CESTAT Delhi Sets Aside Allegations of Undervaluation and Customs Duty Evasion

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 24.12.2025

CESTAT Delhi Sets Aside Allegations of Undervaluation and Customs Duty Evasion

In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has delivered a judgment in favor of M/s ABC Overseas, effectively setting aside allegations of customs duty evasion and undervaluation of imported goods. The case, which revolved around the import of LED TVs and Drywall Screws, has been a significant legal battle for the appellant. ​

Background of the Case

M/s ABC Overseas, a New Delhi-based importer and trader of goods, primarily deals in LED TVs and Drywall Screws. ​ The company faced allegations from the Department of Customs regarding evasion of customs duty through undervaluation of imported goods. ​ The dispute arose from the import of unbranded 17” and 19” LED TVs under Bill of Entry No. ​ 4973274 dated 27.01.2018, and six past Bills of Entry from 2016 to 2018 for Drywall Screws. ​

The Department alleged that the imported goods were branded and undervalued, leading to evasion of customs duties. ​ The case was built on comparisons between the declared transaction values and proforma invoices from unrelated third parties, as well as documents retrieved during investigations. ​

Key Arguments by the Appellant

The appellant, represented by legal counsels, argued that the goods imported under the live Bill of Entry were physically examined and found to match the commercial invoice and packing list. ​ They contended that the TVs were unbranded, as only the LED panels had brand stickers, which were revealed after unscrewing the back panel. ​ The appellant also highlighted that the certificate of origin, which contained incorrect details, was issued by the Government of Thailand and the error was later clarified by the foreign exporter. ​

Regarding the past Bills of Entry, the appellant argued that the Department’s reliance on proforma invoices from unrelated third parties was unjustified. ​ They emphasized that the declared transaction values were accurate and supported by commercial invoices, packing lists, and payments made through official banking channels. ​ The appellant also pointed out that the Department failed to provide contemporaneous export data or evidence of undervaluation.

Tribunal’s Observations and Final Decision

After hearing both parties and reviewing the evidence, the Tribunal made the following key observations:

1. Live Bill of Entry: The Tribunal noted that the goods were found to be in conformity with the commercial invoice and packing list during a 100% examination. ​ It held that the Department’s allegations of undervaluation and misdeclaration were baseless, as the TVs were correctly declared as unbranded. ​
2. Past Bills of Entry: The Tribunal found that the Department’s reliance on proforma invoices from unrelated third parties was unreasonable. ​ It emphasized that transaction value, as defined under Section 14 of the Customs Act, 1962, should be the basis for determining customs duty unless there is substantial evidence to reject it. ​ The Tribunal also highlighted the lack of compliance with Section 138C of the Customs Act regarding the admissibility of electronic evidence. ​

The Tribunal concluded that the Department’s allegations were based on assumptions and lacked substantial evidence. ​ It set aside the order rejecting the declared values and re-determining the transaction values, thereby allowing the appeal. ​

Key Takeaways

This judgment underscores the importance of adhering to legal procedures and evidentiary requirements when investigating allegations of customs duty evasion. ​ It also highlights the significance of transaction value as the primary basis for determining customs duty, as per Section 14 of the Customs Act, 1962. ​ The decision is a major victory for M/s ABC Overseas, reaffirming the principle that allegations must be backed by concrete evidence and not mere assumptions. It serves as a reminder to importers and authorities alike about the importance of transparency, compliance, and adherence to legal norms in customs-related matters.

Source: CESTAT Delhi

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