Customs Cannot Reject Declared Value of LED TVs Based on Third-Party Documents Without Independent Evidence: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that Customs authorities cannot reject the declared transaction value of imported LED TVs based solely on third-party documents and assumptions without independent and legally admissible evidence.

ABC Overseas, the appellant, is engaged in the import and trading of goods, including LED TVs and drywall screws. The appellant imported a consignment of unbranded 17-inch and 19-inch LED TVs from Thailand under a Bill of Entry dated 27 January 2018.

Based on intelligence alleging undervaluation, the consignment was subjected to 100 percent examination by the Special Intelligence and Investigation Branch. The examination confirmed that the goods matched the description, quantity, and value declared in the Bill of Entry, commercial invoice, and packing list.

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During further inspection, the back panels of the TVs were opened, and brand stickers such as Samsung and HannStar were found only on the LED panels inside the TVs, while the outer bodies carried no brand markings. The department provisionally released the goods after recording statements and obtaining bonds and bank guarantees.

Subsequently, a show cause notice was issued alleging undervaluation and mis-declaration on the basis of documents recovered in a separate investigation involving another importer.

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Similar allegations were also raised in respect of six earlier Bills of Entry for drywall screws. The adjudicating authority rejected the declared value, re-determined the value, ordered confiscation of goods, and imposed duty, interest, and penalties. Aggrieved by this order, the appellant approached the CESTAT.

The appellant’s counsel argued that the live consignment was examined on a 100 percent basis and found to be fully in accordance with the declared documents. It was argued that the presence of brand stickers on an internal component did not render the entire LED TV a branded product, especially when such branding was not visible unless the product was dismantled.

The counsel argued that reliance on third-party proforma invoices and computer printouts was impermissible as the mandatory requirements of Section 138C ofthe Customs Act were not followed. They also argued that for past imports, the department relied on unrelated third-party data without producing any contemporaneous import evidence.

The revenue counsel argued that investigation revealed undervaluation by comparing declared values with documents recovered during investigation. It was argued that these documents showed higher values and justified rejection of the transaction value under the Customs Valuation Rules. They also argued that extended limitations and penalties were correctly invoked due to deliberate mis-declaration.

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The two-member bench comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) examined the record and observed that the department itself accepted that the goods matched the declared documents during the 100 percent examination.

The tribunal observed that the LED TVs could not be treated as branded products merely because one internal component carried a brand sticker, especially when such branding was discovered only after dismantling. The tribunal explained that certificates of origin issued by a foreign government authority cannot be discarded without evidence of collusion or falsification by the importer.

The tribunal pointed out that electronic records and computer printouts relied upon by the department were inadmissible as the requirements of Section 138C were not complied with. The tribunal also observed that comparison with third-party invoices relating to different importers, suppliers, and periods could not form the basis for rejecting the declared value. In the absence of contemporaneous import data or independent corroborative evidence, rejection of transaction value was not justified.

In view of these findings, the tribunal set aside the rejection of declared value, confiscation of goods, and the demand of duty, interest, and penalties. The appeal was allowed in favour of the appellant.

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