The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has held that an importer’s written acceptance of an enhanced customs valuation does not, by itself, take away the statutory right to challenge the reassessment.
The bench of P. K. Choudhary (Judicial Member) and Pullela Nageswara Rao (Technical Member) reiterated that rejection of the declared transaction value must satisfy the requirements of the customs valuation law and cannot rest merely on an acceptance letter or unsupported reliance on import database figures.
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The bench set aside the Commissioner (Appeals)’ order that had upheld the reassessment on the ground that the importer had accepted the enhancement in writing.
The appellant/assessee which imports goods including polyester lining fabric and knitted fabric from China, challenged the enhancement of the declared value of a consignment covered by a Bill of Entry dated May 31, 2019.
The importer had declared a unit price of USD 1.30 per kilogram, which Customs enhanced to USD 1.77 per kilogram.
According to the order, examination of the goods revealed that they were in accordance with the declarations. However, after comparing the declared price with contemporaneous import data, the department sought further particulars, including the composition and dimensions of the fabric.
The importer supplied the description sought by the assessing officer. The department subsequently proposed rejection of the declared value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
The importer argued that it had correctly assessed customs duty on the basis of the supplier’s invoice and the negotiated purchase price.
It submitted that clearance remained pending despite requests for provisional assessment and payment of duty on the enhanced value under protest. According to the importer, it ultimately submitted consent letters agreeing to the departmental valuation to avoid further delay in clearance.
The importer also maintained that it had requested a speaking order, but none was issued. It therefore challenged the reassessment before the Commissioner (Appeals).
The Commissioner (Appeals) rejected the challenge, reasoning that the written acceptance of the enhanced value dispensed with the requirement of a speaking order under Section 17(5) of the Customs Act, 1962, and made the reassessment binding on the importer.
Before the Tribunal, the importer contended that acceptance of the enhanced value could not validate a reassessment made without following Section 14 of the Customs Act and the Customs Valuation Rules.
The department defended the reassessment by relying on the consent letter.
It submitted that the importer had acknowledged understanding the grounds for rejection of the declared value and the particulars of contemporaneous imports of similar or identical goods. The letter also recorded agreement with the enhancement and stated that a show cause notice or speaking order was not required.
The department argued that, in these circumstances, the assessing officer was not required to issue a speaking order under Section 17(5).
It also relied on the Allahabad High Court’s decision in S. S. Overseas. The importer sought to distinguish that case on its facts and disputed the department’s argument concerning the effect of the subsequent dismissal of the special leave petition.
The Tribunal found that the Commissioner (Appeals) had proceeded merely on the importer’s written acceptance of the enhancement and the resulting absence of a requirement to issue a speaking order.
It held that the appellate authority had failed to consider the complete ratio of the Supreme Court’s judgment in Century Metal Recycling Pvt. Ltd. v. Union of India.
Relying on that decision, the Tribunal reiterated that the formation of reasonable doubt about the truth or accuracy of the declared value, recording of reasons, and communication of those reasons when required are integral to the procedure under Rule 12. These requirements cannot be bypassed while rejecting the transaction value and proceeding to valuation under the succeeding rules.
Examining the acceptance letter, the Tribunal noted that it referred generally to the disclosure of grounds and contemporaneous import particulars. However, the alleged comparable import data was not actually detailed in the letter.
The Bench found an unexplained gap between the language of the acceptance letter and the importer’s other communications. It consequently declined to accept the contents of the consent letter at face value.
The Tribunal relied on the Delhi High Court’s November 27, 2024 judgment in Niraj Silk Mills v. Commissioner of Customs, which considered whether an importer could challenge valuation enhancement after giving up the right to a show cause notice or speaking order.
As explained in that judgment, written acceptance of reassessment under Section 17(5) may relieve the proper officer of the obligation to issue a speaking order. However, that concession does not deprive the importer of the statutory right to question the correctness of the reassessment.
The Tribunal also reproduced the High Court’s reasoning that valuation enhancement based solely on National Import Database (NIDB) data requires independent and cogent supporting evidence. Departure from the declared value must be supported by tangible material and a reasoned application of the valuation rules.
Holding that the dispute was squarely covered by Niraj Silk Mills, the Tribunal found the Commissioner (Appeals)’ order dated June 18, 2020 unsustainable.
It accordingly set aside the order and allowed the appeal with consequential relief, if any, as permitted by law.
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