Excess Quantity, Enhanced Value Alone Don't Establish Misdeclaration Under Customs Act: CESTAT Mumbai

The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that finding excess imported goods during examination, even when their assessable value is enhanced, does not by itself establish misdeclaration under the Customs Act, 1962.

Technical Member M.M. Parthiban observed that the department had produced no evidence to show the importer had ordered or suppressed the excess quantity of goods, and held that confiscation, redemption fine and penalty could not be sustained merely because excess goods were found.

The bench observed, "Therefore, part of the imported consignment being as per declaration and rest of the same being in excess quantity as well as the varying contemporaneous values on the basis of NIDB data, which is alleged to be mis-declaration by the department for the reason it being in excess and undervalued alone, in my considered view, does not enable the imported goods as mis-declared for the purpose of Section 111(l) & 111(m) ibid and for imposition of redemption fine on the goods and penalty on the appellant importer"

The case concerned an import of ladies' polyester knitted leggings from China. When customs examined the consignment, officers found more goods than had been declared in the Bill of Entry. The department also enhanced the assessable value based on contemporaneous import data and demanded differential duty.

The importer accepted the enhanced value and paid the differential duty before the goods were cleared. Later, the Commissioner (Appeals) imposed a redemption fine of ₹3 lakh under Section 125 of the Customs Act and upheld a penalty of ₹10,000 under Section 112(a)(ii).

Allowing the appeal, the tribunal noted that the invoice and packing list issued by the Chinese supplier reflected the same quantity declared by the importer. It also found no material on record to show that the importer had ordered the excess goods or tried to suppress the excess quantity by declaring only the lower quantity.

The tribunal was also critical of the valuation exercise. It observed that the authorities had not identified the specific rule under the Customs Valuation Rules, 2007, for rejecting the declared value and had failed to produce specific contemporaneous valuation data to justify the enhancement.

It further held that a redemption fine could not be imposed without first determining the market price of the goods and the margin of profit, which the authorities had failed to do. The tribunal therefore set aside the redemption fine and penalty, while leaving the differential duty undisturbed because the importer had not challenged the enhanced valuation or the differential duty.

For Appellant: K.V.P. Singh, Consultant.

For Respondent: L.B. D'Coasta, Authorised Representative.