CESTAT Mumbai Sets Aside Enhanced Valuation and Penalty on Flipkart

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 17.03.2026

CESTAT Mumbai Sets Aside Enhanced Valuation and Penalty on Flipkart

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai, recently delivered a landmark judgment in the case of Flipkart India Private Limited vs. Commissioner of Customs (Import), setting aside the enhanced valuation, confiscation, redemption fine, and penalty imposed on Flipkart India Private Limited by the Commissioner of Customs (Appeals), Mumbai Zone-III. The case revolved around the alleged undervaluation of imported goods and the subsequent re-determination of their assessable value by the customs authorities. ​

Background of the Case ​

Flipkart India Private Limited filed Customs Appeal No. ​ 89472 of 2018, challenging the Order-in-Appeal dated January 19, 2018, which upheld the original authority’s decision to enhance the assessable value of imported goods, confiscate them, and impose penalties. ​ The goods in question were 28,600 units of “Power Bank 5200mAH” (part number VXN4062IN) imported from M/s Xiaomi Singapore PTE Limited, Singapore. ​ The declared unit value of the goods was US $3.64, which the customs authorities rejected, citing alleged undervaluation based on contemporaneous import data.

The original authority had re-determined the assessable value of the goods at Rs. ​ 454.50 per unit, based on the import value of similar goods supplied to M/s Beetel Teletech Limited at Rs. ​ 454.50 per unit. ​ The customs authorities also imposed a redemption fine and penalty under Sections 125(1) and 112(a) of the Customs Act, 1962, and confiscated the goods under Section 111(m) of the Act. ​

Key Issues in the Case ​

The Tribunal was tasked with determining two critical issues:

1. Whether the enhancement of the value of imported goods based on the value of similar goods was sustainable under Section 14 of the Customs Act, 1962, and the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR). ​
2. Whether the consequential actions of confiscation, imposition of redemption fine, and penalty were legally justified under the Customs Act, 1962. ​

Arguments Presented

Arguments by Flipkart India Private Limited ​

The learned advocate for Flipkart India Private Limited argued that:

1. The declared transaction value of US $3.64 per unit was accurate and should have been accepted under Rule 3 of the CVR, as it was based on a valid supply agreement with the foreign supplier, M/s Xiaomi Singapore PTE Limited. ​
2. The customs authorities failed to consider the value of identical goods imported by Flipkart from the same supplier during the same period, which were cleared without dispute at the declared value. ​
3. The re-determined value of Rs. ​ 454.50 per unit was based on a single transaction of 10,000 units imported by M/s Beetel Teletech Limited, which was not comparable to Flipkart’s wholesale-level import of 28,600 units as part of a larger purchase order for 2,00,000 units. ​
4. The customs authorities did not follow the sequential application of Rules 4 to 9 of the CVR, as mandated by law, and failed to provide evidence of mis-declaration or flowback of additional consideration. ​
5. The alleged undervaluation was based on a misinterpretation of the INCO terms in the proforma invoice, which was later clarified by the supplier. ​

Arguments by the Revenue ​

The learned authorized representative for the Revenue justified the impugned order, arguing that:

1. The enhancement of the value was based on contemporaneous import data of similar goods, which was valid under Rule 5 of the CVR. ​
2. The mis-declaration of INCO terms and undervaluation empowered the customs authorities to reject the declared value and impose penalties and fines. ​

Tribunal’s Observations and Findings ​

After carefully examining the submissions and evidence presented by both sides, the Tribunal made the following observations:

1. Rejection of Declared Value: The Tribunal noted that the customs authorities had failed to consider the transaction value of identical goods imported by Flipkart from the same supplier during the same period. ​ The declared value of US $3.64 per unit for 1,71,400 units of identical goods was accepted by the same Customs Commissionerate without dispute. ​ The authorities instead relied on a single transaction of 10,000 units imported by M/s Beetel Teletech Limited at Rs. ​ 454.50 per unit, which was not comparable in terms of commercial level and quantity. ​
2. Sequential Application of CVR Rules: The Tribunal emphasized that the customs authorities did not follow the sequential application of Rules 4 to 9 of the CVR, as required by law. ​ The authorities directly invoked Rule 5 without considering the transaction value under Rule 3 or the value of identical goods under Rule 4. ​
3. Mis-declaration of INCO Terms: The Tribunal found that the alleged mis-declaration of INCO terms was adequately explained by the supplier’s letter dated March 9, 2015, which clarified that the terms of sale were on a “CIP” basis. ​ The customs authorities failed to provide evidence to support their claim that the declared value was incorrect. ​
4. Confiscation, Fine, and Penalty: The Tribunal held that the confiscation of goods under Section 111(m) of the Customs Act, 1962, and the imposition of redemption fine and penalty were not justified, as the customs officers who examined the goods did not report any mis-declaration, and the mandatory requirements for labeling were complied with. ​
5. Judicial Precedents: The Tribunal relied on several judicial precedents, including Suyog Extrusions, Sarto Electro Equipment Ltd., Agarwal Foundries (P) Ltd., and South India Television (P) Ltd., to conclude that the transaction value cannot be rejected without evidence of contemporaneous imports of identical or similar goods at higher prices. ​

Final Decision

The Tribunal set aside the impugned order dated January 19, 2018, and allowed the appeal filed by Flipkart India Private Limited. ​ The Tribunal ruled that the re-determination of the assessable value, confiscation of goods, and imposition of redemption fine and penalty were not sustainable under the Customs Act, 1962, and the CVR, 2007. ​

Key Takeaways

1. Importance of Transaction Value: The judgment reinforces the principle that the transaction value declared by the importer should be accepted unless there is concrete evidence to prove undervaluation or mis-declaration. ​
2. Sequential Application of CVR Rules: Customs authorities must follow the sequential application of Rules 4 to 9 of the CVR when determining the assessable value of imported goods. ​
3. Burden of Proof: The onus is on the customs authorities to prove that the declared value is incorrect, supported by evidence of contemporaneous imports of identical or similar goods at higher prices. ​
4. Commercial Level and Quantity: The price of imported goods at the wholesale level cannot be compared to the price of goods

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Source: CESTAT Mumbai

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