FOB Value Of Goods Can't Be Modified By Anyone Including Any Customs Officer: CESTAT
Mehak Dhiman
12 March 2025 11:40 AM IST
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that no stranger to the contract, including any Customs officer has any right to interfere with the Free on Board (FOB) value of the goods. The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has stated that “there is a privity of contract between the buyer...
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that no stranger to the contract, including any Customs officer has any right to interfere with the Free on Board (FOB) value of the goods.
The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has stated that “there is a privity of contract between the buyer and the seller and they alone can decide the terms of contract and in case of non-compliance by one, the other can seek to enforce it. The consideration or the transaction value cannot be modified by any stranger to the contract including any officer.”
In this case, the three exporters filed shipping bills to export garments in the Inland Container Depot, Tughlakabad. However, on the suspicion that the goods were overvalued, they were seized and later provisionally released on bond and were allowed to be exported.
The assessee had waived the requirement of show cause notice but made written submissions and attended personal hearings. The Joint Commissioner passed the Order in Original dropping all proceedings.
The Commissioner (Appeals) passed the impugned order accepting the valuation in respect of all the shipping bills and releasing the bonds and bank guarantees pertaining to redemption fine and penalty.
However, he ordered that admissible exports benefits in the 8 shipping bills need to be re-determined based on the investigation and the evidence available with the exporters and for that purpose remanded the matter to the Joint Commissioner.
The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.
What is FOB value?
FOB is one of the internationally accepted terms of commerce known as by INCOTERMS which determine the rights and liabilities of the buyer and seller in a transaction. If goods are agreed to be sold on FOB basis, the exporter is free once the goods are put on board the vessel and all risks and costs associated with transporting them up to destination thereafter is on account of the importer.
In short, FOB value is the transaction value of the goods agreed to between the buyer and the seller.
Tribunal's Observation
The bench opined that no stranger to the contract, including any Customs officer has any right to interfere with the FOB value of the goods. The Customs Act does not empower any officer to modify the FOB value of goods.
The Tribunal observed that the power to notify rates of drawback is vested with the Central Government and if the rates of drawback are as a percentage of FOB value, drawback should be paid accordingly and no Customs officer has the power to ignore the FOB value and determine drawback based on any other value determined by him.
The bench stated that “the entire investigation and the subsequent SCN and the adjudication proceedings were on the wrong impression that the Customs officers have the right to modify the FOB value or that drawback, MEIS and ROSL which, as per the drawback schedule and the FTP which have to be paid as a percentage of FOB could, instead, be paid on some other value determined by the officers.”
In view of the above, the Tribunal allowed the appeal.
Case Title: JBN Apparels Pvt. Ltd. v. Commissioner of Customs, New Delhi
Case Number: CUSTOMS APPEAL NO. 50127 OF 2024
Counsel for Appellant/ Assessee: Mukeshwar Nath Dubey, Mohd. Faraz Aneez, P. Pathak and Ajay Kumar
Counsel for Respondent/ Department: Shashi Kant Sharma