Undervaluation Can’t Be Alleged Without Proof That Imported Goods Were Branded: CESTAT Quashes Customs Duty Demand

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)has set aside a customs duty demand of over Rs. 9.63 lakh holding that the Department failed to establish the core legal requirement that the imported electronic components were of a branded (Philips) nature so as to justify rejection of the declared transaction value. The bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya, Member (Technical) has observed that in the absence of the examination report—admittedly destroyed—the Department could not rely merely on correlation of invoices or overseas documents to conclude that the goods imported were Philips-branded. It reiterated that undervaluation must be proved by cogent and positive evidence, and transaction value cannot be rejected on conjectures, assumptions, or third-party documents alone. The appellant, Rama Krishna Sales Pvt. Ltd., is an importer and trader of electronic components sourced from Hong Kong and Singapore. The Directorate of Revenue Intelligence (DRI) initiated investigations on allegations that the company had undervalued electronic components by routing imports through intermediary firms in Singapore, particularly M/s Hopeen Trading Pte. Ltd. According to the Department, the goods were originally supplied by Philips entities in Taiwan and Hong Kong, and the price charged by Philips to the Singapore supplier represented the true value of the goods. Following investigation, a show cause notice was issued alleging undervaluation, suppression of brand name, and mis-declaration. An earlier adjudication order was set aside by the Tribunal in 2008 and the matter was remanded for fresh consideration, directing the adjudicating authority to specifically co-relate the goods supplied by Philips to Singapore firms with the imports made into India. In the impugned order passed pursuant to remand, the adjudicating authority dropped most of the demand but confirmed duty, interest, and penalty in respect of two invoices issued by the Singapore supplier, on the ground that the description and quantities matched with Philips invoices. The central legal issue before the Tribunal was whether the Customs Department could allege undervaluation and reject the declared transaction value without conclusively proving that the goods imported by the appellant were in fact Philips-branded components, especially when the examination report at the time of import was unavailable. The appellant contended that the goods were cleared as unbranded electronic components and there was no contemporaneous examination report indicating that the goods bore the Philips brand. Article or part numbers relied upon by the Department were not exclusive to Philips and were commonly used by multiple manufacturers, including Chinese suppliers. The Department admitted that the examination report had been destroyed and could not be produced, thereby depriving the appellant of the most crucial piece of contemporaneous evidence. Even assuming the goods originated from Philips, the price at which Philips sold the goods to a Singapore entity could not automatically be treated as the transaction value for imports into India, in light of settled Supreme Court jurisprudence on customs valuation. The Department argued that the transaction value was rightly rejected under the Customs Valuation Rules due to suppression of brand name and reliance on overseas inquiry documents. It also contended that mis-declaration of brand and value justified redetermination of assessable value and imposition of penalty. The Tribunal held that the Department’s case failed at its foundation. It observed that an examination report is the primary contemporaneous document that records the actual nature, brand, and condition of imported goods, and plays a critical role in valuation disputes. In the present case, the impugned order itself did not record any finding that the goods were found, on examination, to be of Philips brand. Relying on settled Supreme Court precedents such as Eicher Tractors, Sounds N. Images, South India Television, and Ganpati Overseas, the Tribunal emphasized that the burden lies squarely on the Department to prove that the declared invoice value is incorrect. Transaction value under Section 14 of the Customs Act must ordinarily be accepted unless specific conditions for rejection under the Valuation Rules are satisfied. In the absence of evidence of contemporaneous imports of identical or similar goods at higher prices, the declared value cannot be discarded. Concluding that the Department had failed to establish that the imported goods were of Philips brand or that the declared transaction value was unacceptable under law, the Tribunal extended the benefit of doubt to the importer. The impugned order confirming duty, interest, and penalty was set aside, and the appeal was allowed in full. Case Details Case Title: M/s. Rama Krishna Sales Pvt. Limited Versus Commissioner of Customs (Import & General), New Delhi Case No.: CUSTOMS APPEAL NO. 546 OF 2010 Date: 14.01.2026 Counsel For Petitioner: Prem Ranjan Kumar, Advocate Counsel For Respondent: Rakesh Kumar, Authorised Representative Click Here To Read Order Read More: Consolidated Demand Of CENVAT Credit Worth Rs. 71 Crore on Electricity Sold to Power Utility Against Hindustan Zinc Quashed: CESTAT

Undervaluation Can’t Be Alleged Without Proof That Imported Goods Were Branded: CESTAT Quashes Customs Duty Demand

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Undervaluation Can’t Be Alleged Without Proof That Imported Goods Were Branded: CESTAT Quashes Customs Duty Demand

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