Customs Dept. Can’t Collect Evidence Behind Importer’s Back And Without Supplying Copies: CESTAT

The Delhi bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the customs department cannot collect evidence behind the back of the importer and use it against them without supplying copies. The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that the customs department cannot rely on contemporaneous import documents to enhance the value of goods unless copies of such documents are supplied to the importer, as failure to do so violates basic procedural fairness. The case arose from imports made by M/s VGS Enterprises, which had imported goods described in the Bills of Entry and invoices as “painted steel sheets.” During investigation, the Directorate General of Revenue Intelligence (DRI) examined the goods and concluded that they were actually “painted galvanised steel sheets,” noting the presence of a zinc coating beneath the paint layer. Samples sent to the Central Revenue Control Laboratory confirmed the presence of zinc coating. Based on this finding, the department alleged that the importer had misdeclared the nature of the goods, making them liable for confiscation under Section 111(m) of the Customs Act, 1962. Authorities also rejected the declared value of USD 620 per metric tonne, invoking Rule 12 of the Customs Valuation Rules, 2007, and re-determined the value using prices from contemporaneous imports. Following adjudication, the Joint Commissioner confirmed the differential customs duty demands, redemption fines, penalties on the importing firm, and separate penalties on its partners. The Commissioner (Appeals) subsequently upheld this order, prompting the appellants to approach the Tribunal. The Tribunal examined whether the description “painted steel sheets” constituted a misdeclaration. It observed that although the goods indeed had zinc coating, this fact alone did not render the description inaccurate in a manner that would justify confiscation. The Tribunal therefore rejected the department’s allegation of misdeclaration. However, the Tribunal noted that even in the absence of misdeclaration, authorities could still reject the declared value under valuation rules if valid grounds existed. The Tribunal found a critical procedural flaw in the department’s approach. The re-determined value had been calculated on the basis of “contemporaneous Bills of Entry” relating to other imports. However, the customs authorities did not attach copies of those Bills of Entry or related documents to the show cause notice, nor were they provided to the importer despite requests. The Bench emphasized that such documents form the core evidence for valuation disputes, and withholding them deprives the importer of the opportunity to verify or contest the alleged comparability. The Tribunal observed that officers cannot gather evidence behind the back of the assessee and rely on it without disclosure, as doing so undermines the principles of natural justice. The Bench further noted that when comparing imported goods for valuation purposes, several technical aspects become crucial, including the level of zinc coating, technical specifications of the sheets, and whether the imports were of comparable commercial quantities. Without access to the relied-upon documents, the importer could not verify whether the goods used as comparables were genuinely similar. Concluding that the valuation exercise was fundamentally flawed due to the non-supply of relied-upon documents, the Tribunal held that the impugned order could not be sustained. Accordingly, the CESTAT set aside the orders of the lower authorities and allowed all three appeals, granting relief to the importer and its partners. Case Details Case Title: M/s VGS Enterprises Versus The Principal Commissioner of Customs (Imports) Citation: JURISHOUR-322-CES-2026(DEL) Case No.: CUSTOMS APPEAL NO. 55860 OF 2023 Date: 11.03.2026 Counsel For Appellant: Sunil Kumar Gupta, Advocate Counsel For Respondent: Rajesh Singh, Authorized Representative Click Here To Read Order Read More: No Cancellation of Charitable Registration Without ‘Specified Violation’: ITAT

Customs Dept. Can’t Collect Evidence Behind Importer’s Back And Without Supplying Copies: CESTAT

Membership Required

Latest articles

Services Used for Setting Up Factory Continue to Qualify as ‘Input Services’: CESTAT

Customs Can’t Enhance Import Value Solely on NIDB Data Without Proof of Comparable Imports: CESTAT

Bona Fide Mistakes Shouldn’t Defeat Substantive Tax Rights: Karnataka High Court Allows Correction of GST DRC-03 Filing Error

Procedural Delay Should Not Defeat Scheme Benefits: CESTAT Directs Manual Processing of SVLDRS Discharge Certificate

More like this

Services Used for Setting Up Factory Continue to Qualify as ‘Input Services’: CESTAT

Customs Can’t Enhance Import Value Solely on NIDB Data Without Proof of Comparable Imports: CESTAT

Bona Fide Mistakes Shouldn’t Defeat Substantive Tax Rights: Karnataka High Court Allows Correction of GST DRC-03 Filing Error

About us

Company

Categories