CESTAT Allahabad Says Customs Cannot Reassess Value Of Goods After Clearance For Home Consumption

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad has recently set aside a customs duty demand of over ₹10.22 crore against Uttam Steel Alloys after finding multiple flaws in the department's case, including its attempt to enhance the value of goods after they had already been cleared for home consumption.

A coram of Judicial Member P K Choudhary and Technical Member P Anjani Kumar held that once goods are cleared for home consumption, they cease to retain the character of imported goods, making the Customs Valuation Rules inapplicable.

“When it is clearly given that the Customs Valuation Rules, 2007 would be applicable on imported goods and in the present case the goods are not „imported goods‟, the declared value of such goods cannot be re-determined by applying the Customs Valuation Rules, 2007. When the value of the goods which were already cleared by the Customs cannot be enhanced by way of reassessment, there would obviously be no demand of differential duty,” the tribunal ruled.

The proceedings arose from allegations that Uttam Steel Alloys had undervalued imported cold rolled stainless steel coils and wrongly claimed preferential duty benefits by misdeclaring the country of origin of consignments imported through suppliers in Malaysia, Hong Kong, Dubai, and other jurisdictions.

The tribunal also rejected the department's reliance on WhatsApp chats and other documents allegedly retrieved from electronic devices during the investigation, holding that they were inadmissible in the absence of the mandatory statutory certificate required for electronic evidence.

“The conditions prescribed under Section 138C(4) of the Customs Act were not fulfilled as the certificate giving the details was not produced,” the bench held.

“Thus, as the provisions of Section 138C(4) of the Customs Act have not been satisfied for the reason that the certificate prescribed therein has not been furnished, the documents obtained by DRI from various banks outside India cannot be admitted as evidence,” it added.

On the issue of country of origin, the tribunal found that customs authorities had failed to verify the authenticity of certificates of origin issued by competent authorities in exporting countries before rejecting the importer's claim.

“No evidence was brought out to infer that country of origin shown in the said certificate was incorrect,” the tribunal observed.

The tribunal also found the undervaluation allegation unsustainable, noting that the department had relied only on proforma invoices allegedly recovered from a hard disk, without evidence of higher payments or contemporaneous import data.

“Therefore, the sole reliance on the proforma invoice for enhancement of value is not legally sustainable,” the tribunal ruled

Accordingly, the tribunal allowed the appeals and set aside the duty demand and penalties imposed on the company and its directors.

For Appellant: Advocate Abhinav Kalra and Nishant Mishra,

For Respondent: Santosh Kumar Authorized Representative