CESTAT New Delhi: Importer Not Liable For Misdeclaration Merely Because Other Importers Declared Higher Prices For Similar Goods
Pranav B Prem
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi Bench, has held that an importer cannot be penalised for misdeclaration merely because other importers declared higher prices for similar goods under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. A Division Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that the mere fact that another importer imported identical goods from the same overseas supplier at higher prices does not establish misdeclaration on the part of the assessee.
Background
The appellant, M/s Continental Trading Company, imported certain goods from an overseas supplier and filed a Bill of Entry declaring the transaction value based on its purchase price. The values declared were approximately 17% lower than those declared by another importer for identical goods imported from the same supplier. Relying on this difference, the proper officer raised doubts under Rule 12 of the Customs Valuation Rules, which allows rejection of declared value if there is reasonable doubt regarding its accuracy. The Commissioner of Customs, after invoking Rule 12, rejected the transaction value and re-determined the assessable value under Rule 4 for one Bill of Entry, and under Rule 9 for 44 past Bills of Entry**, while also demanding duty under Section 28(4) of the Customs Act, 1962 and imposing an equivalent penalty under Section 114A and another penalty under Section 114AA for alleged misdeclaration. Aggrieved, the importer filed an appeal before the CESTAT.
Revenue’s Contentions
The Department argued that the rejection of declared transaction value was justified because the importer’s declared prices were significantly lower than those declared by other importers for identical goods imported from the same overseas supplier. It was contended that the pattern of undervaluation was consistent and deliberate across several consignments and that the importer had failed to explain the price difference, which amounted to misdeclaration with intent to evade duty.
Assessee’s Contentions
The appellant submitted that it was a long-standing customer of the foreign supplier and had entered into a direct agreement for bulk purchases, which entitled it to preferential prices. The importer argued that price variation between buyers is common and cannot, by itself, justify a finding of misdeclaration. The assessee further argued that Rule 12 empowers only the proper officer to reject a transaction value when there is reasonable doubt as to its accuracy — there is no provision for an importer to reject or revise its own declared value. Therefore, penalising the importer merely because another importer paid higher prices is legally unsustainable. It was also contended that the importer could not have known the transaction values declared by other importers and that the penalty imposed under Section 114AA was without basis.
Tribunal’s Findings
The Bench observed that differences in prices alone do not prove misdeclaration, and that each import transaction must be examined on its own commercial terms. It clarified that under Rule 12, the rejection of transaction value must be based on reasonable doubt supported by evidence, not merely on comparative pricing by unrelated importers. The Tribunal held: “The mere fact that another importer has imported identical goods from the same overseas exporter at different prices does not, by itself, establish misdeclaration by the assessee in the Bill of Entry.”
The Tribunal further explained that the Customs Valuation Rules provide a structured mechanism for re-determining value once the declared value is rejected. However, such rejection cannot be arbitrary or based solely on market comparison. It emphasized: “A proper officer can reject the transaction value under Rule 12 if he has reasonable doubt about its truth or accuracy. There is no provision enabling an importer to reject his own declared value, nor can the importer be presumed to know the transaction values declared by others.” The Bench also noted that while there was some variation in prices, there was no material evidence showing that the importer had suppressed or falsified transaction details. Consequently, the penalty under Section 114AA, which applies to cases of intentional misdeclaration, could not be sustained.
Decision
After examining the case records, the Tribunal partly allowed the appeal, drawing a distinction between reasonable revaluation of goods and wrongful imposition of penalties. It held that while the rejection of the transaction value under Rule 12 and re-determination of value under Rule 4 was justified in respect of one Bill of Entry, the Commissioner’s action in extending the same finding to 44 past Bills of Entry and imposing penalties was unsustainable. The Tribunal held: “Even if the assessee was aware that another importer was importing goods at different prices, it cannot be presumed that such knowledge mandates self-declaration at those values. The importer was bound only to declare its own transaction value, which it did faithfully.” Accordingly, the CESTAT:
Upheld the rejection of transaction value under Rule 12 and re-determination under Rule 4 in respect of one Bill of Entry, along with demand of duty and interest;
Set aside the re-determination of value for the other 44 Bills of Entry, as well as the demand under Section 28(4) and penalty under Section 114A;
Quashed the penalty under Section 114AA, observing that there was no misdeclaration.
The Tribunal concluded that mere price disparity between importers does not automatically imply undervaluation or misdeclaration, especially where the importer’s declared value corresponds to the actual transaction price.Accordingly, the appeal was partly allowed, with the penalty and extended demand being set aside.
Appearance
Counsel for Appellant/ Assessee: Shri Priyadarshi Manish and Shri Kunal Sharma
Counsel for Respondent/ Department: Shri Girijesh Kumar
Cause Title: Continental Trading Co. v. Principal Commissioner, Customs-New Delhi
Case No: Customs Appeal No. 51966 Of 2022
Coram: Justice Dilip Gupta (President), P.V. Subba Rao (Technical Member)
