CESTAT Rules Customs Cannot Reject Declared Export Price with 11% Mark-Up Absent Evidence; Transaction Value Must be Accepted in Iron Ore Duty Case [Read Order]

The Customs, Excise andService Tax Appellate Tribunal (CESTAT) Hyderabad held that Customs authorities cannot arbitrarily reject the declared export price of iron ore fines by applying an 11% mark‑up without substantive evidence, and the transaction value corroborated by the sale contract and Bank Realization Certificate (BRC) must be accepted unless cogent reasons are recorded for its rejection.

The appellant, S.K. Sarawagi & Co. Pvt Ltd, had exported 10,500 WMT of iron ore fines (61% Fe content) to a Hong Kong buyer in October 2010. The declared price of USD 115 per dry metric tonne (PDMT) was provisionally assessed, subject to moisture content and final documentation.

On finalization, the adjudicating authority adopted a higher concurrent price of USD 128 PDMT (based on exports by Rungta Sons Pvt Ltd) and levied duty on excess lumps beyond the 5% tolerance limit, resulting in a demand of ₹2,97,081 with interest.

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The appellant argued that the adjudicating authority had not raised any doubt about the declared transaction value or the Bank Realization Certificate (BRC). They also added that rule 4(2) of the Export Valuation Rules requires adjustments for differences in dates, quality, quantity, and freight, but no such adjustments were made.

They relied on Supreme Court rulings, including Vishal Exports Overseas Ltd (2007), which held that foreign exchange realization and BRC are the primary evidence of transaction value.

On the other hand respondent side reiterated the findings of the Commissioner (Appeals) in the impugned order.

After hearing both sides, the Tribunal observed that the adjudicating authority failed to issue a query memo or provide reasons for doubting the declared value, as mandated under Rule 8 of the Export Valuation Rules, 2007.

They also noted that Supreme Court precedents (Century Metal Recycling, Sanjivani Non Ferrous Trading) emphasize that rejection of transaction value without cogent reasons is impermissible.

The bench of A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) held that the rejection of transaction value was not proper, legal, or correct. The impugned order was set aside, and the matter was remanded to the assessing officer to finalize the assessment strictly based on the transaction value reflected in the BRC.

Accordingly, the appeal was allowed.

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