Legal principle

An exporter who declares the transaction value reflected in its export documents cannot have its goods confiscated under section 113(i) or be penalized under sections 114(iii) and 114AA merely because the proper officer rejects the transaction value and re-determines a different export value under section 14 and the Export Valuation Rules.

Court decision

The Tribunal allowed the appeal and set aside the impugned order in favour of the appellant: the goods were held not liable to confiscation under section 113(i) because on examination they matched the declaration and only the value was disputed; the redemption option under section 125 became irrelevant; the consequential penalty under section 114(iii) and the penalty under section 114AA were unsustainable; and the appellant was held entitled to consequential relief.

Facts

M/s Standard Cartons Pvt. Ltd., an exporter with an IEC, filed a shipping bill dated 27.3.2019 at ICD Tughlakabad to export 48,000 pairs of ladies slippers to UAE at Rs. 406.68 per pair, claiming MEIS and drawback; a Let Export Order was given and the container was railed to Mundra Port. DRI officers intercepted it at Mundra, found the goods as declared but suspected overvaluation, and detained and then seized them. Provisional release was permitted subject to a bond of Rs. 1,95,20,760, a 10% bank guarantee and an undertaking not to contest the description and quality of the goods, which the appellant refused, so the goods were never released. Relying on a Chartered Engineer's market survey valuing the slippers at Rs. 21 per pair and statements recorded under section 108, the department's SCN proposed rejection of the declared FOB value of Rs. 1,95,13,925 and re-determination at Rs. 10,08,000, confiscation under section 113(i) and penalties under sections 114(iii) and 114AA, which the Additional Commissioner confirmed and the Commissioner (Appeals) upheld.

Key provisions

• Rule 8, Customs Valuation (Determination of Value of Export Goods) Rules, 2007 — Rejection of declared value
• Rule 6, Customs Valuation (Determination of Value of Export Goods) Rules, 2007 — Residual method
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 11, The Foreign Trade (Development and Regulation) Act, 1992 — Contravention of provisions of this Act, rules, orders and foreign trade policy.
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Rule 18, Customs and Central Excise Duties Drawback Rules, 2017 — Recovery of amount of Drawback where export proceeds not realised