Case Details: Principal Commissioner of Customs (Import-II), Mumbai vs. Vaibhav Agarwal (2026) 39 Centax 273 (Tri.-Bom)
Judiciary and Counsel Details
- S/Shri C.J. Mathew, Member (T) & Ajay Sharma, Member (J)
- Shri Shambhoo Nath, Special Counsel, for the Appellant.
- Shri Suyog Bhave, Advocate, for the Respondent.
Facts of the Case
The importers had imported steam coal through intermediaries who sourced the goods from Indonesian suppliers and raised invoices on the importers at contracted prices. The imports were cleared for home consumption on payment of customs duty based on the declared transaction value reflected in the invoices issued by the intermediaries. Thereafter, based on statements and documents obtained from third-party sources indicating that prices had been negotiated in advance at rates lower than those declared in the intermediary invoices, the department issued a show cause notice (SCN) alleging overvaluation of imports. The SCN proposed rejection of the declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and substitution thereof with the actual price paid by intermediaries to the Indonesian suppliers. It was also alleged that the importers and intermediaries were related and that such a relationship enabled obfuscation of the actual value through over-invoiced prices for remittance purposes. However, the SCN did not propose recovery of any customs duty as short-paid or unpaid under Section 28 of the Customs Act, 1962. The adjudicating authority dropped the SCN, holding that once the declared value was proposed to be rejected, valuation had to be determined through sequential application of Rules 4 to 9 of the Valuation Rules. The matter was carried before the CESTAT.
CESTAT Held
The CESTAT held that the department proposed rejection of declared transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, by substituting it with an earlier-stage invoice value paid by intermediaries to Indonesian suppliers; however, neither the SCN nor Revenue’s appeal demonstrated any provision in the valuation scheme permitting such substitution of invoices. It held that Rule 3 and Section 14 of the Customs Act, 1962 could not be disregarded by arbitrarily truncating the declared price merely by preferring invoices issued by Indonesian suppliers over invoices issued by Hong Kong intermediaries, particularly when invoices only reflected the agreed price between buyer and seller. The CESTAT further held that although declared value could be rejected, such rejection necessarily required determination of surrogate value through the sequential mechanism under Rules 4 to 9, which was not undertaken in the present case. It was also noted that neither the SCN nor Revenue’s appeal suggested any evidence of flowback to importers, and even admitted markup was not of an unreasonable magnitude so as to justify penal consequences. Accordingly, the adjudication order dropping the SCN was upheld.
List of Cases Cited
- Commissioner v. Adani Power Maharashtra Ltd. — (2023) 3 Centax 169 (Tri.-Bom) — Relied on [Paras 2, 6]
- Commissioner v. Maharashtra Eastern Grid Power Transmission Company Ltd. — (2023) 6 Centax 115 (Tri.-Bom) — Relied on [Para 2, 6]
- Eicher Tractors Ltd. v. Commissioner — 2000 (122) E.L.T. 321 (S.C.) — Distinguished [Paras 11, 14]
- Karnataka Soaps and Detergents Ltd. v. Commissioner — 2017 (357) E.L.T. 1272 (Tribunal) — Distinguished [Paras 11, 14]
- Knowledge Infrastructure Systems Pvt. Ltd. v. Additional Director General — 2019 (366) E.L.T. A95 (Tribunal) — Relied on [Paras 2, 6, 7]
- Union of India v. Kamlakshi Finance Corporation Ltd. — 1991 (55) E.L.T. 433 (S.C.) — Relied on [Para 6]
