The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the impugned order and remanded the matter back to the adjudicating authority, holding that failure to follow principles of natural justice vitiates the assessment proceedings.
The bench of Justice S.G.Pandit and Justice K. V. Aravind noted that the disagreement did not pertain to iron content or unit price but was limited to variation in moisture content affecting the quantity and, consequently, duty computation. However, it found a fundamental procedural lapse—crucial documents, including the Customs Laboratory report relied upon by the department, were not provided to the appellant.
The dispute arose from export of iron ore fines by the appellant, where the department sought to re-determine the assessable value based on variation in moisture content between load port and discharge port test reports. The original authority had finalized the assessment by adopting the declared price but recalculated duty liability due to differences in moisture content, leading to recovery of differential duty along with interest. The Commissioner (Appeals) upheld this decision, prompting the appeal before the Tribunal.
At the core of the dispute was whether transaction value should be determined based on load port test reports relied upon by the department or discharge port analysis as per contractual terms and final invoice. The appellant contended that the final invoice value, duly realized through banking channels, should be accepted as the transaction value, especially in the absence of any allegation of extra consideration or flow-back.
The Tribunal highlighted that even the Commissioner (Appeals) had acknowledged this violation of natural justice. Despite recording that the adjudicating authority failed to follow due process—such as issuing query memos, providing relied-upon documents, and granting proper opportunity of hearing—the appellate authority still proceeded to decide the matter on merits. This approach was found legally untenable.
Reinforcing settled legal principles, the Tribunal observed that under Section 14 of the Customs Act, export value must ordinarily be the transaction value, i.e., the price actually paid or payable. It emphasized that such value can only be rejected for valid and cogent reasons. In the present case, there was no allegation of undervaluation, relationship between parties, or receipt of any amount beyond the declared invoice value.
The Bench also reiterated that in cases where export duty is levied on an ad valorem basis, it is the transaction value that is determinative, not variations in physical parameters such as moisture content. Relying on precedents including the Tribunal’s earlier rulings and judicial pronouncements, it held that quantity adjustments based on moisture content do not override the agreed transaction value when duty is value-based.
The Tribunal concluded that the rejection of transaction value and the assessment process suffered from serious legal infirmities. It held that non-compliance with principles of natural justice alone was sufficient to invalidate the proceedings.
The order was set aside, and the matter was remanded to the adjudicating authority with directions to follow due process, provide all relied-upon documents, and re-decide the case in accordance with law.
Case Details
Case Title: M/s Mangilall Rungta Versus Commissioner of Customs Visakhapatnam – CUS
Citation: JURISHOUR-1034-HC-2026(HYD)Â
Case No.: Customs Appeal No. 20965 of 2015
Date: 27.04.2026
Counsel For Appellant: S.C. Choudhary, Advocate
Counsel For Respondent: A. Rangadham, AR
