No Stranger to Contracts, Including Customs Officer Cannot Modify FOB Value of Goods: CESTAT [Read Order]

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has stated that no stranger to the contract, including any Customs officer has any right to interfere with the Free on Board ( FOB ) value of the goods.

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At Tughlakabad's Inland Container Depot, the three exporters submitted shipping bills for their clothing exports. The commodities were confiscated on suspicion of being overpriced, but they were later temporarily released on bond and permitted to be exported. The assessee, JBN Apparels Pvt. Ltd., presented written representations and appeared in person at hearings despite not having to give a show-cause notice. All procedures were dropped when the Joint Commissioner issued the original order.

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The contested order was issued by the Commissioner (Appeals), who accepted the valuation for each shipping bill and released the bonds and bank guarantees related to the redemption penalty and fine. Nevertheless, he remanded the case to the Joint Commissioner, ordering that the permissible export profits in the eight shipping invoices be recalculated in light of the investigation and the evidence that the exporters had available. Before the Tribunal, the assessee has contested the Commissioner's (Appeals) ruling.

The two member  bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has stated that there is a privity of contract between the buyer and the seller and they alone can decide the terms of contract and in case of non-compliance by one, the other can seek to enforce it. The consideration or the transaction value cannot be modified by any stranger to the contract including any officer.

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The Tribunal noted that no Customs officer has the authority to disregard the FOB value and determine drawback based on any other value he determines, and that the Central Government has the authority to notify rates of drawback. If the rates of drawback are expressed as a percentage of FOB value, drawback should be paid appropriately.

The bench allowed the appeal, ruling that the entire investigation, the SCN that followed, and the adjudication proceedings gave the false impression that the Customs officers had the authority to change the FOB value or that the drawback, MEIS, and ROSL, which must be paid as a percentage of FOB according to the drawback schedule and the FTP, could instead be paid on a different value that the officers decided.

To Read the full text of the Order CLICK HERE

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