Customs Duty Can’t Be Demanded “Jointly or Severally” From Multiple Persons Unless Goods Were Imported Jointly: CESTAT

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that customs duty cannot be demanded “jointly or severally” from multiple individuals unless goods are shown to have been imported jointly. The bench of Vasa Seshagiri Rao (Technical Member) and Ajayan T.V. (Judicial Member) has observed that valuation under Rule 9 cannot be arbitrary or fictional and must, as far as possible, be based on previously determined customs values. The principal appellant, M/s Nakshatra International Food Company (NIFCO), a proprietorship concern of Mukesh Kumar, was accused of under-invoicing import value of confectionery items such as jellies, chocolates, wafers, juices and coffee. Misdeclaring Retail Sale Price (RSP). Misclassifying certain products. Allegedly misusing four other Import Export Codes (IECs) to route imports. A total of 566 Bills of Entry were scrutinised, of which 388 imports were directly in the name of NIFCO. 178 imports were made under four different IEC holders. The Directorate of Revenue Intelligence (DRI) relied heavily on Seizure of goods worth ₹1.46 crore. Two hard disks allegedly containing “parallel” proforma invoices. Statements of the Kumar brothers recorded under Section 108 of the Customs Act. Market survey data for enhancement of RSP. The Tribunal examined multiple complex issues, including whether customs duty can be demanded jointly or severally from multiple persons. Legality of rejecting declared transaction value under Customs Valuation Rules, 2007. Admissibility of electronic evidence under Section 138C of the Customs Act. Validity of reliance on retracted statements. Classification disputes for three products. Legality of corrigendum imposing penalties on Customs Brokers. Revenue’s plea for imposition of redemption fine under Section 125 and penalties under Sections 112(b) and 114AA. The Tribunal held that customs duty liability rests with the “importer” as defined under Section 2(26) read with Sections 46 and 47 of the Customs Act, 1962. In respect of NIFCO’s 388 Bills of Entry, the Bench ruled that NIFCO was a sole proprietorship. Mukesh Kumar, as proprietor, alone could be treated as importer. Duty demand on Mukesh Kumar and his brothers jointly or severally was legally unsustainable. Relying on its earlier ruling in Commissioner of Customs vs Unik Traders (2025), the Tribunal reiterated that duty cannot be demanded jointly or severally unless goods were imported jointly. Accordingly, the demand confirmed jointly against the three Kumar brothers was held to be bad in law. The Revenue alleged misuse of four IECs. However, the Tribunal noted IEC holders were found to be genuine entities. Some had appeared before DRI and admitted lending IECs for consideration. Bills of Entry and shipping documents were in their names. There was no prohibition in law (during 2008–2013) against use of another valid IEC. Importantly, the concept of “beneficial owner” was introduced only in 2017—after the relevant import period. Thus, the Tribunal held that imports under these IECs could not automatically be clubbed with NIFCO for joint liability. The appellants highlighted discrepancies in serial numbers of seized hard disks and those analysed by forensic experts. They argued non-compliance with Section 138C of the Customs Act governing admissibility of electronic records. The Tribunal examined whether proper certification procedures were followed; copies of seized materials were supplied; cross-examination was unjustifiably denied. These procedural lapses were treated as serious infirmities affecting evidentiary reliability. The Kumar brothers had allegedly admitted under-invoicing of 30–50% but later retracted statements. The Tribunal examined whether statements were voluntary; they were corroborated by independent evidence. Rule 12 (rejection of transaction value) and Rule 9 (residual method) were correctly applied. The Bench noted that DRI had enhanced RSP based on retailer data and applied a multiplier (2.42 times enhanced landed value). The appellants contended that VAT returns showed goods were sold at declared RSP. Market survey relied on unverified Excel sheets. No authentic retail bills supported DRI’s calculations. The Tribunal expressed reservations over formula-based RSP enhancement without credible supporting documentation. A corrigendum issued after the original order imposed penalties on Customs Brokers under Sections 112(b) and 114AA. The CHAs argued that corrigendum could not introduce fresh penal findings. No violation of KYC norms was alleged. Section 114AA was intended for false export documents, not routine imports. The legality of the corrigendum itself became a contested issue. The Chennai Bench of CESTAT has delivered a detailed and nuanced ruling addressing complex valuation, evidentiary, and procedural issues in a high-value confectionery import case. By setting aside the concept of joint and several duty demand in the absence of joint importation, the Tribunal has reaffirmed foundational principles of customs law—ensuring that liability flows strictly from statutory definition of “importer” and not from presumptive or investigative assumptions. Case Details Case Title: M/s. Mukesh Kumar Versus Commissioner of Customs Citation: JURISHOUR-42-CESTAT-2026 (Che) Case No.: Customs Appeal No. 41655 of 2019 Date: 17.02.2026 Counsel For Appellant: Vasa Seshagiri Rao (Technical Member) Counsel For Respondent: Ajayan T.V. (Judicial Member) Click Here To Read Order Read More: Validity of Notifications Issued Without ‘Force Majeure’ Under Section 168A Questioned: Calcutta HC Stays GST Recovery

Customs Duty Can’t Be Demanded “Jointly or Severally” From Multiple Persons Unless Goods Were Imported Jointly: CESTAT

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