TaxTMI 
TaxTMI 
2026 (4) TMI 446
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.... to export 48,000 pairs of ladies slippers to UAE at a price of US$ 5.95 (Rs.406.68) per pair claiming the benefit of Merchandise Exports from India Scheme [MEIS] under the Foreign Trade Policy [FTP] implemented by the Directorate General of Foreign Trade [DGFT] and also claiming drawback. The proper officer at ICD Tughlakabad gave a 'Let Export Order' [LEO] The container was then transported by rail by the custodian to Mundra Port, Gujarat from where it was to be shipped to the destination. 4. When the container was at Mundra Port, officers of the Directorate General of Revenue Intelligence [DRI] stopped the container and examined the goods on 22.9.2019 and found them as declared. However, they felt that the goods were overvalued and so detained them, drew samples and on 1.10.2019, seized them. 5. On 15.10.2019, the Additional Commissioner permitted provisional release of the goods subject to three conditions: (i) Submission of bond for Rs. 1,95,20,760/- (ii) Submission of Bank Guarantee of 10% of the above value (iii) Submission of an undertaking that the exporter will not contest the description and quality of goods covered under the shipping bil....
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....sed by the Additional Commissioner were upheld by the Commissioner (Appeals) in the impugned order. Submissions of the appellant 11. Learned counsel for the appellant made the following submissions: (i) The impugned order is a non-speaking order and the Commissioner (Appeals) neither discussed nor addressed the grounds taken in the appeal before her. (ii) The Commissioner (Appeals) accepted the credibility of the report of Shri Bhatt, the Chartered Engineered and his market enquiry report without giving any findings on the appellant's submissions on the report. (iii) The Commissioner (Appeals) relied on the statement of Shri Bhaskar, Director of the appellant made during the investigation which was subsequently retracted. The statement of Shri Bhaskar made under section 108 of the Act could not have been admitted in evidence without following the procedure prescribed under section 138B of the Act. Reliance is placed on this Tribunal's decision on Surya Wires Pvt. Ltd. versus Principal Commissioner of GST, Raipur [2025-TIOL-736-CESTAT-DEL] (iv) The entire case of the department that the goods were overvalued is based on the statement and the....
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....fficers investigating the matter. 17. Effectively, the Additional Commissioner, held the appellant hostage and said that unless the appellant waived its right to contest whatever DRI may decide after investigation, the goods will not be provisionally released. It is like arresting a person and telling him that he will be released on bail only if he agrees to confess to whatever crimes the prosecution may decide to charge him with and that he would not even defend against the charges. What is FOB Value? 18. We now proceed to decide the question of valuation. The term 'Free on Board' (FOB) value is not defined or used in the Customs Act but it is a commonly understood INCOTERM (the terms used in international commerce). It is the price paid or payable by the buyer to the seller for the goods on the understanding that the seller is free once the goods are put onboard the vessel or aircraft. All risks and costs associated with the goods thereafter such as cost of transport, transit insurance, etc. are on the buyer's account. 19. There are also other INCOTERMS such as C&F (in which the price includes the FOB value and the cost of transport) and CIF (in which the price includ....
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.... the transaction value. Only the duty will be determined as per the value (tariff value or transaction value or some other value determined by the proper officer). Drawback and export incentives 26. Drawback is a scheme under the Customs Act which reimburses duties and taxes incurred in the exported goods. Usually, drawback is given as per the drawback schedule notified by the Central Government. 27. Other incentive schemes such as MEIS are part of the Foreign Trade Policy by the Government and implemented by the DGFT. 28. Drawback, MEIS and most other incentive schemes are given as a percentage of FOB value of the goods and NOT as per the value determined by the proper officer under section 14. These schemes come with an obligation to obtain remittance of the foreign exchange as per the FOB value. For instance, if the FOB value of the export goods is US$ 1,000/- and the proper officer determines the value as US$ 800/- or US$ 1,200/- under section 14 and the Customs Valuation Rules, export duty, if any, has to be paid on the value determined by the proper officer, i.e., US$ 800/- or US $ 1,200/- but drawback and other export incentives will be payable as per the FOB val....
