Win for Wipro: CESTAT Rules Value Reassessment Unjustified for Free Replacement of Defective Goods [Read Order]

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) held that the customs department’s reassessment of import value was unjustified, as the consignment imported by Wipro Ltd. was a free replacement for defective goods, not a fresh commercial transaction.

Wipro had imported a service application module from Cisco Systems, Mexico, declaring its value at USD 26,400. The original consignment, imported two months earlier, had been accepted at USD 29,150, inclusive of a 76% discount.

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The replacement was supplied free of cost. The customs department rejected the declared value, reassessed it at USD 110,000 based on the list price, confiscated the goods under Section 111(m) of the Customs Act, and imposed a redemption fine of Rs. 50,000 and a penalty of Rs. 2,00,000.

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On appeal, the Commissioner (Appeals) upheld the confiscation but reduced the penalty and allowed re-export. The appellant then approached CESTAT, arguing that the goods were not new purchases and had been wrongly valued and that the goods were auctioned without proper notice during the pendency of the appeal.

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The department’s counsel countered that the valuation was based on the supplier’s list price and that the appellant had not produced sufficient documentation to substantiate the claimed discount. They also argued that Wipro had been informed about the goods’ auction through letters issued by the warehouse custodian prior to the confiscation order.

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The two-member bench comprising Judicial Member Dr. D.M. Misra and Technical Member R. Bhagya Devi observed that the replacement goods had been supplied free of charge and the discount structure was part of a consistent commercial arrangement with Cisco, previously accepted by the department.

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The tribunal further held that the confiscation, fine, and penalty were not sustainable, as the import was clearly a replacement, not a case of undervaluation or misdeclaration. The tribunal criticized the customs department for auctioning the goods while the appeal was still pending, without issuing fresh notice or obtaining permission from the appellate forum. The tribunal set aside the impugned order and directed the customs department to restore the full sale value of the auctioned goods to the appellant. The appeal was allowed.

To Read the full text of the Order CLICK HERE

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