Dept Fails to Re-test Samples Examined by Govt Valuer: CESTAT Quashes Penalties for Lack of Evidence in Precious Stones Over-Invoicing [Read Order]

The Kolkata Bench ofCustoms, Excise & Service Tax Appellate Tribunal (CESTAT) set aside penalties imposed on a government-approved valuer in an alleged precious stones over-invoicing case, in the absence of evidence and stated that the samples examined by the valuer were never sent for re-testing to any authorized agency.https://www.taxscan.in/tags/penalties

The Appellant, Amit Bhutoria, a Government approved valuer, filed appeals against penalties imposed under Sections 112(a)(iii) and 114AA of the Customs Act, 1962, as upheld by the Commissioner of Customs (Appeals) vide Order-in-Appeal Nos. KOL/CUS/AIRPORT/KS/495/2023 and KOL/CUS/AIRPORT/KS/494/2023 both dated 30.06.2023 received intelligence that importers were over-invoicing inferior quality stones declared as “precious/semi-preciousstones” from Hong Kong and Dubai to facilitate trade-based money laundering. Since no customs duty applied and IGST was nominal, high-value declarations enabled illegal money transfer out of India. Investigations were initiated against imports by M/s. Gaurik Trading Private Limited and M/s. Destiny (Star) India Private Limited through Kolkata Airport.

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The investigating officers concluded that the Appellant connived with others to facilitate clearance of mis-declared goods by certifying over-invoiced values and incorrectly describing inferior quality stones as precious/semi-precious stones for extra monetary consideration violating Sections 14 and 46 of the Customs Act, 1962.

The Section 46 of the Customs Act, 1962 explained that: Entry of goods on importation.

“The importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing [in such form and manner as may be prescribed] [Substituted 'in the prescribed form' by Finance Act, 2018 (Act No. 13 of 2018), dated 29.3.2018.]:

Provided that if the importer makes and subscribes to a declaration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof (a) to examine the goods in the presence of an officer of customs, or (b) to deposit the goods in a public warehouse appointed under section 57 without warehousing the same.”

Show Cause Notices were issued proposing penalties under Sections 112(a)(iii), 112(b)(iii) and 114AA. The Joint Commissioner of Customs Adjudication Cell (Airport & A.C.C.), confirmed penalties totaling Rs. 1,80,00,000/- (Rs. 60,00,000/- under Section 112(a)(iii) and Rs. 1,20,00,000/- under Section 114AA across both orders. On appeal, the Commissioner of Customs (Appeals) upheld penalties under Sections 112(a)(iii) and 114AA but set aside penalties under Section 112(b)(iii). The appellant filed these appeals before the tribunal which were heard together.

The Counsel for the Appellant, V.N. Dwivedi and Smt. Jayanti Char, submitted that the samples from consignments he examined were never sent to Geological Survey of India (GSI) or Government valuer Sunil Verma for re-examination, and the goods he valued under three Bills of Entry (semi-precious tourmaline and ruby rough stones) were cleared by Customs based on the Department's own assessment, not his valuation.

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The Counsel argued that the samples examined were different from those tested by GSI and the Government valuer, and the SCN failed to explain why his samples were not tested. He denied admitting to over-valuation or receiving extra consideration in his Section 108 statement, calling the findings perverse and baseless and submitted that he acted professionally in the presence of Customs Officers with no evidence of deriving benefits, having prior knowledge of fraud, or conniving with importers.

Further, the Counsel relied on Meticulous Forwarders v. Commissioner of Customs [2025 SCC ONLINE CESTAT 2048 (Tri)] arguing that Section 114AA was not attracted as he never issued certificates for goods' description or composition, and the penalty exceeded the prescribed limit.

On the other hand, the Counsel for the Respondent, Ashwini Kr. Choudhary, Authorized Representative, reiterates the findings in the impugned orders.

The Tribunal consisted of Judicial Member, R. Muralidhar and Technical Member, K. Anpazhakan, heard and reviewed the matter filed by the Appellant.

The Tribunal, after considering the submissions made, found that Section 112(a)(iii) requires proof that the appellant's actions rendered goods liable for confiscation, while Section 114AA requires proof of intentionally making false statements or submitting incorrect documents and samples from consignments examined by the appellant were never sent to GSI or Government valuer Sunil Verma for testing.

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The Tribunal also stated that the investigation relied on "stones thrown on the roadside." which were different from those examined by the appellant. The Department cleared goods based on its own assessment, not the appellant's valuation. The appellant did not value goods of any importers listed in the investigation, confirming that goods he examined and those tested by GSI/Government valuer were not the same.

Further, the Tribunal found no evidence that the appellant derived benefits, received extra consideration, had prior knowledge of fraud, or connived with importers, and noting the absence of corroborative evidence linking goods examined by him with those in the investigation, the Tribunal held that essential ingredients for imposing penalties under both sections were absent.

Thus, the Tribunal set aside the penalties imposed and allowed the appeals with consequential relief. The Order was pronounced in the open court on 02.12.2025.

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