Customs Valuation Rejected for Timber Import: CESTAT Quashes Customs Duty Demand for Non-Compliance with Rule 12 [Read Order]

The Chennai Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside the enhanced customs valuation on timber imports after finding that the department rejected the declared value without meeting the requirements of Rule 12. It held that reliance on a single unrelated Bill of Entry and failure to share reference documents with the importer violated due process. Accordingly, the Customs duty demand was quashed and the appeals were allowed with consequential relief.

The Appellant, M/s. Fine Wood Products Pvt. Ltd., filed appeals challenging the Order in Appeal Nos. 265 to 279/2015 (CXA – II) dated 22.09.2015, which upheld the rejection of the Appellant's declared transaction value for imported Gurjan Round Timber Logs and the redetermination of duty based on the residual method under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007).

The Appellant imported Gurjan Round Timber Logs from Myanmar through Cuddalore Port and filed Bills of Entry for customs duty assessment. The department, upon verifying data from similar imports through Tuticorin Port and NIDB, found the recorded price to be higher than the appellant's declared value. Alleging lack of evidence confirming the accuracy of the declared value, the department rejected it under Rule 3(1) read with Rule 12 of the Customs Valuation Rules, 2007, and redetermined the value using the residual method under Rule 9.

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The Rule 12 of the Customs Valuation Rules, 2007 explained that: Rejection of declared value.

“(1) When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any imported goods, he may ask the importer of such goods to furnish further information including documents or other evidence and if, after receiving such further information, or in the absence of a response of such importer, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such imported goods cannot be determined under the provisions of sub-rule (1) of rule 3.

(2) At the request of an importer, the proper officer, shall intimate the importer in writing the grounds for doubting the truth or accuracy of the value declared in relation to goods imported by such importer and provide a reasonable opportunity of being heard, before taking a final decision under sub-rule (1).”

Differential duty on 15 Bills of Entry was paid by the appellant under protest. A Show Cause Notice was issued to vacate the protest. The Original Authority confirmed the duty amounts under Section 28of the Customs Act, 1962. The Commissioner (Appeals) upheld this order, prompting the appellant to file these appeals before the Tribunal.

On the other hand, section 28 of the Customs Act, 1962 explained that: Notice for payment of duties, interest, etc.

“When any duty has not been levied or has been short-levied or erroneously refunded, or when any interest payable has not been paid, part paid or erroneously refunded, the proper officer may, -(a)in the case of any import made by any individual for his personal use or by Government or by any educational, research or charitable institution or hospital, within one year;(b) in any other case, within six months, from the relevant date, serve notice on the person chargeable with the duty or interest which has not been levied or charged or which has been so short-levied or part paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice:”

The Counsel for the Appellant, N. Viswanathan, argued that the Original Authority failed to comply with Rule 12 of the Customs Valuation Rules by not informing them of the reasons for doubting their declared value. The revenue's doubt was based on a single Bill of Entry beyond the 3-month period mandated under Rule 5, which was not provided to the appellant as required by law.

The Counsel also stated that the redetermination under Rule 9 was improper as the valuation process must be followed sequentially per statutory provisions and Supreme Court judgments. Since contemporaneous values for similar goods existed, the authority should have determined the price under Rule 5, not Rule 9.

Further, the Counsel stated that the appellate authority also ignored Rule 5(ii) read with Rule 4(iii), which mandates adoption of the lowest value when multiple transaction values exist. Despite the appellant producing data showing the lowest values, it was rejected. There was no allegation of misdeclaration warranting value enhancement, rendering the citations relied upon by the Appellate Authority untenable. The counsel prayed for allowing the appeal with consequential relief.

On the other hand, the Counsel for the Respondents, O.M. Reena, Authorized Representative, reiterated the findings contained in the impugned order and prayed for the rejection of the appeals filed by the Appellant.

The Tribunal, consisting of Judicial Member, Ajayan T.V., and Technical Member, M. Ajit Kumar, heard and reviewed the matter filed by the Appellant.

The Tribunal, after hearing the submissions made, found the valuation procedure fundamentally flawed. The department relied on B.E. No. 9510941 dated 07.03.2013 (reference value Rs. 24,397.56 per CBM) for BOEs 1-9, and NIDB database for BOEs 10-15, but failed to share any BOE or invoice with the importer, denying them the opportunity to defend their case on parameters like quality, grade, quantity, or country of origin.

The Tribunal also held that Rule 12's Clause (iii) permits doubting declared value based on significantly higher values for identical or similar goods imported at about the same time in comparable quantities. However, the revenue failed to demonstrate these parameters, relying solely on one invoice. The Tribunal observed the phrase: "one swallow does not make a summer."

Further, the Tribunal relied on the Supreme Court's judgment in Century Metal Recycling Pvt. Ltd. & Another Vs Union of India & Ors. [2019 (367) E.L.T. 3 (S.C.)], which emphasized that Rule 12 requires the proper officer to communicate grounds for doubting the declared value in writing and provide opportunity of hearing and these requirements were not satisfied.

Thus, the Tribunal set aside the impugned order and allowed the appeals with consequential relief. The Order was pronounced in open court on 11.11.2025.

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