CESTAT: Incorrect Valuation Doesn’t Amount to Suppression If Bonafide; Penalty Under Customs Act Not Sustainable
Pranav B Prem
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Principal Bench at New Delhi, comprising Justice Dilip Gupta (President) and Ms. Hemambika R. Priya (Technical Member), held that a bonafide declaration of the value of imported goods—later found to be incorrect—does not automatically constitute suppression or misdeclaration under the Customs Act, 1962. Consequently, the imposition of penalty under Sections 112 and 114AA was deemed unsustainable.
The Tribunal allowed the appeals filed by M/s Goldstar Glasswares Pvt. Ltd. and its Director, Mr. Arjinder Singh Gulati, setting aside the impugned order passed by the Principal Commissioner of Customs, ICD, Tughlakabad.
Background
The dispute centered around the import of melamine by the appellant, which the Department alleged was overvalued to circumvent the anti-dumping duty imposed on imports from China. The Department suspected that the appellant intentionally declared a higher Free on Board (FOB) value—USD 1475 per MT—to exceed the anti-dumping duty threshold of USD 1681.49 per MT. Based on this suspicion, searches were conducted at the appellant’s premises on 03.09.2015, and 9900 kgs of melamine were seized.
Subsequently, the Directorate of Revenue Intelligence (DRI) issued a show cause notice on 27.03.2018, nearly two and a half years after recording the director’s statement. The notice demanded recovery of anti-dumping duty along with interest and penalty under Section 28(4) of the Customs Act, alleging suppression of facts. The Principal Commissioner confirmed the demand, invoked the extended limitation period under Section 28(4), re-determined the assessable value under Rule 5 of the Customs Valuation Rules, and imposed penalties under Sections 112, 114A, and 114AA of the Act.
Contentions
The appellants contended that the extended limitation period under Section 28(4) was wrongly invoked. They argued that all material facts—description, classification, quality, quantity, and applicable notifications—were correctly disclosed in the Bills of Entry. Moreover, the goods had been examined and cleared by customs officials, and there was no suppression or mis-declaration.
It was submitted that merely declaring a higher value, without intent to deceive, does not amount to willful misstatement. They emphasized that the valuation was based on documents provided by the overseas supplier and was a bona fide self-assessment, not influenced by fraudulent intent.
The Department maintained that the appellant’s conduct amounted to deliberate suppression intended to avoid anti-dumping duty. They argued that the higher value was purposefully declared to escape the levy of duty and that the extended period under Section 28(4) was rightly applied.
Observations and Findings
The Tribunal thoroughly examined the evidence and noted that the Bills of Entry clearly disclosed all relevant facts, including the applicable anti-dumping duty notification. The goods were examined and cleared by customs officers at multiple ports, and there was no allegation of mis-declaration regarding the nature or quantity of goods.
The Tribunal emphasized that the delay of over two years in issuing the show cause notice, despite the department having access to all records and statements by 2015, undermined the justification for invoking the extended limitation period. It observed that there was no indication that the department discovered any new facts after the search or after recording the director’s statement.
Importantly, the Tribunal reiterated that mere incorrectness in valuation, without mens rea, cannot be equated with suppression. Citing the Supreme Court’s ruling in Commissioner of C. Ex. & Customs v. Reliance Industries Ltd [2023 (385) E.L.T. 481 (S.C.)], the Tribunal noted that in a self-assessment regime, a mistaken declaration made bona fide does not attract extended limitation or penalties. The Tribunal also relied on its own prior decision in G.D. Goenka Pvt. Ltd. v. Commissioner of CGST [Service Tax Appeal No. 51787 of 2022 dated 21.08.2023], reiterating that suppression under the Customs Act requires intent to evade duty, not just incorrect declarations.
Verdict
The Tribunal held that the declaration of value by the appellant was a bonafide act and did not constitute suppression or misstatement. As a result, the invocation of the extended limitation period under Section 28(4) of the Customs Act was unjustified. Further, since the declaration was not fraudulent, the imposition of penalties under Sections 112, 114A, and 114AA was also unwarranted. Accordingly, the order dated 30.05.2019 passed by the Principal Commissioner was set aside, and both appeals were allowed with consequential relief.
Appearance
Counsel for Appellant/Assessee: Dr. G.K. Sarkar and Shri Prashant Shrivastava
Counsel for Respondent/Department: Manish Kumar Shukla
Cause Title: M/s Goldstar Glasswares Pvt. Ltd. V. Principal Commissioner of Customs
Case No: Customs Appeal No. 52752 Of 2019
Coram: Justice Dilip Gupta [President], Hemambika R. Priya [Technical Member]
