Diyas Mantra Lighting’s ₹84.38-Lakh Customs Duty Demand Set Aside As CESTAT Finds No Proof Related-Party Link Affected Prices

The importer declared electric decorative lighting imported under the brands “Diyas” and “mAntra” at values the Customs Department considered undervalued.

The Department alleged that the importer and its UK supplier, Inspired Lighting Ltd., were related and that their relationship affected the prices.

The Principal Commissioner rejected the declared values, re-determined values for a live consignment and past imports, confirmed differential duty, and ordered confiscation and penalties.

The Supreme Court set aside the original adjudication and the Tribunal’s first decision, directing the Principal Commissioner to apply the valuation rules sequentially, beginning with Rules 3 to 5, while leaving the appellants’ other legal pleas open.

On de novo adjudication, the Principal Commissioner again confirmed duty and imposed fines and penalties for the live consignment and 13 past UK imports, but accepted the declared values for imports from Spain and China.

The importer and its directors appealed.

Section 14 of the Customs Act, 1962, read with Rule 3(1) of the Customs Valuation Rules, 2007, makes the transaction value the ordinary basis for assessment.

Under Rule 3(3)(a), a transaction between related parties may be accepted unless examination of the circumstances of sale shows that the relationship influenced the price; Rule 3(3)(b) provides a means of testing the declared value against specified comparable values.

If the value cannot be determined under Rule 3, Rule 3(4) requires sequential recourse to Rules 4 to 9, so Rules 7 to 9 cannot be used before Rules 3 to 5 are exhausted.

The Tribunal relied on *Sanjivani Non Ferrous Trading Pvt. Ltd. v. Union of India*, which requires cogent reasons and supporting material to reject transaction value, and *Impex Steel & Bearing Co.*, which states that transaction value should be accepted absent evidence justifying rejection.

Sections 111(m), 125, 112(b), 114A, 28 and 28AA of the Customs Act were relevant to the challenged confiscation, fines, penalties, duty demand and interest.

The Tribunal found that the adjudicating authority had not shown how the relationship with the UK supplier affected the declared prices.

It had, moreover, accepted declared values for goods imported from China and Spain, including goods of the brands in question, without explaining why the UK-sourced goods required a different valuation.

Although the authority found the parties related, that finding alone did not establish price influence under Rule 3(3)(a).

Nor could the authority sustain its deductive valuation under Rule 7 without first properly applying the preceding valuation rules, as required by the Supreme Court’s remand directions.

The Tribunal therefore found no sufficient basis for rejecting the declared values or for the consequential findings of misdeclaration and confiscability.

The Tribunal set aside the differential-duty demands and related re-determination for the UK imports and the live consignment, as well as the confiscation orders and penalties imposed on the importer and its directors.

The decision records that the live consignment was covered by Bill of Entry No. 8059523 dated 21 January 2015; a later reference to 21 January 2025 appears to be a typographical error.