2026-VIL-1106-CESTAT-DEL-CU
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CUSTOMS CESTAT Cases

Customs - Valuation of Imported Goods - Rejection of Transaction Value under Rule 10A and Re-determination under Valuation Rules – Appellant declared values for imported watch parts and movements, which were rejected by the Commissioner on the ground that the buyer and seller were related persons – The values were re-determined under Rule 8 (residual method) of the Customs Valuation Rules, 1988, by applying a uniform 60% undervaluation across different categories of goods - Whether the rejection of transaction values under Rule 10A of the Customs Valuation Rules, 1988 was justified, and whether the re-determination of values under Rule 8 by applying arbitrary undervaluation percentages across different categories of goods is legally sustainable – HELD - While the rejection of transaction values under Rule 10A was justified on the ground that the buyers and sellers were related persons, thereby creating reasonable doubt about the truth and accuracy of the declared values, the re-determination of values was fundamentally flawed as the Commissioner failed to follow the sequential method prescribed under the Valuation Rules and instead applied an arbitrary 60% undervaluation across multiple categories of goods. The Valuation Rules must be applied sequentially and Rule 8 (residual method) can be invoked only when value cannot be determined under preceding rules. The Commissioner's assertion that no identical or similar goods were imported, sold or manufactured in India during the relevant period is found to be unbelievable and contradicted by the very evidence relied upon in the impugned order itself - The use of an arbitrary 60% undervaluation percentage, particularly for items such as plastic straps, watch movements, abrasive wheels, and miscellaneous items, is explicitly prohibited under Rule 8(2)(vi). Further, the reliance on prices prevailing in the exporting country to determine value under Rule 8 violated the explicit prohibition under Rule 8(2)(iii) - The impugned order also failed to specify which Rule was applied to determine the value of which specific good under which B/E, rendering the re-determination process non-transparent and arbitrary - The impugned order is set aside and the appeals are allowed
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