TaxTMI 
TaxTMI 
2026 (9) TMI 1677
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....Act, 1962, with an option being extended to the appellant for redemption thereof solely for the purpose of re-export upon payment of a redemption fine of Rs.20,00,000/- under Section 125 of the said Act, besides imposition of a penalty of Rs.20,00,000/- under Section 112(a) ibid. 2. The facts of the case are that the appellant had imported DIN 975 Threaded Rods, including goods of Property Class 10.9 and Property Class 4.8, from China and filed Warehousing Bill of Entry No. 5137854 dated 16.10.2025 for warehousing of the said goods. The goods were declared under Customs Tariff Item No. 7318 1900, with a declared assessable value of Rs.35,21,730/-, corresponding to Rs.66.90/- per kg. The import was not intended for clearance for home consumption in India. The goods had been imported against an export order for their subsequent 100% reexport to Poland and were intended to remain under Customs control in a bonded warehouse pending completion of the requisite re-export formalities. 3. At the stage of assessment, the Department entertained a doubt regarding the declared value of the goods in the context of the Minimum Import Price (MIP) applicable to goods falling under the releva....
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....examined with reference to the import documents, declaration, description, quantity and other relevant parameters. Pursuant thereto, the goods were physically opened and examined on 26.11.2025 in the presence of the appellant's Customs Broker, in terms of the Group/RMS instructions. The physical examination, however, did not disclose any discrepancy in the declared description, quantity or other particulars of the imported goods. 7. Notwithstanding the aforesaid position, the Department proceeded on the basis that the declared value was below the MIP prescribed under DGFT Notification No.55/2023 dated 03.01.2024. A Show Cause Notice under Section 124 of the Customs Act, 1962 was consequently issued on 19.12.2025 in respect of the subject Warehousing Bill of Entry. In the said notice, it was recorded that the declared value of the goods was approximately Rs.66.90 per kg., whereas, in terms of the aforesaid DGFT Notification, the CIF value of the subject goods was required to be Rs.129/- per kg. or above. The notice proceeded on the premise that, since the declared CIF value was below the prescribed threshold, the goods became prohibited within the meaning of Paragraph 2.46 of the....
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....ion under Section 125 to redeem the confiscated goods solely for the purpose of re-export, upon payment of a redemption fine of Rs.20,00,000/-. In addition thereto, a penalty of Rs.20,00,000/- under Section 112(a) of the Customs Act, 1962 was imposed upon the appellant-importer. 9. Aggrieved by the aforesaid findings and the consequential liabilities fastened upon it, the appellant-importer has preferred the present appeal before the Tribunal, assailing, inter alia, the rejection and redetermination of the declared assessable value of the goods in question, the treatment of the goods as prohibited notwithstanding their intended warehousing and 100% re-export, the consequential order of confiscation and redemption fine, and the imposition of penalty under Section 112(a) of the Customs Act, 1962. 10. During the course of hearing, the Ld. Advocate representing the appellant-importer made detailed submissions, which inter alia are as under: - I. DECLARED TRANSACTION VALUE COULD NOT HAVE BEEN REJECTED MERELY BECAUSE IT WAS BELOW MIP (i) Section 14 of the Customs Act, 1962 and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 constitute ....
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....ld be applicable only when the goods are imported for the purpose of 'Home Consumption' and not applicable for the goods imported with the sole purpose of re-export. (ii) The impugned order effectively proceeds on the following logic that the declared value was below MIP, which is contrary to the policy and as such, declared value was unreliable and NIDB value was adopted. Such reasoning reverses the statutory sequence. (iii) The question whether the import satisfies a DGFT policy condition is distinct from the question whether the price actually paid or payable constitutes the transaction value under Section 14. The MIP of Rs. 129/kg is, therefore, not itself evidence that the Appellant actually paid Rs. 129/kg or Rs. 142.90/kg to the overseas supplier. (iv) Indeed, if MIP were automatically to constitute customs value, every import below MIP would necessarily constitute undervaluation. Such an interpretation would render the independent statutory machinery contained in Rules 3, 4 and 12 of the Customs Valuation Rules otiose. (v) The Hon'ble Supreme Court has consistently held that the Department must first establish legally sustainable grou....
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....vely challenge the NIDB comparison unless the complete underlying documents are furnished. Therefore, adoption of Rs. 142.90/kg without demonstrating the statutory comparability requirements under Rule 4 is legally unsustainable. IV. THE FINDING UNDER SECTION 111(m) IS UNSUSTAINABLE (i) Section 111(m) applies where the goods do not correspond in respect of value or any other particular with the entry made under the Customs Act. (ii) In the present case, the Appellant declared the actual invoice value. The Department has not established that the invoice was false or that the Appellant paid any amount over and above the declared price. (iii) There is a fundamental distinction between: a. a declaration of a genuine transaction value which Customs subsequently considers unacceptable under the valuation rules; and b. a deliberate misdeclaration of value. (iv) A subsequent enhancement of value by Customs does not ipso facto establish that the importer had mis-declared the value. (v) The Appellant correctly declared the description, quantity, country of origin and invoice particulars. The examination also confirmed th....
