Weight-Based Formula to Compute Value Not Legally Valid for Furniture: CESTAT Restores Declared Transaction Value in Nilkamal Ltd Case [Read Order]
CESTAT held that applying a weight-based formula to determine the value of imported furniture is legally unsustainable and directed acceptance of the declared transaction value
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that applying a weight-based formula to determine the value of imported furniture is not legally valid and directed that the declared transaction value be accepted for assessment.
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Nilkamal Limited, the appellant, imported wooden furniture and sofa sets from Malaysia and China during 2012. The customs authorities rejected the declared transaction values under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, citing lack of comparability with contemporaneous imports, and reassessed the goods under Rule 5 using a price-per-kilogram formula.
The Commissioner (Appeals) upheld the reassessment, leading the appellant to approach the CESTAT.
The appellant’s counsel argued that the rejection of the declared value was arbitrary and that valuation based on weight was contrary to the Customs Valuation Rules, as furniture is not traded by weight but by unit. They submitted that the department failed to identify truly similar goods and that applying a statistical price factor instead of the transaction value violated Rule 5.
The revenue’s counsel argued that the declared values were unreliable due to insufficient product details and that Rule 12 empowered the proper officer to reject such values. They further argued that the reassessment based on contemporaneous imports and the price factor method was reasonable.
The bench comprising Justice Dilip Gupta (President) and C.J. Mathew (Technical Member) observed that the valuation method adopted by the authorities was inconsistent with the law. The tribunal explained that Rule 5 requires the value to be determined based on the transaction value of similar goods, with adjustments as permitted under the rules, and not by applying a weight-based formula.
The tribunal pointed out that the use of “kilogram” as a unit in the tariff schedule is meant only for statistical purposes and cannot be used as a basis for valuation. The tribunal also observed that standing orders or valuation alerts cannot substitute statutory methods prescribed under Section 14 of the Customs Act and the Valuation Rules.
The tribunal set aside the reassessment orders, holding that the weight-based computation was not permissible and that the declared transaction values must be accepted. The appeals were allowed.
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