Legal principle

A proper officer may reject a declared transaction value and re-determine the assessable value, but cannot alter the transaction value itself; export benefits such as drawback and MEIS are computed on the FOB (transaction) value and not the re-determined assessable value, and goods whose true value was correctly declared are not liable to confiscation under section 113(i) merely because the officer re-determines the value.

Court decision

The Tribunal allowed the appeal and set aside the impugned order, holding that the re-determination of the FOB value, the confiscation under section 113(i), the redemption fine under section 125 and the penalty could not be sustained.

Facts

M/s Modak Dyeing and Printing Co. Pvt. Ltd. filed two shipping bills dated 31.08.2018 for export of Girls Frocks Woven Made of Manmade Fibre, declaring a total FOB value of Rs. 4,10,52,321/- (about Rs. 274.13 per piece). Acting on intelligence that the goods were overvalued to claim excess drawback, ROSL, MEIS and IGST refund, the SIIB examined the goods and conducted a market enquiry, concluding the market value was only Rs. 45-65 per piece. The goods were provisionally released against bond and bank guarantee and exported. A show cause notice proposed rejection of the declared FOB value under Rule 8 of the Export Valuation Rules, 2007 and re-determination under Rule 6 (to Rs. 45,00,000/- and Rs. 29,88,000/- for the two shipping bills), plus confiscation under section 113(i) and penalties under sections 114(iii) and 114AA. The Joint Commissioner confirmed these proposals, imposing a redemption fine of Rs. 2 lakhs under section 125 and penalties of Rs. 1 lakh each under sections 114(iii) and 114AA, and the Commissioner (Appeals) upheld the order.

Key provisions

• Section 14, Customs Act, 1962 — Valuation of goods
• Section 113(i), Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Rule 8, Customs Valuation (Determination of Value of Export Goods) Rules, 2007 — Rejection of declared value
• Section 2(q), The Foreign Exchange Management Act, 1999 — Definitions.
• Section 11(1), The Foreign Trade (Development and Regulation) Act, 1992 — Contravention of provisions of this Act, rules, orders and foreign trade policy.