The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, has held that an importer’s written acceptance of an enhanced customs value does not deprive it of the statutory right to challenge the reassessment. 

The Bench of P. K. Choudhary (Judicial Member) and K. Anpazhakan (Technical Member) set aside the common appellate order that had upheld the reassessments on the ground that the importer had accepted the enhanced values in writing.

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The bench emphasised that customs authorities must comply with the prescribed valuation procedure when rejecting the declared transaction value.

The appellant/assessee imported eight consignments of mixed lots of 100% polyester knitted fabrics from China between July 17 and November 3, 2020. The goods, consisting of rolls of assorted colours and weights, were cleared through ICD, Dadri.

The importer declared unit prices ranging from approximately USD 1.11 to USD 1.30 per kilogram. Customs authorities enhanced those prices to between USD 1.626 and approximately USD 1.972 per kilogram.

Physical examination found the goods to be consistent with the declarations. However, after comparing the declared prices with contemporaneous import data, the department sought additional information about the fabrics, including their composition and dimensions.

Although the importer responded to the queries, the department proposed rejection of the declared values under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

The assessee argued that it had correctly self-assessed duty on the basis of the negotiated prices reflected in its invoices. It submitted that clearance was delayed and that repeated written requests for provisional clearance, with payment of duty on the enhanced values under protest, were not acted upon.

According to the importer, it was consequently compelled to furnish consent letters accepting the valuations proposed by customs authorities to secure release of the consignments.

The importer also maintained that it subsequently requested speaking orders explaining the reassessments, but none were issued.

It challenged the assessments before the Commissioner (Appeals), who rejected the appeals on the basis of the written acceptance letters. The appellate authority reasoned that Section 17(5) of the Customs Act, 1962 did not require a speaking order where the importer had accepted the reassessment in writing.

The assessee argued that acceptance of an enhanced value could not validate an assessment made contrary to Section 14 of the Customs Act and the valuation rules, or prevent a statutory appeal against it.

The department defended the reassessments by referring to the consent letters. It submitted that the importer had acknowledged understanding the grounds for rejecting the declared values and the details of contemporaneous imports of identical or similar goods.

The department also pointed out that the letters recorded agreement with the enhanced values and stated that the importer did not require a show cause notice or a speaking order.

It relied on the Allahabad High Court’s decision in S. S. Overseas concerning the absence of a requirement to issue a speaking order following written acceptance of an enhanced value. The importer sought to distinguish that case, arguing that it concerned provisional assessments and their finalisation.

The Tribunal found that the Commissioner (Appeals) had proceeded merely on the importer’s acceptance of the enhanced values and the consequent absence of a requirement for speaking orders.

Although the appellate authority had referred to the Supreme Court’s judgment in Century Metal Recycling Pvt. Ltd. v. Union of India, CESTAT held that it had failed to consider the ruling in its entirety.

Drawing on that judgment, the Tribunal emphasised the requirements governing rejection of a declared transaction value under Rule 12. These include forming a reasonable doubt about the truth or accuracy of the declaration, recording reasons, and communicating the grounds to the importer when required.

The Tribunal explained that the statutory procedure could not be circumvented through an acceptance letter. Rejection of the declared value and subsequent determination under the applicable valuation rules had to comply with the legal framework.

Examining the letters relied upon by the department, CESTAT noted that they stated that the grounds for rejection and details of contemporaneous imports had been explained to the importer.

However, the letters did not actually mention the details of the alleged comparable imports.

The Tribunal found a gap between the assertions in those letters and the material supporting the reassessments, which the Revenue had not bridged. It therefore declined to accept the contents of the communications at face value.

This finding was significant because the importer had disputed whether the department had established a proper basis for comparison, including relevant characteristics of the goods and comparable commercial transactions.

CESTAT relied on the Delhi High Court’s November 27, 2024 judgment in Niraj Silk Mills, which distinguished acceptance of a reassessment for the purposes of Section 17(5) from abandonment of the statutory right to challenge that reassessment.

Under the reasoning adopted by the Tribunal, written acceptance may relieve the proper officer of the obligation to issue a speaking order. It does not automatically prevent the importer from questioning the officer’s decision through the remedies provided by law.

The Tribunal also referred to the High Court’s observations that enhancement based solely on National Import Database (NIDB) data requires independent and cogent supporting evidence. A departure from declared transaction values must rest on tangible material and a reasoned application of the valuation rules.

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