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TMI Blog2025 (4) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... Six Thousand Six Hundred only) under Rule 6 of the Customs Valuation (Determination of Export Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962. (ii) I hereby confiscate the impugned goods having re-determined value of Rs. 8,06,000/- under Section 113 (i) of the Customs Act, 1962. However, as the goods have been released provisionally, I impose Redemption fine of Rs. 8,00,000/- (Rupees Eight Lakh only) under Section 125 of the Customs Act, 1962 in lieu of confiscation. (iii) I also impose a penalty of Rs. 12,00,000/- (rupees Twelve Lakh only) on M/s Kritika Enterprises, Delhi under Section 114 (iii) of the Customs Act, 1962. (iv) I also impose a penalty of Rs. 12,00,000/- (Rupees Twelve Lakh only) on M/s Kritika Enterprises, Delhi under Section 114 (AA) of the Customs Act, 1962. (v) I order that the Bank Guarantee submitted by M/s Kritika Enterprises be encashed against the above redemption fine and penalty, if the same are not deposited by the Noticee within 30 days of issue of this order". 2. The appellant filed Shipping Bill dated 22.12.2018 to export Oil Filters declaring Free on Board (FOB) value of Rs.1,36,75,185/-. It paid IGST of Rs. 24,61,534/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods cannot be determined under the provisions of rules 4 and 5, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules provided that local market price of the export goods may not be the only basis for determining the value of export goods". (v) The so called market enquiry is nothing but the opinions of two traders namely M/s Space and Space, New Delhi and M/s Arshi Automobile, U.P. who are said to have experience in business of auto spares and who, after seeing the samples, gave their opinions about the market value of the goods. Therefore, the re-determined value of export goods under Rule 6 is on the face of it, is not correct and cannot be sustained. (vi) During investigation, the appellant had provided details of the purchase of the impugned goods like details of vendors, certified copies of invoices, E-way bills, details of payment, etc. to substantiate the declared value of the impugned goods. The department did not conduct any further enquiries to verify the details provided by the appellant. (vii) Both the confiscation of the goods and imposition of penalties therefore, need to be set aside. Subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case of the department is that the appellant had declared a high value in the shipping bill so as to claim excess benefit of MEIS and IGST refund. 8. The question which needs to be answered is what is the meaning of FOB value and whether the customs officers have the right to re-determine it under the Act and Rules. 9. The Free on Board or FOB is one of the INCOTERMS - which are the terms used in international commerce. These are universally understood and accepted. The INCOTERMS make the costs, risks and liabilities of the buyer and seller explicit. For instance, if the goods are exported on FOB basis, the seller is responsible until the goods are put on Board the vessel or aircraft. All costs and risks up to loading the goods on to the ship or aircraft are on the seller's account. The seller is free once the goods are put on board. The costs and risks associated with transportation to the destination, etc., are all on account of the buyer. 10. Similarly, if the agreement is to sell goods on C&F basis the seller is responsible for the costs and freight i.e., in addition to the cost of the goods, the seller is also responsible to bear the cost of freight up to the port of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value and also provides for the Government to make Rules for the purpose. These Rules include conditions under which the transaction value can be rejected and the value can be determined by other means. Section 12 and Section 14 of the Act are reproduced below :- "Section 12 : Dutiable goods : Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under [the Customs Tariff Act, 1975, or any other law for the time being in force, on goods imported into, or exported from, India. Section 14. Valuation of goods. (1) For the purposes of the Customs Tariff Act, 1975, or any other law for the time being in force, the value of the imported goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination of value under Section 14 and the Valuation Rules is irrelevant. 16. The Additional Commissioner, however, held that the FOB value stands re-determined under Rule 6. This is not correct because the FOB value is the transaction value, i.e., the price paid or to be paid by the buyer to the exporter as agreed to between them. No stranger to a contract, including the customs officers have any right to re-determine the transaction value between the buyer and the seller. If the transaction value is rejected under Rule 8 and the value is re-determined, the customs officer, refuses to accept the transaction value as the value for determining the export duty. He, thereafter determines the value through some other method provided in the Rules. 17. An illustration will make this distinction between FOB value and assessable values clear. 'A' a resident of India buys a luxury car from his friend 'B', a resident of U.K. for $ 1,000. 'B' sends the car to India and 'A' files the Bill of Entry declaring the transaction value of $ 1000. On examination, the customs officer, finding the value to be too low, re-determines it as, say, $ 5000. The assessable value will be $ 5,000 on which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proper officer, who alone can, reject the transaction value and redetermine the value under any of the other methods. At the time of filing the Shipping Bill, the exporter will have no mechanism of knowing if the proper officer will find the transaction value acceptable as assessable or if he would reject it and if he rejects it, what he would find as the correct re-determined assessable value. Therefore, it is impossible for any exporter to anticipate what value the proper officer would determine and file the Shipping Bill accordingly. Law does not require anyone to do the impossible task of predicting if the proper officer would find the value acceptable or reject and re-determine it and if so, what value he would re-determine as the assessable value. At the time the Shipping Bill, neither the exporter nor even the officer can indicate what the re-determined value would be. Therefore, the only obligation on the exporter is to correctly declare the transaction value in the Shipping Bill. 20. If the transaction value is 'X' as is evident from the records and the exporter declares 'Y' as the value, then Section 113(i) gets attracted and the export goods will be liable to confis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue declared in the Shipping Bill is not correct and the true FOB value is something else as per the documents, the declared FOB value has to be accepted. The Customs Act and Rules cannot be applied to re-determine the FOB value. (v) Once the FOB value is decided, the benefits which are based on the FOB value automatically follow. (vi) The re-determination of the FOB value by the Additional Commissioner is without any authority of law and it has been wrongly upheld by the Commissioner (Appeals) in the impugned order. (vii) Export goods are liable to confiscation under Section 113(i) if the goods are not as per declaration in the Shipping Bill in respect of value or any other parameter. The value required to be declared by the exporter is only the transaction value. (viii) The exporter has no obligation whatsoever to do the impossible task of anticipating if the proper officer would accept the declared transaction value or would re-determine it and if so, what would be the re-determined value and file the Shipping Bill accordingly. (ix) Therefore, the finding that the goods were liable to confiscation under Section 113(i) and the redemption fine imposed are liable to be set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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