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.... value is the primary basis and that only after valid rejection can the subsequent valuation rules be sequentially invoked. Accordingly, once the rejection under Rule 12 fails, the consequential redetermination under Rule 4 and the resultant differential duty also cannot survive. VII. WITHOUT PREJUDICE: WAREHOUSING AND REEXPORT DESERVE DUE CONSIDERATION (ii) The Appellant had filed a Warehousing Bill of Entry and consistently informed the Department that the goods were imported for 100% reexport to Poland. The Department was aware of this position from the very beginning. The goods were never intended to be cleared for home consumption. The Appellant's case is, therefore, materially different from a case where prohibited goods are clandestinely introduced into the Indian domestic market. The purpose of warehousing provisions is precisely to permit imported goods to remain under Customs control without being released for home consumption, subject to fulfilment of statutory conditions. (iii) The Appellant further submits that the re-export aspect should be considered not merely as an equitable factor but as an important circumstance in determining the n....
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....uation enhancement. Once the valuation enhancement fails, there is no basis for treating the enhanced value as the basis for determining the gravity of the alleged offence. XI. PENALTY UNDER SECTION 112(a) (i) The penalty of Rs. 20,00,000/- under Section 112(a) is also unsustainable once the findings under Sections 111(d) and 111(m) are set aside. (ii) The entire penalty order proceeds from the finding that the Appellant's act rendered the goods liable to confiscation. The impugned order itself records that the penalty has been imposed because the goods were held liable to confiscation under Sections 111(d) and 111(m). Thus, the penalty is consequential to the confiscation finding. More importantly, there is no finding of any fraudulent document, concealed payment, deliberate fabrication or clandestine conduct. The Appellant had openly disclosed the nature of the goods; their actual invoice value; their intended use; the export destination; the export order and the proposed warehousing/re-export arrangement. (iii) The Appellant even specifically requested Customs to assess the Bill of Entry without enhancement and, rather than consenting to e....
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....er. Nature and purpose of the import - goods intended exclusively for re-export 14. The first and most fundamental aspect which, in our considered view, appears to have escaped adequate appreciation in the impugned order is the manifest purpose for which the subject goods entered India. It is borne out by the records that the appellant did not file a Bill of Entry for home consumption, but a Warehousing Bill of Entry, and there is nothing on record to suggest that, at any point of time, the goods were intended to be diverted into the domestic market. On the contrary, the appellant consistently disclosed, from the very stage of assessment, that the goods had been imported against an export order and were intended for 100% re-export to Poland, while remaining under Customs control in a bonded warehouse. The export order was also placed before the Department. The subsequent correspondence further records the appellant's specific request that the goods be assessed on the declared value, pointing out that an artificial enhancement thereof would adversely affect the contemplated re-export transaction. In such circumstances, the treatment of the declared value as an attempt to i....
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....echanism, as envisaged under the DGFT Notification No.55/2023 dated 03.01.2024, must likewise be examined in the context in which such a restriction is sought to operate. The evident commercial rationale of the said mechanism is to regulate the entry of such goods into the Indian market and thereby afford protection against the adverse consequences which may follow from their importation at artificially low values. It is amply clear that the rationale loses much of its force where the goods are not destined for the Indian domestic market at all, but are placed in a Customs bonded warehouse under a warehousing entry and are intended, as disclosed from inception, for 100% reexport to Poland. Such goods do not enter the commercial stream available for consumption, use or sale in India; nor is there any material on record suggesting that the appellant sought to circumvent the warehousing controls or divert the goods for home consumption, as already noted hereinbefore. The application of the MIP restriction to the present transaction, therefore, cannot be assumed merely by juxtaposing the declared price with the prescribed threshold. It was incumbent upon the Revenue to establish that t....
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....rence of deliberate misdeclaration without establishing the necessary intervening facts, thus appears to have travelled beyond what the evidentiary record can legitimately sustain. 17. Be that as it may, at the cost of repetition, it must be noted that the goods in question were never meant to be cleared for home consumption in India; rather, their entire commercial trajectory, from the very inception of the proceedings, stood disclosed as one culminating in 100% re-export to Poland. This was not an explanation introduced belatedly in the course of adjudication; it was the consistent stand of the appellant from the commencement of the proceedings, and the said fact has, significantly, also found express acknowledgment in the impugned order itself. The Revenue, therefore, cannot proceed upon a premise contrary to a fact which stands both contemporaneously disclosed and judicially recorded. 17.1. Once the goods are found to have been imported solely for the purpose of re-export and never intended to enter the domestic stream of commerce, the very substratum of the allegation of undervaluation, in the context in which it has been raised in the present proceedings, becomes conspi....