Acceptance of reassessed value waives only a speaking order, not the statutory right of appeal.

M/s A. R. Fabrics Private Limited imported polyester knitted fabrics from China and declared the transaction value in its Bills of Entry at USD 0.35 per metre/1.77 per kg, based on the supplier’s commercial invoices.

On examination, the goods were found to conform to the declared description, quantity and nature.

The Customs authorities enhanced the assessable value, allegedly relying upon contemporaneous import data. The appellant requested provisional or final clearance on payment of duty on the enhanced value under protest, citing delay, demurrage and detention concerns.

It was nevertheless required to submit letters accepting the enhanced value and stating that it did not require a show-cause notice or speaking order.

The appellant subsequently challenged the reassessment before the Commissioner (Appeals), contending that the acceptance letters were not voluntary and that the requirements of Section 14 of the Customs Act, 1962 and Rule 12 of the Customs Valuation Rules, 2007 had not been followed.

The Commissioner (Appeals) rejected the appeals on the ground that the written acceptance of the enhanced value dispensed with the requirement of a speaking order under Section 17(5).

1. Whether the appellant’s written acceptance of the enhanced assessable value barred it from challenging the reassessment in appeal under Section 128 of the Customs Act, 1962?

2. Whether the Customs authorities could reject the declared transaction value and enhance the assessable value without complying with Section 14 of the Customs Act, 1962 and Rule 12 of the Customs Valuation Rules, 2007, including communicating the grounds for doubting the declared value?

3. Whether the acceptance of reassessment only dispensed with the requirement of a speaking order under Section 17(5), or also constituted a waiver of the substantive right to challenge the reassessment itself?

The Tribunal applied Section 14 of the Customs Act, 1962, which requires customs valuation to be based on the statutory valuation framework; Sections 17(4) and 17(5), under which reassessment ordinarily requires a speaking order unless the importer confirms acceptance of the reassessment in writing; and Section 128, which confers a statutory right of appeal against an assessment or reassessment.

Rule 12(2) of the Customs Valuation Rules, 2007 requires the proper officer, where the declared value is doubted, to communicate the grounds of such doubt to the importer; the declared transaction value may then be rejected and redetermined only by sequential application of the valuation rules.

Relying on Century Metal Recycling Pvt. Ltd. v. Union of India, 2019 (367) E.L.T. 3 (S.C.), the Tribunal held that the requirement to record and communicate the grounds for doubting the declared value is mandatory and cannot be waived or circumvented.

Following Niraj Silk Mills v. Commissioner of Customs (ICD), Patparganj, CUSAA Nos. 26 and 27 of 2022, decided on 27 November 2024, it held that acceptance of reassessment waives, at most, the procedural requirement of a speaking order; it does not extinguish the importer’s independent statutory right to challenge the reassessment.

The Tribunal also applied the principle that there is no estoppel against the exercise of a statutory right, as recognised in Dunlop India Ltd. v. Madras Rubber Factory Ltd., 1983 (13) E.L.T. 1566 (S.C.), and related decisions.

The Tribunal found that the Commissioner (Appeals) had treated the acceptance letters as conclusively establishing voluntary acceptance of the enhanced value and as foreclosing any subsequent challenge.

However, the appellant’s contemporaneous requests for provisional or final clearance under protest demonstrated that the matter was not one of unconditional acceptance simpliciter.

Further, the acceptance letters merely referred generally to contemporaneous import data and did not disclose the relevant particulars, such as quantity, quality, GSM, commercial comparability or time of import.

Accordingly, the Customs authorities had not demonstrated compliance with Rule 12(2) or the sequential valuation methodology under the Customs Valuation Rules.

Applying Niraj Silk Mills, the Tribunal distinguished between waiver of a speaking order under Section 17(5) and waiver of the statutory appellate remedy under Section 128. The former could not be construed as an abandonment of the latter.

The Tribunal also held that the Department’s reliance on S.S. Overseas v. Union of India, Writ Tax No. 881 of 2022, was misplaced because that case concerned the maintainability of a writ seeking a speaking order and did not decide whether an acceptance letter barred an appeal on the merits.

Since the Customs authorities had not adequately demonstrated compliance with Section 14 of the Customs Act and Rule 12 of the Customs Valuation Rules, and had not properly communicated the grounds for rejecting the declared value, the impugned Orders-in-Appeal were held unsustainable.

The Tribunal allowed Customs Appeal Nos. 70471–70482 of 2021, set aside the impugned Orders-in-Appeal, and granted consequential relief, if any, in accordance with law.