2025 (7) TMI 1554 - AT - Customs

Mis-declaration of imported goods - under-valuation of goods - enhancement of transaction value based on earlier imports - non-adherence to the provisions of Section 138B of the Customs Act 1962 - Confiscation - redemption fine - penalty - HELD THAT - It is found that Revenue has not provided any evidence regarding the prevalence of any value of goods contemporaneously imported by other so that the transaction value declared by the appellants could be rejected. Therefore we find that the very rejection of transaction value is on a weak ground. It cannot be held that the goods are under-valued for the reason that the value of one variety of goods imported by the appellant in the past was enhanced by about 30%; this kind of reference price is unheard of in the annals of customs law and jurisprudence that evolved over the years. What is more irrational illogical and thus objectionable and acceptable is the attempt to fasten the value of a particular variety to a spectrum of items imported by the appellant - the value adopted cannot be a basis for rejection of value declared by the appellants over a period of time for all imports. The adjudicating authority while relying on the statements of some persons did not examine the statements under the rigours of Section 138B of the Customs Act 1962. Once the adjudicating authority has not examined the persons in terms of Section 138B the evidentiary value of the statements recorded under Section 108 of the Customs Act 1962 is lost. The adjudicating authority by not permitting the cross-examination of the persons as requested by the appellants has further compounded the loss of case for Revenue. The ship of investigation show cause notice and the impugned order not so carefully built are bound to be wrecked by the deluge of case laws presented by the learned Counsel for the appellants. At the same time it is not necessary to discuss each of the cases and their applicability. Thus it would suffice in the interest of justice if a couple of them are considered. Hon ble Apex Court in the case of Sanjivani Non- Ferrous Trading Pvt. Ltd. 2018 (12) TMI 738 - SUPREME COURT has gone into the issue of re-determination of the value of imported goods in an elaborate manner and Hon ble Court held that The Tribunal has clearly mentioned that this declared price could be rejected only with cogent reasons by undertaking the exercise as to on what basis the Assessing Authority could hold that the paid price was not the sole consideration of the transaction value. Since there is no such exercise done by the Assessing Authority to reject the price declared in the Bills of Entry Order-in-Original was therefore clearly erroneous. As regards the non-adherence to the provisions of Section 138B of the Customs Act 1962 the Principal Bench of CESTAT in a recent judgment in the case of Surya Wires Pvt. Ltd. 2025 (4) TMI 441 - CESTAT NEW DELHI has gone into the issue at length. Principal Bench held that The provisions of section 9D of the Central Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The impugned order cannot be sustained and is liable to be rejected - Appeal allowed.

Summary

ISSUES:

1. Whether the transaction value declared by importers can be rejected and enhanced uniformly across multiple imports of varying specifications, quantities, times, and countries of origin without contemporaneous evidence of higher values of identical or similar goods?

2. Whether statements recorded under Section 108 of the Customs Act, 1962, without examination and admission under Section 138B, and without allowing cross-examination, can be relied upon as evidence?

3. Whether the provisions of the Customs Valuation Rules, 1988/2007, particularly Rules 3, 4, and 5, were properly applied in re-determining the value of imported goods?

4. Whether the invocation of extended limitation period and imposition of confiscation, redemption fine, and penalties under Sections 112, 114A, and 114AA of the Customs Act is justified when goods have been cleared for home consumption?

RULINGS / HOLDINGS:

1. The Court held that rejection of transaction value based solely on enhancement of value in one past bill of entry, without evidence of contemporaneous imports of identical or similar goods at higher prices, is "unheard of in the annals of customs law and jurisprudence" and "irrational, illogical and thus objectionable." The Customs Valuation Rules, 2007 were not properly applied, and uniform enhancement across diverse imports is unjustified.

2. Statements recorded under Section 108 of the Customs Act, 1962, without adherence to Section 138B procedures-specifically, without examination of the declarants as witnesses before the adjudicating authority and without admission of statements in evidence-have "lost evidentiary value" and cannot be relied upon. Denial of cross-examination further renders such reliance illegal.

3. The Court reaffirmed that under Rule 4(1) of the Customs Valuation Rules, the "price actually paid or payable" for the particular transaction is to be accepted as the transaction value unless rejected for reasons enumerated in Rule 4(2), which require cogent reasons and supporting material. Reliance on vendor price lists or non-contemporaneous imports without proper evidence is insufficient to reject declared transaction value.

4. The Court held that when goods have been cleared for home consumption, they are not liable for confiscation under Section 2(25) of the Customs Act; accordingly, redemption fines and penalties under Sections 112, 114A, and 114AA cannot be imposed. Invocation of extended limitation period was not justified on the facts.

RATIONALE:

The Court applied the statutory framework under Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 1988/2007, emphasizing that the assessable value is the "deemed value" based on the "price actually paid or payable" for the imported goods unless specific exceptions apply under Rule 4(2). The Court relied on binding precedent from the Supreme Court and High Courts, including the detailed exposition in Sanjivani Non-Ferrous Trading Pvt. Ltd. and South India Television (P) Ltd., which clarify that rejection of declared transaction value requires evidence of contemporaneous imports at higher prices or other specified grounds.

Regarding evidentiary value of statements recorded during investigation, the Court underscored the mandatory procedural safeguards under Section 138B of the Customs Act (and analogous Section 9D of the Central Excise Act), requiring that such statements be recorded as evidence only after examination of the declarant as a witness before the adjudicating authority and admission in the interests of justice. This procedure protects against coerced confessions and ensures compliance with principles of natural justice, including the right to cross-examination.

The Court found that the adjudicating authority failed to comply with these mandatory procedures, thereby rendering reliance on such statements unlawful and undermining the Revenue's case.

No doctrinal shift was observed; rather, the Court reaffirmed established principles and stressed strict compliance with statutory valuation rules and procedural safeguards in customs adjudication.