• Dated 13^th February, 2026

Rejection of Export Transaction Value Without Evidence – CESTAT Dismisses Revenue Appeal in Alleged Overvaluation Case

Facts of the Case (Paragraph):

The respondent exporter proposed to export consignments of men's cow leather wallets under nine shipping bills filed during 16–17 February 2023, declaring a total FOB value of Rs. 6,61,02,740/-. The Customs authorities suspected that the goods were overvalued and that the inflated value was intended to enable the exporter to claim excess drawback benefits. On this suspicion, the consignments were detained and subjected to investigation.

ASSESSEE'S CONTENTION

The exporter contended that the Department wrongly rejected the declared transaction value without following the mandatory valuation procedure prescribed under Section 14 of the Customs Act and the Customs Valuation Rules, 2007. It was argued that the declared value represented genuine transaction value arising from regular commercial dealings with the overseas buyer, with whom the exporter had a long-standing business relationship at comparable prices in past exports.

The Appellant submitted that the Department relied solely on an arbitrary market survey that compared prices of manufacturers, whereas the Appellant procured goods from traders, which naturally involved higher procurement costs and margins. Therefore, the comparison was fundamentally flawed and incapable of forming the basis for rejection of transaction value.

The Appellant emphasized that there was no misdeclaration in respect of quantity, quality, or description of goods, and that the goods were intended for genuine export through proper banking channels. In the absence of evidence of extra-commercial considerations, under-invoicing, or illicit gain, confiscation and penalties were wholly unsustainable in law.

DEPARTMENT'S CONTENTION:

The Department contended that the exporter had declared an abnormally high FOB value for the leather wallets with the intention of claiming excess drawback benefits. According to the Department, a joint market survey was conducted to ascertain the prevailing market price of similar goods, and the survey revealed that the declared export value was significantly inflated compared to the market value.It was argued that the market survey was carried out fairly and transparently, and even the exporter's representative participated in the survey process. Based on the findings, the Department maintained that rejection of the declared transaction value was justified. The Department further submitted that the adjudicating authority had already taken a balanced view by modifying the valuation proposed in the show cause notice and arriving at a higher figure than originally suggested, thereby demonstrating fairness and adherence to principles of natural justice.

The Department asserted that the overvaluation clearly indicated an attempt to obtain undue export incentives and that such conduct justified confiscation of the goods as well as imposition of redemption fine and penalties.

Court's Held:

The Tribunal dismissed the Revenue's appeals and upheld the order of the Commissioner (Appeals), holding that the rejection of the declared transaction value was contrary to Section 14 of the Customs Act and the Customs Valuation Rules. It reaffirmed that transaction value is the primary basis for export valuation and can be rejected only upon production of cogent evidence showing that the declared value is not genuine.

The Tribunal found that the Department failed to follow the mandatory sequential valuation mechanism and did not produce contemporaneous export data of identical or similar goods. Reliance on a retail market survey comparing non-comparable goods was held to be legally unsustainable. The adjudicating authority's addition of a notional profit margin was also found to have no statutory basis.

The Court further held that there was no misdeclaration regarding the description, quantity, or quality of the goods. In the absence of proof of overvaluation supported by evidence, confiscation and penalties were unjustified. Accordingly, the Tribunal confirmed that the declared value was acceptable in law, set aside all fines and penalties, and directed release of the goods.

BTA's COMMENT:

This decision reinforces the settled principle that declared transaction value remains the cornerstone of customs valuation and cannot be rejected on mere suspicion or generalized market perception. The Tribunal emphasized strict adherence to the statutory valuation framework and the burden on the Department to produce credible contemporaneous evidence before discarding an exporter's declared value. By rejecting reliance on arbitrary market surveys and presumptive profit calculations, the ruling protects legitimate trade practices and ensures fairness in export assessments. The judgment serves as an important precedent affirming that valuation disputes must be resolved through evidence-based legal standards rather than conjecture, thereby strengthening certainty and transparency in customs administration.

Case Reference- Commr. of Customs (Port), Kolkata VS Dhruv Agarwal & Ankraj Developer Pvt. Ltd (Customs Appeal No. 76098 of 2025)

Author- Madhurima Bose

Edited by- Sneha Nandi