MARCH 15, 2025

By R K Singh

THIS article is intended as a very brief critique of a recent lucid judgement of CESTAT in the case of JBN Apparels Pvt Ltd 2025-TIOL-452-CESTAT-DEL.

In this judgement, the CESTAT declaims as under:

"Nothing in the Customs Act confers any power on anyone to modify the transaction value between the buyer and seller - be it FOB, C&F or CIF or on any other terms."

2. In the said case, CESTAT clearly and rightly brought out the difference between the FOB value declared by the exporter and the value as determined (assessed) in terms of the provisions of s.14 of the Customs Act and the Valuation Rules framed thereunder. However, in that process and in its legitimate desire to propound a general principle/ratio, the CESTAT seems to have gotten carried away and ended up in an avoidable and untenable overreach; avoidable, because it was not required for deciding the issue in the said case and untenable for the reasons given below.

3. In declaiming that "nothing in the Customs Act confers any power on anyone to modify the transaction value between the buyer and seller- be it FOB, C&F or CIF or on any other terms", it seems CESTAT got detained by the provisions of s.14 and consequently lost sight of s.113(i) which states as under:

'"S.113. The following export goods shall be liable to confiscation:-

(i) any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77;"

2. It is scarcely disputable that the value mentioned in s.113(i) is not the value determined (assessed) under s.14; it is the value declared by the exporter. Evidently, the person who is legally empowered (and duty bound) to make a determination, whether the goods entered for exportation correspond in respect of value declared, is (or can be) none other than the Customs officer. And if he makes a determination that the goods do not correspond in respect of value declared, the goods become liable to confiscation. Several situations can be contemplated where the Customs officer will be within his powers to 'reject' (i.e. not accept) the FOB value (not by virtue of s.14) but on the ground that the goods do not correspond in respect of the value declared. Just to cite one extreme example, (technique generally employed to drive home the point), imagine a shipping bill filed for an ordinary piece of stone picked from the road side declaring the FOB value Rs.1 Crore (say, with the consent of the consignee). The Customs officer, (even without any elaborate investigation because it is too evident to need any elaborate investigation) will be legally justified in holding the goods liable to confiscation on the ground that the goods do not correspond in respect of value declared. Several other situations can be cited. But having proved the point on the basis of general and logical reasoning and interpretation of s.113(i), there is no need to cite more supporting examples because supporting examples are required to buttress empirical reasoning.

3. Thus it stands proved that the general principle/ratio propounded by CESTAT conferring sacrosanctity to FOB value is untenable. There are always possibilities of pitfalls in pronouncing general principles.

QED.

[The author is former Member CESTAT and Sr. Partner, TLC Legal Advocates. The views expressed are strictly personal.]