereon; (c) where the drawback due in respect of any goods is less than fifty rupees. (2) Without prejudice to the provisions of sub-section (1), if the Central Government is of opinion that goods of any specified description in respect of which drawback may be claimed under this Chapter are likely to be smuggled back into India, it may, by notification in the Official Gazette, direct that drawback shall not be allowed in respect of such goods or may be allowed subject to such restrictions and conditions as may be specified in the notification. 25. Section 76 (1)(b) clearly conceives that the market value of the goods, i.e., the price at which such goods are sold in Indian market could be lower and the export prices could be much higher. An illustration will explain the legal position beyond any shadow of doubt. Goods, which are worth, say Rs. 100/- are exported for say Rs. 200/- and the drawback rate is 10%. The exporter would get drawback of Rs. 20/-(10% of Rs. 200/-). If the same goods are exported, say at Rs. 800/-, the export ....
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....schedules by the Joint Commissioner must be restored. Confiscation of the goods and redemption fine 32. The Commissioner (Appeals) held that seizure of goods under section 110 is a pre-requisite for confiscation of goods and since there was no seizure memo but only a detention memo, confiscation of the goods under section 113 and the consequential redemption fine under section 125 cannot be sustained. 33. A finding has also been recorded that the reasonable doubt that the goods were liable to confiscation is a pre-requisite for seizing the goods and the doubt is not evident. 34. Learned authorised representative, on the other hand, points out that seizure is not a pre-requisite for confiscation. He further submits that where the goods are already in the custody of the custodian and the customs does not process their clearance because of some investigation, a detention memo is issued giving reasons for the detention. The detention memo in this case clearly indicated the reason for doubt. Although detention is not seizure under section 110, through a series of judicial pronouncements, it has been held that detention should also be treated as seizure in the interest of jus....
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..... If the goods are otherwise available (say, by being in the custody of the custodian), they can be confiscated. A perusal of section 110, 110A, 113 and 126 will clarify the position that seizure is not a pre-requisite for confiscation. They read as follows: Section 110. Seizure of goods, documents and things. - (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods: ***** (2) Where any goods are seized under sub-section (1) and no notice in respect thereof is given under clause (a) of section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: ****** Section 110A. Provisional release of goods, documents and things seized or bank account provisionally attached pending adjudication. - Any goods, documents or things seized or bank account provisionally attached under section 110, may, pending the order of the adjudicating authority, be released to the owner or the bank account holder on taking a bond from him in the proper form with such security and conditions as the ....
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....me being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit: ****** (3) Where the fine imposed under sub-section (1) is not paid within a period of one hundred and twenty days from the date of option given thereunder, such option shall become void, unless an appeal against such order is pending. ****** Section 126. On confiscation, property to vest in Central Government. - (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government. (2) The officer adjudging confiscation shall take and hold possession of the confiscated goods. 39. Nothing in any of the above sections stipulates that seizure is a prerequisite for confiscation. Any lingering doubt will be removed if section 126 (2) is examined. It states that 'the officer adjudging confiscation shall take and hold possession of the confiscated goods.' If the goods have already been seized, there is nothing to t....
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....erned, the fact that the export goods were declared as being of cotton but found to be of blended fabric by CRCL is not disputed. Thus, the goods fall under section 113(i). 42. Section 113 (ia) provides for confiscation of any goods entered for exportation under claim for drawback which do not correspond in any material particular with any information furnished by the exporter or manufacturer under this Act in relation to the fixation of rate of drawback under section 75. There is no dispute that the goods were entered for export under claim of drawback and that the goods were found to be of a different fabric than what has been declared and this required a change in the serial number of the drawback schedule. Thus, the goods were liable to confiscation under section 113 (ia). 43. Section 113 (ja) provides for confiscation of any goods entered for exportation under claim of remission or refund of any duty or tax or levy to make a wrongful claim in contravention of the provisions of this Act or any other law for the time being in force. The respondent claimed refund of state levies (ROSCTL) and that the fabric of the export goods did not correspond to the declaration and this ....
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....on 114AA is not contingent upon the confiscation of the goods under section 113 and it has nothing to do with section 113. Section 114AA reads as follows: Section 114AA. Penalty for use of false and incorrect material. - If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods. 49. A perusal of this section makes it clear as crystal that penalty under section 114AA can be imposed if there was a mis-declaration with knowledge and has nothing to do with confiscation of the goods under section 113. The Commissioner (Appeals) clearly fell in error in holding that penalty under section 114AA is dependent on the confiscation under section 113. According to the Joint Commissioner, the respondent had mis-declared both the value of the goods and the nature of the fabric of which the garments were made. We have held in favour of the respondent on the question of value and there is no dispute that the nature of....
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....r determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty five per cent of the penalty so determined; (iii) in the case of any other goods, to a penalty not exceeding the value of the goods, as declared by the exporter or the value as determined under this Act, whichever is the greater. 51. The declared FOB value of the goods was Rs.10,88,05,179/- in the four shipping bills and the penalty imposed by the Joint Commissioner under section 114 (iii) was only Rs. 2,00,000/- way below the value of the goods. The Commissioner (Appeals) did not discuss this penalty when setting it aside. 52. In view of the undisputed fact that the nature of the fabrics in the export goods were mis-declared and consequently, they were liable to confiscation and the respondent's actions rendered them liable to confiscation, the penalty of Rs. 2,00,000/- under section 114 (iii) imposed by the Joint Commissioner must be restored and the impugned order must be set aside to this extent. 53. To sum up: a) The re-determination of the FOB value of the export goods by the Joint Commissioner has been correctly set aside by the Commis....