CESTAT Mumbai Sets Aside Customs Value Enhancement Based Solely On DRI Alert In Fabric Import Case

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) on 19 February set aside the enhancement of value of imported knitted fabrics, holding that customs authorities cannot reject the declared transaction value solely on the basis of a DRI Alert and NIDB data without following the procedure prescribed under law.

The Bench, comprising Judicial Member Dr. Suvendu Kumar Pati and Technical Member M.M. Parthiban, was hearing an appeal filed by Kumar Mahendra Exim against the order of the Commissioner (Appeals), which had upheld the re-determination of the value of the imported goods.

The Bench observed:

“...we are of the considered view that the authorities below in re-assessment of impugned goods under Section 17(5) ibid, had not followed the requirements of the legal provisions of Section 14 ibid and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.”

Mahendra Exim had imported “Knitted Fabrics” from China, declaring the value at USD 2.80 per kg. During assessment, the Department enhanced the value to USD 4.60 per kg based on a DRI Alert Circular and contemporaneous import data, and the differential duty was paid. The declared transaction value was rejected under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, and re-determined under Rule 4.

Before the Tribunal, the importer argued that no proper basis had been shown to reject the declared value and that the mandatory requirements under Section 14 of the Customs Act, 1962 and the Valuation Rules were not followed.

The Tribunal examined the scheme of Section 14 and the 2007 Valuation Rules. It noted that, although a speaking order under Section 17(5) had been passed, the crucial issue was whether the enhancement of value was carried out in accordance with the statutory framework.

The Bench found that while the Department relied on values of other imports, it had not examined whether such goods were imported at the same commercial level and in substantially the same quantity, as required under Rule 4. The necessary adjustments and detailed comparisons mandated under the Rules were also not carried out.

Holding that the requirements of Section 14 and the Customs Valuation Rules were not properly followed, the Tribunal concluded that the enhancement of value was not legally sustainable.

Accordingly, it set aside the order of the Commissioner (Appeals) and allowed the appeal in favour of the importer.

Appearance for the Appellant: Shri Ashwini Kumar, Advocate

Appearance for the Respondent: Shri L.B. D'coasta, Authorized Representative