Consent Under Duress Cannot Substitute Statutory Valuation Compliance: CESTAT Allahabad Rules in Favour of Fabric Importer

Background and Overview

CESTAT Allahabad, in a significant ruling pronounced on 25.06.2025, allowed a batch of appeals filed by MKY Enterprises Pvt. Ltd. against the Commissioner of Central Excise & CGST. The appeals arose from the enhancement of assessable value of imported fabrics, and the central legal question before the Tribunal was whether the Commissioner (Appeals) was correct in dismissing the appeals solely on the ground that the importer had furnished written letters accepting the enhanced customs value at the time of clearance.

The decision carries considerable weight for importers who face pressure at the time of clearance and are effectively compelled to sign acceptance letters without receiving the mandatory written communication of grounds for rejecting their declared transaction values.

Facts of the Case

MKY Enterprises Pvt. Ltd. is a regular importer of various categories of fabrics sourced from China. Between 01.07.2019 and 18.09.2019, the assessee imported 80 consignments of fabrics through ICD, Dadri. The goods were self-assessed by the importer on the basis of invoice values, as is the standard practice under self-assessment. However, Out of Charge Orders were not issued by the proper officer following self-assessment.

To prevent prolonged detention of goods and mounting commercial losses due to delay, the assessee made repeated written requests seeking provisional clearance of the consignments upon payment of duty on the enhanced value under protest. These requests were allegedly not acted upon by the proper officer. Eventually, the assessee was left with no practical alternative and furnished consent letters stating agreement to the valuation proposed by Customs.

Subsequently, when the assessee sought speaking orders to understand the basis of enhancement, none were issued. The assessee then filed appeals before the Commissioner (Appeals) against the reassessment reflected in the Bills of Entry.

The Commissioner (Appeals) rejected all the appeals, holding that since the assessee had accepted the enhanced value in writing, Section 17(5) of the Customs Act, 1962 did not require the issuance of a speaking order. The reassessment was accordingly upheld as legal and binding.

The appeals before CESTAT Allahabad raised the following principal issues:

  1. Whether written acceptance of an enhanced assessable value, given under circumstances of commercial compulsion, extinguishes the importer's statutory right to challenge the reassessment.
  2. Whether the proper officer is relieved of the obligation under Rule 12(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 to communicate in writing the grounds for doubting the declared transaction value, merely because the importer has signed an acceptance letter.
  3. Whether enhancement of assessable value based solely on NIDB data, without independent and cogent supporting material, satisfies the requirements of the Customs Valuation Rules, 2007.

Appellant's Contentions

The assessee's counsel made the following submissions before the Tribunal:

  • The assessee had correctly self-assessed the Bills of Entry in accordance with invoice values. The proper officer, without issuing Out of Charge Orders, effectively detained the goods.
  • The acceptance letters were not voluntary. Multiple written communications were sent by the assessee to the proper officer requesting clearance either provisionally or finally on payment of duty on enhanced value under protest.
  • Despite these requests being on record, the proper officer took no cognizance and compelled the assessee to furnish consent letters.
  • The acceptance letters, on examination, did not contain any particulars of the contemporaneous import data allegedly relied upon to justify the enhancement. They merely stated that the declared value was liable to be rejected and re-determined.
  • Even for application of Rule 5 of the Customs Valuation Rules, 2007, several comparability parameters must be satisfied — including quantity in comparable commercial transactions, GSM of fabric, quality, and time of placement of the import order. A bare assertion that contemporaneous imports exist does not meet this threshold.

Reliance on Century Metal Recycling

The assessee placed strong reliance on the Supreme Court's ruling in Century Metal Recycling Pvt. Ltd. Vs Union of India, 2019 (367) E.L.T. 3 (SC). It was argued that:

"As per sub-rule (2) of Rule 12, the proper officer when required must intimate to the importer in writing the grounds for doubting the truth or accuracy of the value declared. The said mandate of sub-rule (2) of Rule 12 cannot be ignored or waived. Formation of opinion regarding reasonable doubt as to the truth or accuracy of the valuation and communication of the said grounds to the importer is mandatory, subterfuge to by-pass and circumvent the statutory mandate is unacceptable."