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....ant portion of which reads as follows: "Section 5. Powers of officers of customs. - (1) Subject to such conditions and limitations as the Board may impose, an officer of customs may exercise the powers and discharge the duties conferred or imposed on him under this Act. (1A) Without prejudice to the provisions contained in sub-section (1), the Board may, by notification, assign such functions as it may deem fit, to an officer of customs, who shall be the proper officer in relation to such functions. (1B) Within their jurisdiction assigned by the Board, the Principal Commissioner of Customs or Commissioner of Customs, as the case may be, may, by order, assign such functions, as he may deem fit, to an officer of customs, who shall be the proper officer in relation to such functions. (2) An officer of customs may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of customs who is subordinate to him. Xxxxx" 34. Thus, the Additional Commissioner can exercise powers conferred on him by the Act or exercise powers conferred on his subordinates. No power has been conferred on any off....
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.... the value was correctly re-determined by the Additional Commissioner and upheld by the Commissioner (Appeals) in the impugned order although the re-determination is inconsequential because there is no export duty on the goods. 40. The transaction value was rejected under Rule 8 and redetermined under Rule 6 of the Export Valuation Rules in pursuance of the SCN issued by DRI. The SCN was issued relying on 12 RUDs of which the ones relevant to the redetermination of value are the market enquiry report (RUD 8) and three statements recorded under section 108 (RUD 9,10 and 11). Other RUDs have been included for the sake of completeness. 41. Statements recorded under section 108 of the Act are relevant to prove the facts contained in them if they are admitted as evidence after following the procedure prescribed under section 138B of the Act which reads as follows: Section 138B. Relevancy of statements under certain circumstances. - (1) A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under thi....
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....etermination of 'estimated FOB value' as chartered engineer but since his expertise lay elsewhere, he went to the market enquired about prices of similar goods in the market, searched on internet and came to the conclusion that the market price was about Rs. 35/- per pair, adjusted it to Rs. 21/- per pair after accounting for some charges. He concluded that Rs.21/- per pair to be a fair value. 45. Needless to say, that there is no procedure for determining FOB value or fair value in either section 14 of the Act or under the Export Valuation Rules. The transaction value (FOB) shall be the value under section 14 unless the proper officer rejects it under Rule 8 of the Export Valuation Rules and if it is rejected, the value should be redetermined sequentially by comparison (Rule 4), computation (Rule 5) and only if neither is possible can the residual method (Rule 6) can be resorted to. Fair Value or estimated FOB values do not find any place either in the Export Valuation Rules or under section 14. 46. The market enquiry was not conducted by either the officers nor was the exporter involved. It was outsourced to a Chartered Engineer with a completely different background. He si....
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....ive times the value of the goods or services or technology in respect of which such declaration, statement or document had been submitted, whichever is more. (4) Where any person, on a notice to him by the Adjudicating Authority, admits any contravention, the Adjudicating Authority may, in such class or classes or cases and in such manner as may be prescribed, determine, by way of settlement, an amount to be paid by that person. (5) A penalty imposed under this Act may, if it is not paid by any person, be recovered by any one or more of the following modes, namely:-- (a) the Director General may deduct or require any officer subordinate to him to deduct the amount payable under this Act from any money owing to such person which may be under the control of such officer; or (b) the Director General may require any officer of customs to deduct the amount payable under this Act from any money owing to such person which may be under the control of such officer of customs, as if the said amount is payable under the Customs Act, 1962 (52 of 1962); or I the Director General may require the Assistant Commissioner of Customs or Deputy Commissioner....
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....paid or recovered, as the case may be. (8) Where any contravention of any provision of this Act or any rules or orders made thereunder or the foreign trade policy has been, is being, or is attempted to be, made, the goods (including the goods connected with services or technology) together with any package, covering or receptacle and any conveyances shall, subject to such conditions and requirement as may be prescribed, be liable to confiscation by the Adjudicating Authority. (9) The goods (including the goods connected with services or technology) or the conveyance confiscated under sub-section (8) may be released by the Adjudicating Authority, in such manner and subject to such conditions as may be prescribed, on payment by the person concerned of the redemption charges equivalent to the market value of the goods or conveyance, as the case may be. Rule 11 of Foreign Trade (Regulation) Rules 1993 11. Declaration as to value and quality of imported goods. -On the importation into, or exportation out of, any customs ports of any goods, whether liable to duty or not, the owner of such goods shall in the Bill of Entry or the Shipping Bill or any oth....