The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) remanded the rejection of a Cost Accounting Standards ( CAS-4 ) certificate in a Special Economic Zone ( SEZ ) valuation matter for reconsideration due to the adjudicating authority’s improper verification of the certificate’s details before rejection.
Sahjanand Medical Technologies Ltd., the appellant is an SEZ unit that was engaged in the supply of goods to buyers located in the Domestic Tariff Area ( DTA ). The customs department alleged the undervaluation of goods sold by the appellant and demanded differential customs duty.
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The customs department rejected the transaction value declared by the appellant stating that the SEZ unit and the DTA buyers were related parties. The department increased the value based on the price of similar goods sold by another SEZ unit, Purple Medical Solutions Pvt. Ltd., located in the same SEZ.
The valuation increase was performed without considering material differences such as the scale of operations, turnover, and product quality between the appellant and the third party. The appellant submitted a CAS-4 certificate to justify the declared value.
The customs authorities rejected the CAS-4 certificate arguing that certain costs such as research and development (R&D) expenses were not included in the cost computation. Aggrieved, the appellant appealed before the CESTAT arguing that the DTA buyer is treated as the importer under the SEZ and Customs Acts making the buyer responsible for filing the Bill of Entry and paying applicable duties.
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The appellant’s counsel claimed that no reassessment of the Bill of Entry was conducted before raising the demand and the SEZ unit and DTA buyers are not related entities for valuation purposes because they operate under different legislative frameworks. The appellant’s counsel argued that the CAS-4 certificate should be accepted as valid since no contrary evidence or alternate price was presented by the customs authorities.
The two-member bench comprising Ramesh Nair (Judicial Member) and Raju (Technical Member) observed the adjudicating authority rejected the CAS-4 certificate due to missing cost components but the appellant was not given a chance to explain.
The tribunal also observed that the adjudicating authority failed to verify details of differences in scale, turnover, and product quality between the appellant and Purple Medical Solutions Pvt. Ltd. before applying the comparable price. So, the tribunal set aside the impugned order and remanded the matter for fresh adjudication.
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