Case Name: Gastrade International Vs. Commissioner of Customs, Kandla

Case Number: Civil Appeal No. of 2025 (Arising out of SLP(C) No. 6470 of 2022 and connected appeals)

Date: March 28, 2025

Quorum: Justice B.V. Nagarathna, Justice Nongmeikapam Kotiswar Singh

 

FACTS OF THE CASE

The appellant who is the Gastrade International, is an importer who in the said case is engaged in the trading of petroleum products. The case arose due to a dispute regarding the valuation and classification of imported goods, which were subjected to additional customs duty by the Commissioner of Customs, Kandla. The customs authorities in the said case had further reassessed the import value of the said products. They had reassessed it by citing the discrepancies in the declared invoice price and the prevailing international market price. The adjudicating authority had further imposed a differential duty and a penalty, which was upheld by the Commissioner in the said case(Appeals). The appellant in the said case had further challenged this decision before the Customs Tribunal. He had argued that the reassessment was being carried out arbitrary and that it lacked a proper legal basis.

ISSUES

 

1. Whether the Commissioner of Customs, Kandla, was justified in reassessing and further increasing the declared value of the imported goods.
2. Whether the reassessment and imposition of additional customs duty were being carried out legally under the Customs Act, 1962.
3. Whether the amount of penalty that was being imposed on Gastrade International was justified in the absence of deliberate misdeclaration.

LEGAL PROVISIONS

 

1. The Section 14 of the Customs Act, 1962 – It governs the valuation of imported goods based on transaction value, adjusted as necessary to align with international prices.
2. The Rule 12 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 – It empowers authorities to reject declared value if there is reasonable doubt regarding its accuracy.
3. The Article 265 of the Constitution of India – It states that no tax shall be levied or collected except by the authority of law.

ARGUMENTS

 

Petitioner’s Arguments:

 

1. The enhancement of value by customs authorities in the said case had lacked documentary evidence and it was all based on conjecture.
2. The price that was being declared was based on a valid commercial agreement, supported by invoices and bank transactions.
3. The rejection of declared value violated the WTO-GATT principles, as India is a signatory to the Agreement on Customs Valuation.
4. They had further cited the Supreme Court ruling in Commissioner of Customs vs. South India Corporation (2007) to argue against arbitrary reassessments.

 

Respondent’s Arguments:

 

1. The importer’s declared value did not reflect the true transaction value, therefore necessitating reassessment.
2. Market intelligence reports indicated a substantial variation in international petroleum prices compared to the declared value therefore the method of reassessment and enhancement in the said case is justified.
3. The customs authorities are empowered to determine the correct valuation when discrepancies are evident, as held in Commissioner of Customs vs. Aggarwal Industries Ltd. (2011).

 

ANALYSIS

 

The Tribunal analyzed the legitimacy of the reassessment process. While the customs authorities are permitted to reject the declared value if discrepancies exist, such rejection must be substantiated with cogent evidence. In this case, the customs department had primarily relied on the generalized market trends rather than specific, verifiable data. Furthermore, the enhancement of value without providing the importer an opportunity to justify its declared price goes against the principles of natural justice.

The Tribunal also noted that mere price fluctuation in international markets is not sufficient to discard a legally valid invoice price unless there is clear evidence of under-invoicing or misdeclaration. As per the decision in Eicher Tractors Ltd. vs. Commissioner of Customs (2000) 2 SCC 123, valuation must be based on objective criteria rather than assumptions.

 

JUDGEMENT

 

1. The Tribunal set aside the enhancement of declared value and quashed the additional customs duty imposed.
2. The penalty imposed on Gastrade International was revoked due to a lack of evidence of intentional misdeclaration.
3. The customs department was directed to process the refund of excess duty paid by the appellant within three months.
4. The judgment reaffirmed that valuation disputes must adhere to legal principles and evidence-based assessments rather than market speculations.

 

CONCLUSION

 

The Tribunal ruled in favor of Gastrade International, emphasizing the necessity of lawful and justified valuation procedures. The judgment serves as a precedent to ensure that customs authorities adhere to due process and do not arbitrarily enhance the declared value of imported goods. The decision reinforces the significance of fair trade practices and prevents undue financial burden on importers due to arbitrary assessments.

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WRITTEN BY POOJA PARAMESWARAN