The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi, has quashed a series of customs duty recovery orders, penalties, and fines imposed against a group of exporters.
The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) ruled that Customs authorities had no legal power to re-determine the Free on Board (FOB) value of exported goods, a move that formed the sole basis of the Department’s case.
The appellant exporters had shipped readymade garments under the Drawback and Duty Entitlement Passbook (DEPB) schemes from the Inland Container Depot, Tughlakabad and Air Cargo Complex, IGI Airport, New Delhi. Both schemes provide exporters with incentives based on the declared FOB value — the price agreed upon between the foreign buyer and the Indian exporter.
Following intelligence inputs, the Directorate of Revenue Intelligence (DRI) launched an investigation alleging overvaluation of export consignments. Based on local market surveys and assessments, the Customs Department rejected the declared invoice values and re-determined them, claiming the exporters had fraudulently availed of excess benefits.
Significant penalties and fines were levied, including Rs. 42.7 lakh penalty on M/s Mahir Fashions (P) Ltd and ₹80 lakh fine in lieu of confiscation. Rs. 25.1 lakh penalty on M/s Almas Creations, along with various other fines across their export consignments. Rs. 22.1 lakh penalty on M/s Naaz Impex with multiple recovery orders. Individual penalties on associated persons, including ₹20 lakh on Mr. Mehruddin Ansari and Rs. 15 lakh on Mr. Sardar Ahmed.
The tribunal held that Customs officers have no authority to alter FOB values agreed upon by the exporter and buyer. While Section 14 of the Customs Act permits Customs to determine “assessable value” for duty purposes using valuation rules, this does not empower them to revise transaction values for the purpose of denying export benefits.
CESTAT emphasized that no stranger to the contract, including any Customs officer, has any right to interfere with the FOB value of the goods.
The Tribunal relied on its earlier ruling in M/s JBM Apparels Pvt. Ltd., reiterating that export incentives like Drawback, MEIS, and ROSL are based on the transaction value (FOB) and cannot be substituted with another value derived by Customs officers.
With the Tribunal setting aside the Commissioner’s orders as being beyond jurisdiction, all penalties, recovery demands, and confiscation orders stemming from the altered FOB values stand annulled. The six appeals were allowed in full, offering consequential relief to the appellants.
Case Details
Case Title: M/S Mahir Fashions (P) Ltd Versus Commissioner Of Customs-(Icd) New Delhi
Case No.: CUSTOMS APPEAL NO. 332 OF 2011
Date: 22/07/2025
Counsel For Appellant: Prabhat Kumar
Counsel For Respondent: Rakesh Kumar
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