Second Enhancement of Assessed Value without New Evidence Unsustainable: CESTAT Sets Aside ₹21.09 Lakh Customs Demand on DTH Components [Read Order]

The Principal bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that once a Bill of Entry has been assessed and the values enhanced by the proper officer, Customs cannot arbitrarily impose a further demand without new evidence. The Tribunal set aside the customs duty demand of Rs 21.09 lakhs on DTH components.

The appeal arises from an order passed by the Commissioner of Customs (Import & General), confirming a demand of Rs. 21.09 lakh on M/s HR Electronics for alleged undervaluation of imported components of Digital Receiver Sets.

The demand, raised under the proviso to Section 28(1) of the Customs Act, included interest under Section 28AB and a penalty under Section 114A of the Act. The appellant had imported 12 consignments of DTH components between February 2003 and September 2004. The declared CIF values were HK$35 (US$4.5) for 10 consignments and HK$25 (US$3.2) for 2 consignments.

The Directorate of Revenue Intelligence (DRI) initiated an investigation, alleging gross undervaluation. It noted that three other importers, MCBS Ahmedabad, Electronic Enterprises Delhi, and Catvision Products Ltd., had imported similar goods at significantly higher prices, ranging from US$10–12 per unit.

Based on these comparisons and statements recorded under Section 108, the Commissioner rejected the appellant’s declared values and imposed the demand.

Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

The appellant contended that the original Bills of Entry had already been enhanced by the proper officer at the time of assessment. The second enhancement by the Commissioner lacked any new evidence and therefore could not be sustained. It was further submitted that DTH components vary in value based on brand, model, and specifications, and the appellant had correctly declared the transaction values.

The appellant also stated that statements relied upon by the DRI were never admitted under Section 138B, which allows examination and cross-examination, rendering them inadmissible as evidence.

The Revenue argued that the reopening was justified due to gross undervaluation confirmed through contemporaneous imports and corroborative statements. It was submitted that the appellant had a history of regular imports over three years and had admitted undervaluation.

On review, the two-member bench comprising Dr Rachna Gupta (Judicial) and P.V. Subba Rao (Technical) observed that Section 14 of the Customs Act requires valuation based on the price at which goods are ordinarily sold at the time and place of importation.

The Tribunal noted that the proper officer had already enhanced the values at assessment, and there was no explanation as to why those values were incorrect.

Subsequently relied on higher prices of other importers without confronting the original enhancement, and without following Section 138B procedures for statements, was deemed insufficient to justify a second enhancement.

Further, the Tribunal clarified that the proviso to Section 28(1) can be invoked only if non-payment or short payment of duty results from collusion, wilful misstatement, or suppression of facts. The SCN issued in this case failed to establish any such wrongdoing by the appellant.

Accordingly, the Tribunal set aside the entire demand of Rs. 21.09 lakh, along with interest and penalty, holding that the second enhancement without new evidence is legally untenable.