Confiscation Cannot Survive Once Declared Transaction Value Is Accepted: CESTAT Mumbai

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 17 March, held that the confiscation of imported goods under Section 111(m) of the Customs Act cannot be sustained once the declared transaction value is accepted.

A Bench comprising Judicial Member Ajay Sharma, set aside the confiscation of goods, redemption fine and penalties imposed on Kumar Impex, reasoning that once the transaction value is accepted, the allegation of undervaluation and resulting revenue loss no longer survives.

The Bench stated:

“Thus, the entire foundation of the adjudication order including confiscation and imposition of penalties, was premised on the allegation that the appellant had undervalued the goods and thereby attempted to evade customs duty. However, in the order impugned herein, the learned Commissioner has categorically set aside the rejection of the transaction value and accepted the value declared by the appellant. Despite accepting the declared value and thereby negating the allegation of undervaluation, the learned Commissioner proceeded to uphold the confiscation of the goods and the consequential Redemption Fine and penalties.”

The dispute arose in October 2016, when Kumar Impex imported PU-coated fabric and opted for a first check examination. During examination, the Department noted discrepancies in the description and thickness of the goods and initiated proceedings.

The goods were provisionally released against bond and bank guarantee. Following this, a show cause notice was issued proposing rejection of the declared value, re-determination of value, confiscation of the goods and imposition of penalties.

The adjudicating authority confirmed the proposals in the notice. However, on appeal, the Commissioner (Appeals) set aside the re-determination and accepted the declared transaction value. Despite accepting the declared value, the authority upheld confiscation of the goods along with redemption fine and penalties.

Examining the matter, the Tribunal noted that the Department's case was entirely founded on the allegation of undervaluation. Once the declared transaction value was accepted and the Bill of Entry finalised accordingly, the basis for alleging misdeclaration or duty evasion ceased to exist.

The Bench observed:

“......Once the declared value stand accepted, the very basis of the allegation about material mis-declaration or attempt to evade customs duty disappears. Consequently, it cannot be said that there is any loss of revenue to the exchequer or any attempt on the part of the appellant to defraud the government of its legitimate dues. In such circumstances, the essential ingredient necessary for invoking Section 111(m), namely a mis-declaration affecting revenue or assessment, is clearly absent.”

The Tribunal further observed that confiscation can be justified only where there is material misdeclaration affecting duty, assessment or compliance, and not for minor discrepancies that do not impact classification or valuation.

Accordingly, the Tribunal set aside the confiscation, redemption fine and penalties imposed and allowed the appeal filed by Kumar Impex.

For Appellant: H K Hirani, Consultant

For Respondent: Krishna Murari Azad, AR