Declared Value of Black Pepper Imports Valid: CESTAT quashes ₹55 Crore Customs Penalty [Read Order]

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has held that the declared transaction value of imported Black Pepper did not warrant any interference, setting aside the Commissioner’s order that had rejected the declared value, and imposed heavy penalties.

Three appeals were heard together since they arose out of a common Order-in-Original passed by the Commissioner of Customs, Tuticorin.

The appeals were filed by Shri Saravanan Palaniappan, Partner of M/s. Sindhu Lakshmi Impex, Shri Malav Rajen Shah, Director of M/s. BNM Global Ventures, and M/s. Sindhu Lakshmi Impex. The dispute originated from the import of 10,79,000 kilograms of Black Pepper from an entity in Sri Lanka.

The Commissioner of Customs, Tuticorin, rejected the declared transaction value, re-determined the same at ₹30,12,86,095 under Rule 3(1) and Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962, and held the goods as “prohibited” for not meeting the Minimum Import Price (MIP) of ₹500 per kg under DGFT Notification No. 21/2015-20.

The Commissioner ordered confiscation under Sections 111(m) and 111(o) and imposed penalties aggregating to ₹55 crores under Sections 112 and 114AA of the Act, leading to the appeal before the Tribunal.

Also Read: Consignment of Prohibited Black Pepper can be ReleasedProvisionally u/s 110-A of Customs Act pending Adjudication: Madras HC

Represented by A. Ashwini Kumar, the appellants argued that the imports were duly assessed under self-assessment, accepted by the proper officer, and therefore could not be revisited through a show cause notice without disturbing the assessment order, citing the Supreme Court ruling in ITC Ltd. v. CCE, Kolkata (2019).

It was contended that the CIF value was above ₹500 per kg, and the inclusion of freight, insurance, and other costs ensured compliance with the DGFT Notification. They argued that the allegation of overvaluation only meant higher duty and GST were paid, resulting in no loss to the exchequer.

It was submitted that Section 111(m) requires mis-declaration, which was absent, and Section 111(o) is inapplicable as there was no post-import condition under the MIP policy.

It was further submitted that penalties under Sections 112, 114A, and 114AA were challenged as unsustainable, relying on the precedents Amrit Foods v. CCE (2005) and Indu Nissan OXO Chemical Industries v. Commissioner of Customs, Kandla (2013).

Represented by Anoop Singh, and Harendra Singh Pal, the Department supported the Commissioner’s order, arguing that the appellants had imported from related parties to circumvent the MIP, and that the declared prices were inflated compared to sales to unrelated buyers in India.

It was contended that such overvaluation amounted to an attempt to bypass the prohibition under the DGFT Notification, justifying confiscation and penalties.

Also Read: CBIC issues Clarifications on GST Rates for Pepper, Raisins,Popcorn, AAC Blocks, and SUVs

The Bench comprising P. Dinesha, Judicial Member and M. Ajit Kumar, Technical Member held that the Commissioner was not justified in rejecting the declared assessable value and treating the goods as “prohibited.” It ruled that the prohibition under the DGFT Notification was conditional and not absolute, since imports were permissible above the MIP threshold.

The Tribunal found no basis for rejecting transaction value solely on the ground of relationship between importer and exporter, particularly when the issue was of overvaluation rather than undervaluation. Import duties and GST had been duly paid, and no loss to the exchequer was established.

Consequently, CESTAT set aside the impugned order, holding that penalties under Sections 112 and 114AA of the Customs Act, 1962 unsustainable.

Thus, the appeals were allowed with consequential relief.

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