Mere Suspicion Over Freight Component Cannot Justify Rejection Of CIF Value: CESTAT Mumbai

On 10 September, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, held that Customs cannot reject the Cost, Insurance and Freight (CIF) value declared by an importer merely on suspicion that freight and insurance were not included, unless there is evidence of any additional payment by the importer.

A Bench comprising Judicial Member Ajay Sharma and Technical Member A.K. Jyotishi allowed appeals filed by I.G. International Pvt. Ltd. and its Director Tarun Arora concerning the import of Royal Gala apples. The Tribunal observed:

“If the invoices issued by the foreign exporter are on CIF basis and the importer has paid only the CIF invoice amount, there is no evidence of any payment over and above the invoice price... then mere suspicion, however strong, regarding the freight component is not sufficient to reject the transaction value.”

The Department had alleged undervaluation after comparing the declared CIF price with the FOB value appearing in documents relating to an earlier transaction between the Brazilian supplier and the French supplier.

The Tribunal found no evidence of any additional payment or flow-back of money by the importer. It held that where the transaction is genuinely on CIF terms, freight and insurance are already included in the price and cannot be added again unless the Department proves otherwise.

It also rejected reliance on the FOB value mentioned in Non-GMO certificates, holding that these are regulatory documents and cannot, by themselves, determine or enhance the customs value.

Further, the Bench held that the extended limitation period was unavailable in the absence of a positive finding of wilful misstatement or suppression of facts.

Accordingly, CESTAT set aside the enhancement of value, confiscation, redemption fine and penalties and allowed the appeals with consequential relief.

Appearances: Rajeev Verma, Advocate for appellants; S. Varalakshmi, Additional Commissioner (AR) for Revenue.