Declared CIF transaction value cannot be rejected absent evidence of additional payment or under-valuation.

I.G. International Pvt. Ltd. imported fresh Royal Gala apples from Brazil during March 2020–May 2023 under CIF contracts with M/s Blue Whale SAS, France. Blue Whale procured the apples from a Brazilian supplier and arranged the freight and insurance to Nhava Sheva. The appellant declared the CIF invoice price as the transaction value under Section 14 of the Customs Act, 1962.

The Directorate of Revenue Intelligence alleged that the appellant had effectively declared the Brazilian supplier’s upstream FOB value without adding freight and insurance. Following searches and investigation, 33 consignments were seized and provisionally released after enhancement of value by 21.125%; the appellant paid duty on the enhanced provisional value and deposited ₹7 crore during investigation.

A show-cause notice proposed rejection of the declared value and re-determination under Rules 3(1), 10(2) and 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (“CVR, 2007”), relying on Brazilian export invoices, Non-GMO certificates and freight documents.

The Principal Commissioner confirmed the proposals by Order-in-Original dated 17 March 2026, leading to the present appeals.

Whether the declared CIF transaction value could be rejected under Rule 12 of the CVR, 2007 and replaced by an upstream Brazilian FOB value in the absence of evidence of additional payment, under-invoicing or flow-back of funds?

Whether freight and insurance could be added under Rule 10(2) of the CVR, 2007 when the appellant’s contract and invoices were on CIF terms and the foreign supplier had arranged and paid the freight?

Whether FOB figures appearing in Brazilian export documents and Non-GMO certificates could constitute the transaction value of the appellant’s imports?

Whether the extended limitation period under Section 28(4) of the Customs Act, 1962 was invocable in the absence of collusion, wilful misstatement or suppression of facts?

Whether confiscation under Section 111(m) and penalties under Sections 112(a), 112(b) and 114A were sustainable?

Section 14(1) of the Customs Act, 1962, read with Rule 3(1) of the CVR, 2007, makes the price actually paid or payable for goods sold for export to India the primary basis of valuation.

Under Rule 12, the declared value may be rejected only where the proper officer has legally sustainable grounds to doubt its truth or accuracy, supported by cogent evidence.

Rule 10(2) permits addition of freight and insurance only to the extent that such costs are not already included in the price paid or payable, while Rule 10(3) requires additions to be based on objective and quantifiable data.

Applying Eicher Tractors Ltd. v. Commissioner of Customs, Sanmar Specialty Chemicals Ltd. v. Commissioner of Customs and South India Television (P) Ltd. v. Commissioner of Customs, the Tribunal held that the Department bears the burden of proving under-valuation and cannot displace the transaction value on mere suspicion.

Wipro Ltd. v. Assistant Collector of Customs supported acceptance of the actual ascertainable cost rather than a fictional or reconstructed value.

The Tribunal also relied on CJ Shah & Co. v. Commissioner of Customs, Microgen Hygiene Pvt. Ltd. v. Commissioner of Customs and Union of India v. Mohit Minerals Pvt. Ltd. concerning CIF transactions and the treatment of freight and insurance.

Under Section 28(4), extended limitation requires a positive finding of collusion, wilful misstatement or suppression with intent to evade duty; Pushpam Pharmaceuticals Co. v. CCE and Anand Nishikawa Co. Ltd. v. CCE establish that mere omission or a bona fide legal dispute does not amount to suppression.

The Tribunal found no evidence that the appellant paid Blue Whale more than the declared CIF invoice value or that any additional amount was remitted, reimbursed or otherwise flowed back. The CA-certified reconciliation showed that remittances did not exceed the declared value.

Since the invoices were expressly on CIF terms, freight was prepaid by Blue Whale, and the shipping-line invoices were raised on Blue Whale rather than the appellant, the Department failed to establish any freight or insurance cost omitted from the declared value.

The Brazilian FOB invoices and Non-GMO certificates related to an upstream transaction between the Brazilian supplier and Blue Whale. They did not establish the price actually paid or payable by the appellant in its separate transaction with Blue Whale, nor did they prove that the appellant was liable for any additional freight or insurance.

The statements recorded under Section 108 raised, at most, suspicion, but were not corroborated by financial or documentary evidence of additional consideration or flow-back.

Accordingly, the Department had not discharged its burden under Rule 12. In the absence of a valid valuation enhancement, the extended limitation, confiscation and penalties also lacked a legal foundation.

No addition of freight or insurance was permissible under Rule 10(2), and the upstream Brazilian FOB values and Non-GMO certificates could not substitute the appellant’s transaction value.

The extended period under Section 28(4) was held unavailable because collusion, wilful misstatement or suppression had not been established.

Consequently, the valuation enhancement, differential duty demand, confiscation under Section 111(m), redemption fine and penalties under Sections 112(a), 112(b) and 114A were set aside.

The impugned order was annulled and both appeals were allowed with consequential relief in accordance with law.