Customs Duty Can’t Be Demanded Jointly Or Severally Without Proof Of Joint Import: CESTAT Chennai
Pranav B Prem
The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that customs duty cannot be demanded “jointly or severally” from multiple individuals unless it is established that the goods were imported jointly. The Bench comprising Vasa Seshagiri Rao (Technical Member) and Ajayan T.V. (Judicial Member) delivered a detailed ruling in a batch of 26 appeals arising out of a high-value confectionery import dispute.
The principal appellant, M/s Nakshatra International Food Company (NIFCO), a sole proprietorship concern of Mukesh Kumar, was accused of under-invoicing the import value of confectionery items such as jellies, chocolates, wafers, juices and coffee, misdeclaring Retail Sale Price (RSP), misclassifying certain products, and allegedly misusing four other Import Export Codes (IECs) to route imports. A total of 566 Bills of Entry were scrutinised, of which 388 imports were directly in the name of NIFCO and 178 imports were made under four different IEC holders.
During investigation, goods valued at ₹1.46 crore were seized from NIFCO’s premises. Two hard disks allegedly containing proforma invoices were also recovered and analysed. Statements of Mukesh Kumar and his brothers Kamlesh Kumar and Naresh Kumar were recorded under Section 108 of the Customs Act, 1962, wherein under-invoicing to the extent of 30–50% was allegedly admitted. One of the statements was retracted within 24 hours. The DRI also relied upon market survey data to enhance RSP and, in certain cases, revised RSP by applying a multiplier of 2.42 times the enhanced landed value.
The Tribunal framed multiple issues for determination, including whether customs duty could be demanded jointly or severally from the Kumar brothers and IEC holders, whether rejection of declared transaction value under the Customs Valuation Rules, 2007 was legally sustainable, the admissibility of electronic evidence under Section 138C, the evidentiary value of retracted statements, classification disputes relating to certain products, and the legality of a corrigendum imposing penalties on Customs Brokers.
On the issue of joint and several liability, the Bench noted that NIFCO was a sole proprietorship and that Mukesh Kumar, as proprietor, had filed the 388 Bills of Entry and made declarations under Section 46(4) of the Customs Act. Referring to the definition of “importer” under Section 2(26) read with Sections 46 and 47, the Tribunal held that liability to pay duty rests with the importer who files the Bill of Entry. It reiterated its earlier ruling in Commissioner of Customs vs Unik Traders (2025) that “the question of demanding duty jointly or severally does not arise unless it can be shown that the goods have been imported jointly.” Accordingly, the demand confirmed jointly against Mukesh Kumar and his two brothers in respect of NIFCO’s imports was held to be bad in law.
With respect to the 178 imports made under four other IECs, the Revenue alleged misuse and treated NIFCO as the beneficial importer. The Tribunal observed that the IEC holders were found to be genuine entities. One IEC holder had appeared before DRI and admitted lending the IEC for consideration. Customs Brokers had stated that they had met the IEC holders personally. The Tribunal also noted that the concept of “beneficial owner” was introduced in the Customs Act only in 2017, whereas the imports in question took place between 2008 and 2013. In the absence of any prohibition during the relevant period against use of another valid IEC, the Tribunal held that imports under those IECs could not be automatically clubbed with NIFCO for joint liability. Each IEC holder remained liable for its own imports.
On valuation, the Tribunal examined the rejection of declared transaction value under Rule 12 of the Customs Valuation Rules, 2007 and the subsequent redetermination under Rules 3(1), 4 and 9. Relying on the Supreme Court’s decision in Century Metal Recycling Pvt. Ltd., the Bench observed that Rule 12 mandates a two-step procedure: the proper officer must first communicate the grounds for doubting the declared value and then provide an opportunity of hearing before proceeding to determine value under Rules 4 to 9. The Tribunal found that this mandatory procedure was not followed.
The Bench further observed that Rule 9, being the residual method, cannot be applied on arbitrary or fictional bases and must, to the greatest extent possible, rely on previously determined customs values. It noted that the Department had disowned contemporaneous NIDB data as unreliable, yet proceeded to enhance value without credible comparable data. Such redetermination was held to be legally unsustainable.
In respect of the proforma invoices recovered from the hard disks, the Tribunal accepted the contention that a proforma invoice is merely a tentative offer and cannot, by itself, constitute proof of actual transaction value unless supported by evidence of additional consideration. The Tribunal found no evidence of any flow-back of consideration over and above the declared import value.
The Bench also examined discrepancies in the serial numbers of the seized hard disks and those analysed by forensic experts, as well as compliance with Section 138C governing admissibility of electronic records. These procedural lapses were treated as serious infirmities affecting the reliability of the electronic evidence. The Tribunal further held that retracted statements recorded under Section 108 cannot form the sole basis for redetermination of value unless corroborated by independent evidence.
On the issue of RSP enhancement, the Tribunal expressed reservations over the formula-based application of 2.42 times the enhanced landed value without credible supporting retail invoices or authenticated market data. It held that such enhancement could not be sustained in the absence of reliable documentary evidence.
The Tribunal also considered the corrigendum issued after the original order imposing penalties under Sections 112(b) and 114AA on Customs Brokers. The legality of introducing fresh penal consequences through a corrigendum was questioned, particularly when no specific finding regarding violation of KYC norms had been recorded in the original order.
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In conclusion, the Tribunal held that customs duty liability flows strictly from the statutory definition of “importer” and cannot be imposed jointly or severally unless goods are shown to have been imported jointly. It confined liability to the respective importers in accordance with law and found significant infirmities in the valuation exercise and evidentiary basis adopted by the Revenue. The appeals were accordingly disposed of by restructuring and setting aside the demands and penalties to the extent found unsustainable in law.
Cause Title: M/s. Mukesh Kumar Versus Commissioner of Customs
Case No.: Customs Appeal No. 41655 of 2019
Coram: Vasa Seshagiri Rao (Technical Member) and Ajayan T.V. (Judicial Member)
