Quotations from Unrelated Suppliers Not a Valid Basis for Customs Revaluation: CESTAT [Read Order]

The Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, ruled that quotations from unrelated suppliers cannot form a valid basis for revaluation of imported goods under the Customs Valuation Rules, 2007.

MMM Overseas Pvt. Ltd., the appellant, imported iron and self-drilling screws from China. Following a search at the residence and godown of its Director, Mahesh Sabharwal, the Directorate of Revenue Intelligence (DRI) initiated proceedings alleging undervaluation of imports. The revenue relied on quotations retrieved from the appellant’s email account and invoices from another importer, Sagar Impex, to re-determine the transaction value.

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The adjudicating authority rejected the declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and reassessed it under Rule 5 using comparable values allegedly found in the email records of Sagar Impex. The Principal Commissioner of Customs confirmed the revaluation, confiscated the goods with an option for a redemption fine, and imposed penalties on the company and its director.

The appellant’s counsel argued that the quotations relied upon were from suppliers with whom it had no commercial dealings and that email printouts lacked evidentiary value in the absence of a certificate under Section 138C of the Customs Act. It also argued that the statements of Khusagar Aggarwal, the proprietor of Sagar Impex, were inadmissible since he was not examined or cross-examined during the proceedings.

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The department’s counsel argued that the declared values were suspiciously low and that quotations and documents from Sagar Impex, along with admissions by Aggarwal, justified the revaluation. They also argued that the statements under Section 108 of the Customs Act had judicial standing and that the request for cross-examination was unnecessary.

The two-member bench comprising Justice Dilip Gupta (President) and P. Anjani Kumar (Technical Member) observed that the Panchnama drawn on the date of search did not mention any email printouts. The only reference to such documents was found in a subsequent statement of Mahesh Sabharwal, which failed to establish the source or reliability of the printouts.

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The tribunal held that documents from unrelated suppliers cannot be used for customs valuation unless supported by direct relevance and verified through proper procedures. It emphasized that Section 138C of the Customs Act mandates a certificate for electronic evidence, and its absence rendered the email printouts inadmissible.

The tribunal also observed that statements from third parties like Khusagar Aggarwal, made in different proceedings, cannot be relied upon unless the person is produced as a witness and subjected to cross-examination, in line with the principles of natural justice and the requirements of Section 138B of the Customs Act. The tribunal found that once this inadmissible evidence was excluded, there was no valid basis to reject the transaction value declared by the appellant.

The tribunal set aside the impugned order, quashed the penalties and redemption fine, and allowed the appeals filed by the appellant and its Director, Mahesh Sabharwal.

To Read the full text of the Order CLICK HERE

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