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TMI Blog2025 (5) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... adymade garments. These goods were examined by the Special Intelligence and Investigation Branch [SIIB] officers of the ICD TKD who found that the shipping bill indicated the FOB value of the goods as Rs. 4,25,17,566/- on which a drawback of Rs. 10,62,939/- and rebate of State levies [ROSL] of Rs. 5,06,603/- were claimed. Suspecting the goods to be overvalued with an intent to claim higher export incentives, the SIIB officers investigated the matter further, conducted a market inquiry on 11.12.2018 and came to the conclusion that the goods had been overvalued in order to claim excess Drawback and ROSL. Based on the market inquiry, the value of the exported goods was re-determined under Rule 6 of Customs Valuation (Determination of Export Goods) Rules 2007 [Valuation Rules] after rejecting the declared value under Rule 8 of the Valuation Rules. Thereafter, the Additional Commissioner passed order dated 28.12.2018, the operative part of which is as follows: "(i) I reject the declared FOB value of Rs. 4,25,17,566/- (Rupees Four Crore Twenty Five Lakh Seventeen Thousand Five Hundred and Sixty Six Only) of the goods under Shipping Bill No. 8379213 dated 22.10.2018 under Rule 8 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmine the assessable value of the goods. Any export incentives such as drawback and ROSL which are available as a percentage of the FOB value should be paid accordingly. In the Customs Officers have no right to say that although the drawback, ROSL etc., are payable as a percentage of the FOB value as per the notification, they shall, instead be paid on a different value determined by the officers. The relevant portions of the Final Order in JBN Apparels is reproduced below: "18. De hors the facts of the case, the fundamental questions which need to be examined and answered are: a) What is the meaning of FOB value of the goods and who decides it? b) Does the Joint Commissioner, Commissioner (Appeals) or any other officer of Customs have the power to re-determine the FOB value of the goods and if so, under what legal provisions? c) If the assessable value of the export goods is re-determined under the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 by the proper officer, will it also change the FOB value? d) If the export incentives are based on FOB value, does any Customs officer have the power under the law to order that the export benefits sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y any stranger to the contract including any officer. If the assessable value of the export goods is re-determined under the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 by the proper officer, will it also change the FOB value? 21. Section 14 of the Customs Act and the Customs Valuation (Determination of Value of Export Goods) Rules, 2007, empower the proper officer to reject the declared value and to re-determine the value. However, one should not confuse this power to be the power to re-determine the FOB value. Section 14 reads as follows: "14. Valuation of goods.-(1) For the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided as a percentage of the FOB value of the goods, does the Customs officer have any power to order that they shall, instead, be given as a percentage of some other value determined by him such as the assessable value? To answer this question, one needs to examine the powers under which the drawback or other export incentives are notified. 26. Section 75 of the Customs Act empowers the Central Government to, by notification, direct that drawback shall be allowed. Relevant extract of this section is below: 75. Drawback on imported materials used in the manufacture of goods which are exported.-(1) Where it appears to the Central Government that in respect of goods of any class or description manufactured, processed or on which any operation has been carried out in India, being goods which have been entered for export and in respect of which an order permitting the clearance and loading thereof for exportation has been made under section 51 by the proper officer, or being goods entered for export by post under clause (a) of section 84 and in respect of which an order permitting clearance for exportation has been made by the proper officer, a drawback should be allowed of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the rates of duty on inputs used in the export goods. 27. It is in exercise of this power under section 75, the Central Government notifies the rates at which drawback shall be allowed. Once the drawback schedule is notified by the Central Government, it is a direction to the officers that the drawback shall be paid accordingly. If the schedule prescribes drawback to be given as a percentage of FOB value, that is the direction of the central government under section 75. The concerned Customs officers are bound to follow the directions of the Central Government. No power is conferred under the Act on the Commissioner or any other officer of customs to defy the notification issued by the Central Government and to determine the drawback based on any other value. 28. The MEIS and ROSL schemes are part of the FTP framed by the Central Government in exercise of the powers under section 5 of the Foreign Trade (Development & Regulation) Act, 1992 [FT(D&R) Act] which reads as follows: 5. Foreign Trade Policy.-The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessable value. Assessable value can be determined as per the transaction value or through some other method. 8. The two export incentives in this case- Drawback and ROSL are to be paid the percentage of FOB value should be paid so. They have no correlation with the assessable value of the goods. The Additional Commissioner had no authority to order that instead of paying the drawback on the FOB value (as notified by the Government), it should be paid on a value determined by him treating it as FOB value. Similarly, he had no authority to order that instead of the ROSL being paid on the FOB value as laid down in the Foreign Trade Policy, it should be paid on a value determined by him treating it as FOB value. 9. To sum up: a. The Additional Commissioner is a stranger to the contract between the exporter and the overseas buyer and has no locus standi to change the FOB value of the goods; b. The Additional Commissioner has no authority to order that the drawback should be paid on a value determined by him instead of on the FOB value as notified by the Government of India; c. The Additional Commissioner also has no authority to order that the ROSL should be paid on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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