Pranav B Prem

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Ajay Sharma (Judicial Member) and C.J. Mathew (Technical Member), has set aside an order passed by the Commissioner of Customs (Import), Mumbai, in a case concerning alleged mis-declaration of the value of used cranes. The tribunal held that fastening liability on the basis of a chartered engineer’s certificate, without granting the importer an opportunity to cross-examine the certifying authority, amounts to a violation of the principles of natural justice.

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The proceedings arose out of imports made by M/s Harvinder & Co., involving 26 cranes imported directly and four on high-seas sales basis, through 30 consignments covered by bills of entry between May 2006 and January 2008. The declared value of ₹3,30,27,101 was rejected by customs authorities, who re-determined the assessable value as ₹7,00,84,564. On this basis, the goods were confiscated under Section 111(m) of the Customs Act, 1962, a duty demand of ₹48,22,659 was raised, and penalties were imposed.

The department’s case primarily relied on the valuation provided by an independent chartered engineer, which was treated as the basis for redetermination of value under Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, and Rule 9 of the 2007 Rules. The appellant, however, consistently argued that the certificate could not be relied upon without permitting cross-examination of the engineer. Their plea for cross-examination was rejected without reasons.

Counsel for the appellant, Dr. Sujay Kantawala, submitted that the denial of cross-examination was peremptory and that the adjudicating authority had acted in breach of natural justice. It was also argued that the show cause notice issued on 30 May 2012 invoked recovery provisions without justification for the extended limitation period. Several judicial precedents were relied upon, including Sun Electronics Technologies Ltd. v. Commissioner of Customs [2008 (231) ELT 334], Shivam Casting v. Commissioner of Central Excise [2018 (359) ELT 16 (Guj.)], and the Supreme Court ruling in Parle Beverages Pvt. Ltd. v. Collector of Central Excise [1998 (98) ELT 585 (SC)], all of which emphasize that when a finding is based on third-party reports or statements, denial of cross-examination vitiates the proceedings.

The revenue defended the order, pointing out that the importer had allegedly admitted undervaluation and that evidence of cash payments to suppliers existed. It argued that reliance on the engineer’s certificate was necessary, as the certificates originally submitted by the importer were unreliable.

The bench, however, noted that the entire case of undervaluation was built on the chartered engineer’s valuation report. It referred to the Gujarat High Court’s ruling in Mahek Glazes Pvt. Ltd. v. Union of India [2014 (300) ELT 25 (Guj.)], which held that cross-examination is not a mere procedural formality but a substantive right, and that adjudicating authorities must decide such applications before proceeding. The tribunal also cited Thilagarathinam Match Works v. Commissioner of Central Excise, Tirunelveli [2013 (295) ELT 195 (Mad.)], where it was held that reliance on third-party evidence without allowing cross-examination is impermissible.

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The tribunal stressed that fastening liability to duty, interest, and penalties purely on the strength of an engineer’s certificate, without testing its veracity through cross-examination, is a blatant violation of natural justice. The bench also noted that since the same officer continued to hold the office of the Commissioner of Customs & Central Excise, Surat-II, it would not be necessary to conduct a fresh round of hearing on the same issue. However, the Commissioner was directed to allow cross-examination if the appellants demonstrated the relevance of such examination. Accordingly, the impugned order was set aside, and the matter was remanded to the adjudicating authority for a fresh decision after ensuring compliance with statutory requirements, including the appellant’s right to cross-examine the certifying engineer. The appeals were thus allowed by way of remand.

Appearance

Shri Sujay Kantawal and Ms Aishwarya Kantawala, Advocates for the appellant

Shri Ram, Kumar, Assistant Commissioner (AR) for the respondent

Cause Title: Harvinder & Co V. Commissioner of Customs (Import)

Case No: Customs Appeal No. 85467 Of 2014

Coram: Ajay Sharma (Judicial Member), C.J. Mathew (Technical Member)