ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 07.02.2026
CESTAT Hyderabad Sets Aside Export Valuation Order
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idΒ intelconsul@gmail.comor on his Mobile +91-9999005379.β
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Hyderabad recently delivered a significant judgment in the Customs Appeal No. β 20682 of 2015, which revolved around the valuation of export goods and the rejection of declared transaction values. This case highlights the importance of adhering to legal procedures and principles in determining export valuation under the Customs Act, 1962, and the Export Valuation Rules, 2007. β
Background of the Case
The appellant, M/s S.K. β Sarawagi & Co. Pvt Ltd, engaged in the export of iron ore fines, filed two shipping bills for exporting 10,500 WMT of iron ore fines with 61% Fe content to a buyer in Hong Kong, China. β The declared unit price was USD 115 PDMT FOB, and the moisture content was declared at 9%. β However, the Visakhapatnam Customs House adopted a moisture content of 3% and provisionally assessed the declared price, pending finalization based on test results and submission of final documents. β
Upon finalization, the Original Authority rejected the declared price and adopted USD 128 PDMT FOB, citing contemporaneous export prices of M/s Rungta Sons Pvt Ltd. Additionally, the Original Authority imposed a duty on 3.4% of the export goods, considering the lumps exceeding the tolerance limit of 5% as per Notification No. β 56/2010-Cus. Consequently, the appellant was ordered to pay Rs. β 2,97,081/- along with applicable interest. β
The appellant challenged this decision before the Commissioner (Appeals), who upheld the Original Authority’s order. Dissatisfied with the outcome, the appellant filed an appeal with the CESTAT.
Key Issues in the Case
The primary dispute in this case revolved around the rejection of the declared transaction value of USD 115 PDMT FOB and the adoption of USD 128 PDMT FOB as the assessable value. β The appellant argued that the Original Authority failed to provide valid reasons for rejecting the declared transaction value and did not follow the prescribed procedures under Rule 8 of the Export Valuation Rules, 2007. β
The appellant contended that the adjudicating authority had chosen the highest price from the contemporaneous export prices without considering adjustments for differences in export dates, commercial levels, quantity levels, composition quality, and domestic freight charges. Furthermore, the appellant emphasized that the transaction value, supported by the Bank Realization Certificate (BRC), should be accepted unless there is substantive evidence to prove that the declared value is not genuine. β
Legal Framework for Export Valuation β
Section 14(1) of the Customs Act, 1962, and the Export Valuation Rules, 2007, provide the legal framework for determining the value of export goods. According to Section 14(1), the transaction value, i.e., the price actually paid or payable for the goods, is the basis for valuation, provided the buyer and seller are not related, and the price is the sole consideration for the sale. β
Rule 4(2) of the Export Valuation Rules outlines the factors that must be considered when determining the value of export goods, including differences in export dates, commercial levels, quality, and domestic freight charges. β Additionally, Rule 8 mandates that the proper officer must issue a query memo, provide reasons for doubting the declared transaction value, and offer a personal hearing before rejecting the declared price. β
CESTAT’s Observations and Judgment
After hearing both sides and reviewing the records, the CESTAT found that the adjudicating authority had failed to provide valid reasons for rejecting the declared transaction value. β The authority did not raise any doubts about the transaction value or the BRC, nor did it follow the procedures prescribed under Rule 8 of the Export Valuation Rules.
The tribunal emphasized that the rejection of transaction value without substantive evidence is legally untenable. β It cited several landmark judgments, including CC, Mumbai Vs Vishal Exports Overseas Ltd and Century Metal Recycling (P) Ltd Vs UOI, which established that transaction value corroborated by sale/purchase contracts and BRC cannot be rejected without valid reasons and evidence. β
The CESTAT concluded that the impugned order of the Commissioner (Appeals) was not proper, legal, or correct. β It set aside the order and remanded the case to the Assessing Officer for finalization of the assessment based on the transaction value as reflected in the BRC. β
Key Takeaways from the Case
- Adherence to Legal Procedures: The case underscores the importance of following the prescribed procedures under the Customs Act and Export Valuation Rules when rejecting declared transaction values. β Proper officers must issue query memos, provide reasons for doubt, and offer personal hearings before making a decision. β
- Transaction Value as the Basis for Valuation: The transaction value, supported by valid documentation such as the BRC, is the primary basis for export valuation. β It cannot be rejected without substantive evidence proving its inaccuracy or lack of genuineness. β
- Contemporaneous Prices: When comparing declared transaction values with contemporaneous export prices, adjudicating authorities must consider all relevant factors, including differences in export dates, quality, and commercial levels. β Arbitrarily choosing the highest price is not permissible. β
- Legal Precedents: The judgment highlights the significance of legal precedents in export valuation disputes. β Decisions by higher courts, such as the Supreme Court, provide clear guidelines for assessing transaction values and rejecting declared prices. β
Conclusion
The CESTAT’s decision in Customs Appeal No. β 20682 of 2015 serves as a reminder of the importance of transparency, adherence to legal procedures, and reliance on substantive evidence in export valuation cases. It reinforces the principle that transaction value, supported by valid documentation, should be the primary basis for valuation unless there are compelling reasons to reject it. β This case is a valuable reference for exporters, customs authorities, and legal professionals dealing with valuation disputes under the Customs Act, 1962.
Source: CESTAT Hyderabad
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