Transaction Value Rejected on Accuracy, Duty on Copper Scrap Re-assessed Based on Similar Imports: CESTAT Upholds Customs Valuation [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that transaction values can be rejected if a reasonable doubt exists, and the duty on copper scrap was reassessed based on similar imports.

M/s Mittal Appliances Ltd., Pithampur, imported copper scrap of the Birch/Cliff variety from the United Arab Emirates. The importer filed Bill of Entry, declaring the value of the imported goods at Rs. 414.54 per kg. The duty was self-assessed based on this declared transaction value, in accordance with Section 17(1) of the Customs Act, 1962, which mandates that importers self-assess the duty payable.

Upon scrutiny, the Customs authorities, through the Indian Customs Electronic Data Interchange System (ICES), raised queries requesting the importer to substantiate the declared value with supporting material or evidence.

The appellant did not furnish any such evidence. Observing that the declared value was significantly lower than contemporaneous imports of similar copper scrap during the period, the proper officer reassessed the value of the imported goods.

In response to the appellant’s request for a speaking order under Section 17(5) of the Customs Act, the Deputy Commissioner issued the Order-in-Original, listing 15 Bills of Entry for imports of copper scrap Birch/Cliff during the period, along with their unit assessable values. The Deputy Commissioner noted that the appellant failed to provide evidence to substantiate the declared transaction value.

The appellant challenged the Deputy Commissioner’s order before the Commissioner (Appeals) and later in this appeal, asserting that the declared transaction value of Rs. 414.54/kg was correct and should have been accepted. Also, there was no evidence that the invoices were fake, fabricated, or that there was a related-party transaction.

The appellant further submitted that the percentage of copper in the comparative Bills of Entry was not specified, and the scrap goods cannot be considered similar, hence valuation based on other imports was inappropriate

The tribunal carefully examined the provisions of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. For the Transaction Value Assessment. The tribunal observed that Valuation Rule 3 prescribes assessment based on the declared transaction value. Valuation Rule 12 allows rejection of the declared value if the proper officer has a reasonable doubt regarding its truth or accuracy.

This doubt may arise from a significant disparity with the value of identical or similar goods imported at the same time. Importantly, the rule does not require proof of fraud, fabrication, or related-party transactions.

In this case, the transaction value was substantially lower than the values of similar imports (ranging from Rs. 465 to Rs. 507/kg). The proper officer had sought evidence from the appellant, but none was provided, justifying rejection under Rule 12.

For the Valuation Based on Similar Goods, the tribunal observed that once the transaction value was rejected, the value had to be determined sequentially under Valuation Rules 4 to 9.

Rule 4 applies to identical goods; since no identical goods were imported during the period, Rule 5 was invoked, which permits valuation based on similar goods. It was noted that the Deputy Commissioner listed 15 contemporaneous Bills of Entry for copper scrap Birch/Cliff, applying ISRI classification standards to confirm similarity. This method provided a reasonable basis for reassessment.

After a detailed review, the tribunal concluded the Deputy Commissioner correctly rejected the declared transaction value under Rule 12 due to reasonable doubt about its accuracy. Also the reassessment based on contemporaneous imports of similar goods under Rule 5 was lawful and procedurally proper, and the Commissioner (Appeals) was correct in upholding the Deputy Commissioner’s speaking order.

Accordingly, the two-member bench of Dilip Gupta (president) and P.V. Subba Rao (Technical Member) upheld the Customs valuation and dismissed the appeal filed by M/s Mittal Appliances Ltd.

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