DGFT’s Minimum Import Price Can’t Be Adopted for Valuation of EOU DTA Clearances: CESTAT

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Minimum Import Price (MIP) fixed by the Directorate General of Foreign Trade (DGFT) cannot be adopted as the assessable value for such clearances in the absence of evidence of undervaluation. The bench of Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) has observed that MIP cannot automatically replace transaction value unless there is evidence of undervaluation or special circumstances. In the present case, the department failed to produce any evidence of manipulation of invoices, additional consideration, relationship between buyer and seller influencing price, or payment beyond the declared value. In the absence of such material, enhancement of value solely on the basis of DGFT’s MIP was held to be legally unsustainable. Consequently, the demand of Rs. 3.33 crore on account of alleged undervaluation was set aside. M/s Exotic Granite LLP, a 100% Export Oriented Unit (EOU) engaged in the manufacture of polished granite slabs and tiles classifiable under CTH 68029300, was accused by the department of undervaluing goods cleared into the Domestic Tariff Area (DTA). The department alleged that the appellant cleared polished granite in DTA at prices lower than the Minimum Import Price (MIP) of USD 80 per square meter prescribed by the DGFT through Notification No. 38(RE-2013)/2009-2014 dated August 26, 2013. On this basis, the department enhanced the assessable value and confirmed a total demand of Rs. 3.62 crore along with interest and equal penalty under Sections 11A and 11AC of the Central Excise Act, 1944. Additionally, a separate demand of Rs. 28.59 lakh was confirmed on the ground that the assessee had wrongly availed concessional duty under Notification No. 23/2003-CE in respect of advance DTA sales permitted under Para 6.8(k) of the Foreign Trade Policy (FTP). The principal question before the Tribunal was whether the Minimum Import Price fixed by the DGFT for imported granite slabs could be adopted as the assessable value for goods cleared by a 100% EOU into DTA. The department argued that DTA clearances by EOUs are akin to imports and should therefore align with MIP norms. It relied on judicial precedents including Hindustan Granites and Tungabhadra Special Products to justify the enhancement of value. However, the Tribunal disagreed with this approach. The Bench observed that under the proviso to Section 3(1) of the Central Excise Act, duty on DTA clearances by EOUs is indeed equal to the aggregate of customs duties. However, valuation must be carried out strictly in accordance with Section 14 of the Customs Act read with the Customs Valuation Rules. The Tribunal clarified that the MIP fixed by DGFT is neither a transaction value under Section 14(1), nor a tariff value fixed under Section 14(2), nor a value determined under the Customs Valuation Rules. On the second issue, the Tribunal examined whether concessional duty under Notification No. 23/2003-CE was available for advance DTA sales permitted under Para 6.8(k) of the FTP. The Bench found that the notification applies only to DTA clearances under Para 6.8(a), (d), (e), and (g) of the FTP. Since advance DTA sales fall under Para 6.8(k), they are not covered by the concessional notification. The Tribunal further noted that the Development Commissioner’s permission dated April 17, 2014 required execution of a differential duty bond as a pre-condition for the permission to become operational. The appellant had failed to execute this bond. It was also observed that the ER-2 returns did not correctly disclose that the clearances were made under Para 6.8(k), and relevant details were suppressed while claiming concessional benefit. In these circumstances, the extended period of limitation was held to be rightly invoked. Accordingly, the Tribunal upheld the duty demand of Rs. 28.59 lakh along with applicable interest. However, taking note of the absence of mens rea and the fact that certain communications had been made to the department, the Bench set aside the equal penalty under Section 11AC. In conclusion, the appeal was partly allowed. The Tribunal set aside the Rs. 3.33 crore demand based on DGFT MIP valuation, upheld the Rs. 28.59 lakh demand relating to wrongful concessional benefit on advance DTA sales, and deleted the penalty. Case Details Case Title: Exotic Granite Llp Versus Commissioner Of C.E.-Kutch (Gandhidham) Citation: JURISHOUR-213-CESTAT-2026(AHEM) Case No.: Excise Appeal No. 10498 of 2020-DB Date: 03.03.2026 Counsel For Appellant: Manish Jain, Advocate Counsel For Respondent: Rajesh R Kurup, Superintendent (AR) Click Here To Read Order Read More: No PE for Oracle Systems in India: ITAT Deletes Notional Royalty Additions

DGFT’s Minimum Import Price Can’t Be Adopted for Valuation of EOU DTA Clearances: CESTAT

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