CESTAT Hyderabad Ruled on Alleged Customs Duty Evasion and Misdeclared MRP

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 09.04.2026

CESTAT Hyderabad Ruled on Alleged Customs Duty Evasion and Misdeclared MRP

The legal case involving Celkon Impex Pvt Ltd and the Commissioner of Customs, Hyderabad, revolves around allegations of customs duty evasion through the misdeclaration of the Maximum Retail Price (MRP) on imported mobile phones. This case, adjudicated by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Regional Bench at Hyderabad, highlights critical issues related to customs valuation, excise duty, and the legal interpretation of related entities.

Background of the Case

M/s Celkon Impex Pvt Ltd, along with its distributor M/s Big C Mobiles Pvt Ltd and individual directors, faced allegations of evading customs duty by declaring a lower Retail Sale Price (RSP) for imported mobile phones. The Customs Department alleged that the appellants declared an RSP below ₹2,000 at the time of import to pay a lower Countervailing Duty (CVD). Subsequently, the MRP labels on the mobile phones were allegedly altered to reflect a higher price after customs clearance.

The case involved multiple appeals:

1. Customs Appeal No. 30111 of 2016: Filed by M/s Celkon Impex Pvt Ltd.
2. Customs Appeal No. 30112 of 2016: Filed by Y. Guruswamy Naidu, Managing Director of Celkon Impex Pvt Ltd.
3. Customs Appeal No. 30113 of 2016: Filed by M. Balachandrudu, Director of Big C Mobiles Pvt Ltd.
4. Customs Appeal No. 30114 of 2016: Filed by M/s Big C Mobiles Pvt Ltd.
5. Customs Appeal No. 30115 of 2016: Filed by K. Krishnapavan, Director of Big C Mobiles Pvt Ltd.

Key Allegations

The Customs Department alleged that:

• Celkon Impex Pvt Ltd intentionally declared a lower MRP for six models of mobile phones during import to evade higher CVD.
• M/s Big C Mobiles Pvt Ltd altered the MRP labels on the mobile phones after customs clearance, increasing the price above ₹2,000.
• Celkon Impex Pvt Ltd and M/s Big C Mobiles Pvt Ltd were related entities, and the alteration of MRP was a joint conspiracy.

Defense Arguments

The appellants contested the allegations on several grounds:

1. No Evidence of Relationship Between Celkon Impex and Big C Mobiles: The appellants argued that M/s Big C was merely a distributor and not a related entity. They cited the lack of evidence to prove mutual interest or flow-back of benefits between the two companies.
2. Improper Interpretation of Statements: The appellants claimed that the statements of individuals, including directors and managers, were misinterpreted by the Customs Department.
3. Inapplicability of Rule 5 of Central Excise Rules, 2008: The appellants argued that Rule 5 does not apply to them as they are neither manufacturers nor involved in altering the MRP.
4. Insufficient Evidence from Market Surveys: The appellants contended that the market survey conducted by the Customs Department lacked tangible evidence and relied on assumptions and photographs.
5. Legal Precedents: The appellants cited several judgments to support their case, including ITC Ltd vs. CCE, Hindustan Coca Cola Beverages Pvt Ltd vs. CCE, and others, emphasizing the lack of legal provisions for redetermining RSP under the Customs Act.

CESTAT’s Observations and Final Decision

The tribunal examined the evidence and legal arguments presented by both parties. Key observations included:

• Relationship Between Entities: The tribunal found that while there were common directors between Celkon Impex and Big C Mobiles, this alone was insufficient to establish that the two entities were related for customs valuation purposes. The corporate veil could not be pierced as there was no evidence of flow-back or mutual interest.
• Market Survey Evidence: The tribunal noted that the market survey conducted by the Customs Department lacked proper documentation and relied on photographs, which were not sufficient to prove the allegations.
• Legal Provisions: The tribunal emphasized that Rule 5 of the Central Excise Rules, 2008, was not applicable to the appellants as they were not manufacturers. Furthermore, the tribunal highlighted that any post-importation alteration of MRP should be addressed under the Central Excise Act, not the Customs Act.
• Judicial Precedents: The tribunal referred to several judgments that supported the appellants’ arguments, including cases that established the lack of machinery provisions for redetermining RSP under the Customs Act.

Based on these findings, the tribunal concluded that the evidence was insufficient to prove intentional misdeclaration of RSP by the appellants. The demand for differential CVD, penalties, and confiscation was deemed unsustainable. The tribunal allowed the appeals and set aside the impugned order.

Key Takeaways

1. Importance of Evidence: The case underscores the necessity of tangible and substantial evidence in establishing allegations of customs duty evasion.
2. Legal Interpretation of Related Entities: Common directors or cross-shareholding alone do not establish a relationship between entities for customs valuation purposes.
3. Applicability of Legal Provisions: The case highlights the importance of applying the correct legal provisions, as post-importation alterations may fall under the purview of the Central Excise Act rather than the Customs Act.
4. Judicial Precedents: Previous judgments play a crucial role in shaping the outcome of legal cases, especially in complex matters involving customs and excise laws.

Conclusion

The Celkon Impex case serves as a significant example of the complexities involved in customs and excise law. It highlights the need for clear evidence, proper application of legal provisions, and consideration of judicial precedents in resolving disputes. The CESTAT’s decision to allow the appeals and set aside the impugned order reinforces the principle that allegations must be substantiated with concrete evidence and legal justification.

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Source: CESTAT Hyderabad

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