2026-VIL-1030-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs - Rejection of Declared Transaction Value under Rule 12 of Customs Valuation Rules - Appellants imported lighting fixtures from China and declared transaction values which were rejected by the Department based on alleged electronic data from pen drives and statements recorded during investigation - Whether the rejection of declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is legally sustainable – HELD - The statutory framework under Section 14 of the Customs Act, 1962 establishes a presumption in favour of the correctness of the declared transaction value, and any departure therefrom must be strictly justified with objective material giving rise to reasonable doubt. The expression "reason to doubt" under Rule 12 requires the existence of objective material and cannot be equated with mere suspicion or conjecture. The burden of establishing such doubt lies squarely on the Department - The Hon'ble Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs and South India Television Pvt. Ltd. v. Commissioner of Customs has authoritatively held that the price actually paid or payable must be accepted unless conditions specified in the rules are not satisfied, and the burden of proving undervaluation lies entirely on the Department through cogent and reliable evidence - In the present case, the Revenue relied upon unverified electronic data and uncorroborated statements without establishing any objective basis for doubting the declared value, no evidence of additional consideration, no corroborated documentary evidence, and no reliable comparison with contemporaneous imports. The entire case rested on suspicion rather than evidence and did not satisfy the statutory requirements of Rule 12 - Accordingly, the rejection of transaction value is set aside.rnrnRe-determination of Value in Accordance with Sequential Application of Valuation Rules - Whether the re-determination of value undertaken by the adjudicating authority was in accordance with the Customs Valuation Rules, 2007 – HELD - The Rule 3(2) of the Valuation Rules unequivocally provides that where value cannot be determined under Rule 3(1), it shall be determined by proceeding sequentially through Rules 4 to 9, with the word "shall" imposing a mandatory obligation leaving no scope for selective or discretionary application - The adjudicating authority bypassed the entire statutory framework and adopted a hybrid and impermissible method based on selective data and assumptions without establishing comparability or providing cogent reasoning. The adoption of standardized rates of rupees 110 per kilogram and rupees 225 per kilogram applied uniformly across multiple consignments was not derived from contemporaneous import data or any recognized valuation source but was extrapolated from unverified electronic records. The conversion of assumed values from RMB into USD and thereafter into INR did not follow any notified exchange rate or consistent methodology. The inclusion of buying agent commission was unsustainable as there was no evidence that such agents acted on behalf of suppliers or that the commission formed part of price actually paid or payable. The re-determination failed to follow the mandatory sequential application of Rules 4 to 9, adopted arbitrary standardized rates without evidentiary basis, relied on unverified electronic records and uncorroborated statements, and ignored commercial realities. Accordingly, the re-determination of value is set aside.rnrnAdmissibility of Electronic Evidence and Statements under Section 138C of Customs Act - Whether the reliance placed on electronic records allegedly retrieved from pen drives and hard disks and statements recorded under Section 108 of the Customs Act was legally admissible and sufficient to sustain the allegations – HELD - The electronic evidence and statements are neither legally admissible nor sufficient to sustain the allegation of undervaluation. Section 138C of the Customs Act, 1962, which governs admissibility of electronic records, is analogous to Section 65B of the Indian Evidence Act, 1872, and incorporates stringent safeguards to ensure authenticity, reliability and integrity of electronic evidence by mandating certification regarding the manner of production, particulars of the device and authenticity of contents - The evidentiary foundation of the electronic records was deeply flawed as they were neither authenticated nor certified, lacked statutory compliance, and had not been correlated with specific consignments. Further, statements recorded under Section 108, while admissible, must be voluntary, tested and corroborated by independent evidence, with denial of cross-examination of witnesses whose statements are relied upon constituting a serious violation of principles of natural justice. Despite specific requests, cross-examination was not granted and no valid reason for such denial was recorded - The absence of any evidence of extra remittance or flow of funds from appellants to suppliers was fatal, as proof of additional consideration is a sine qua non in cases of alleged undervaluation. Defective evidence cannot corroborate another defective piece of evidence. Accordingly, the electronic evidence and statements are held to be inadmissible and unreliable.rnrnInvocation of Extended Period of Limitation under Section 28 of Customs Act - HELD - The entire basis for invoking the extended period was the allegation of undervaluation founded upon electronic records and statements recorded during investigation, but as such evidence was found to be legally inadmissible and lacking statutory compliance under Section 138C and devoid of corroboration, when the very foundation of the allegation fails, the consequential invocation of extended limitation cannot survive. Extended period cannot be invoked on the basis of assumptions, suspicion or inferential reasoning and requires clear evidence of deliberate intent to evade duty. All imports were effected through proper Bills of Entry with goods examined and assessed by Customs authorities at the time of clearance, with values being enhanced wherever considered necessary. This factual position demonstrates that the Department was fully aware of the transactions and had applied its mind to the issue of valuation contemporaneously - The extended period is an exception to the normal rule and must be invoked strictly in accordance with statutory conditions. Once the Department is in possession of all relevant facts, the limitation clock begins to run. Accordingly, the invocation of extended period is set aside and the demand is barred by limitation.rnrnConfiscation and Penalties without Proof of Deliberate Misdeclaration - Whether the confiscation of goods under Section 111(m) of the Customs Act, 1962, the imposition of redemption fine, and the penalties imposed under Sections 112, 114A and 114AA were sustainable in law – HELD - Held that the confiscation, redemption fine and penalties are unsustainable. Confiscation under Section 111(m) can be invoked only where there is misdeclaration of value, quantity or other material particulars, and such misdeclaration must be deliberate, conscious and supported by cogent evidence - A mere difference in valuation or subsequent re-determination of value does not automatically amount to misdeclaration. Once the foundation for confiscation fails, the confiscation itself cannot be sustained as confiscation is not an automatic consequence of every valuation dispute. Redemption fine is purely consequential to confiscation, and it is a settled principle that where confiscation is set aside, redemption fine cannot survive independently. The imposition of penalty under Section 114A is not sustainable as the said provision is attracted only where duty has not been levied or has been short-levied by reason of collusion, wilful misstatement or suppression of
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