2026-VIL-1379-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs – Valuation of Imported Goods – Related Parties and Administrative Control – Respondent imported bioceramics from Malaysia. Department alleged that Conybio Malaysia was real supplier and had administrative and financial control over Respondent company despite imports shown as from third party suppliers - Respondent contended aborted investment proposal did not materialize and no shares were ever allotted. Whether correspondence and requests for share certificates establish that Conybio Malaysia had administrative and financial control over Respondent – HELD – Adjudicating authority's finding that Conybio Malaysia had active participation rested entirely on correspondence requesting share certificates. In absence of evidence on record that share certificates were actually allotted or requests were complied with, mere requests cannot establish allotment of shares. Assumption that request for share certificate would arise only upon allotment of shares lacks evidentiary foundation. Being limited company registered under Companies Act, it would not be difficult to ascertain whether Malaysian personnel were shareholders if they actually were. Correspondence constituted part of aborted investment proposal which did not fructify and allotted no shares. Finding that Conybio Malaysia had administrative and financial control has no basis – The finding is set aside - Valuation of Imported Goods – Actual Supplier and Parallel Invoices – Department contended that Conybio Malaysia was actual supplier of goods imported and showed as from Bryncoch Malaysia, and alleged that parallel invoices at fifty percent higher prices proved undervaluation. Respondent submitted that parallel invoices were proforma invoices raised during aborted investment proposal and payment was made only to Bryncoch at invoiced prices without any excess remittance - Whether parallel invoices without evidence of actual payment or share allotment can constitute valid evidence of undervaluation – HELD – Adjudicating authority accepted parallel invoices as evidence despite allegation that undervaluation would be adjusted through share allotment which never occurred. Allegations that payments made for suppressed value lack supporting evidence of any remittances in excess of invoiced prices. Tribunal in Oswal Metal Works held that proforma invoices can never be basis for alleging undervaluation without supporting evidence of flowback of consideration. Charge of undervaluation based on proforma invoices without evidence of actual payment or share transfer is not sustainable. Business was at incipient stage and certain mix-ups cannot question legitimacy of transactions without evidence. Non-audited Statement of Accounts cannot lend authenticity to transactions – Confirmation of demand based on parallel invoices is not sustainable - Valuation of Imported Goods – Related Parties – Artificial Persons vs Natural Persons – Department alleged that directors of Rekamacro Resources were brother and mother of Respondent's president and concluded parties were related family members. Respondent contended that concept of members of same family under Rule 2(2)(viii) applies only to natural persons and not to artificial persons. Whether artificial persons like limited companies and Respondent can be related parties based on family connections of their individual directors and shareholders – HELD – Supreme Court in Alembic Glass Industries held that limited company is juridical person separate from its shareholders and directors and common directorship is no ground to treat companies as related. Cooper Pharma case held that limited company cannot be treated as related person based only on blood relations of shareholders/directors. Rule 2(2)(viii) concept of family members applies only to natural persons and not artificial persons. Relationship between Respondent and Malaysian companies through family connections of individuals is not sufficient to establish parties as related under Rule 2(2). Department failed to establish relationship under any clause of Rule 2(2) – Finding that Reka Network and Rekamacro Resources are related parties is not legally sustainable - Customs – Valuation – Retail Selling Price – Post-Import Redetermination – Respondent declared RSP for imported goods but Department redetermined RSP claiming misdeclaration. Respondent submitted details of invoices on which revised RSP was based were not furnished and prior to March 2008 no statutory provision existed for post-import redetermination of RSP. Whether Department can redetermine RSP post-import without statutory mechanism and without furnishing supporting documents to importer – HELD – No statutory machinery existed for redetermining RSP of imported goods prior to 01.03.2008. Section 4A Subsection 4 ascertaining or redetermining RSP was introduced only from 14.05.2003 and prescribed rules were notified only on 01.03.2008. During period prior to March 2008 no methodology was available for reassessing or redetermining RSP. Documentary evidence on which RSP was adopted/revised was not furnished to Respondent despite specific request, causing serious prejudice and negating principles of natural justice. Tribunal in Acer India case held there is no machinery or provisions for ascertaining RSP when RSP not declared by importer on imported articles. Demand based on RSP is unsustainable – Demand for Additional Duty based on RSP is set aside - Classification of Goods – Medicament vs Skin-Care Product – Department reclassified product Cony Takara from CTH 3004 (Medicament) to CTH 3304 (Skin-Care Product). Respondent contended that product possessed therapeutic and curative attributes being a foot-care sheet that promotes blood circulation and detoxification, placing it on skin, thereby meriting classification as medicament. Whether product with curative attributes for treating pain and promoting blood circulation should be classified as skin-care product – HELD – HSN Explanatory Notes for CTH 3004 specifically cover measured doses including in transdermal administrative form as patches for direct application to skin for therapeutic or prophylactic use. Supreme Court in Ciens Labs case held that when product contains pharmaceutical ingredients with therapeutic or curative properties, curative attributes render product a medicament not cosmetic. Product's primary function is cure not care and contains curative ingredients, it must be branded medicament. Adjudicating authority's finding that product is foot-care sheet with therapeutic attributes but classified as skin-care product lacks reasoning and explanation. Product used when person is in pain to ease pain and activate blood circulation is medicament for cure not skin-care product. Reclassification under CTH 3304 is not correct – Product Cony Takara merits classification under CTH 3004 as Medicament - Customs – Cross-Objections – Scope and Maintainability under Customs Act – Appellant Principal Commissioner of Customs challenged non-imposition of redemption fine in common order. Respondent importer filed cross-objections contesting substantive portions of order including charges of undervaluation and reclassification. Revenue raised preliminary objection that cross-objection scope is restricted to points raised in revenue appeal and cannot challenge entire order. Whether cross-objections filed under Section 129A(4) of Customs Act can be used to challenge substantive portions of adjudicating authority order beyond points raised in appeal filed by other party – HELD – Section 129A(4) clearly provides that Respondent in an appeal filed by other party can file cross-objections against any part of order appealed against within 45 days and CESTAT is obliged to dispose of cross-objection as if it were an appeal. Statutory provision employs clear and categorical language conferring right to contest order as whole or part thereof in addition to contesting grounds raised in appeal memorandum. Trib
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