{"id":355008,"date":"2025-07-30T14:30:34","date_gmt":"2025-07-30T09:00:34","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=355008"},"modified":"2025-08-01T10:31:09","modified_gmt":"2025-08-01T05:01:09","slug":"cestat-customs-commissioner-cannot-re-determine-fob-value","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2025\/07\/30\/cestat-customs-commissioner-cannot-re-determine-fob-value\/","title":{"rendered":"Commissioner of Customs is a stranger to contract of sale, cannot re-determine FOB value of export goods: CESTAT"},"content":{"rendered":"
\n

CESTAT New Delhi:<\/span> In an appeal against the order dated 24-3-2011, passed by Commissioner of Customs Tughlakabad (impugned order), the two-member bench of Dilip Kumar,J. (President) and P.V. Subba Rao (Technical member)*<\/span>, held that the Commissioner had no authority to re-determine the Free on Board (\u2018FOB\u2019) values of the export goods and accordingly set aside the impugned order. The Tribunal further stated that the Commissioner or any customs officer, being a stranger to the contract of sale, would have no authority to re-determine the transaction value under the FOB.<\/p>\n

Background<\/h3>\n

The appellants had exported garments and claimed benefits under Drawback and Duty Exemption Passbook Scheme (\u2018DEPS\u2019) as a percentage of the FOB value of the exported goods. The Directorate General of Revenue Intelligence (\u2018DGRI\u2019) had received intelligence that the appellants were over-valuing the garments to avail excess drawback and DEPS benefits and thus officers of the DGRI had examined the consignment of goods. The impugned order had rejected the declared FOB values and re-determined the FOB values under Section 14<\/a> of the Customs Act, 1962<\/a> (Customs Act) read with Customs Valuation (Determination of Value of Export Goods) Rules, 2007 (Valuation Rules).<\/p>\n

The issue for consideration before the CESTAT was whether the Commissioner or any customs officer had the power to re-determine the FOB value of export goods.<\/p>\n

Analysis, Law and Decision<\/h3>\n

The Tribunal noted that FOB, being an International Commercial Term<\/span> (\u2018INCOTERM\u2019), indicated rights and liabilities of buyers and sellers in international trade. Where goods are bought and sold on FOB basis, the seller becomes free of all costs and risks associated with the transportation of goods as soon as the goods are put on board the vessel or aircraft. FOB value is the transaction value of the goods agreed to between the buyer and the seller and as such, only the parties to the contract of sale may determine it. The Tribunal further noted that no stranger to the contract, including any customs officer would have any role in determining or changing the FOB value.<\/p>\n

The Tribunal observed that Section 14<\/a> of the Customs Act<\/a>, on the other hand, provided for determination of \u2018value\u2019 of imported or exported goods which shall be the \u2018transaction value\u2019 but it may be rejected or re-determined by the proper officer following some other method as per the Valuation Rules. The Tribunal further stated that a combined reading of Sections 14<\/a> and 2 (2)<\/a> of the Customs Act<\/a> made it evident that the value determined under Section 14 is for the purpose of assessment of duty. The Tribunal noted that the proper officer is at the liberty to reject the transaction value as the assessable value and determine the assessable value through some other methods such as value of contemporaneous export goods of similar market assessment etc. However, this re-determination would not change the transaction value.<\/p>\n

The Tribunalfurther observed that while duty is to be paid on the assessable value, drawback, DEPS and other export benefits are generally notified as a percentage of the FOB value. The exporter would receive remittance and be entitled to receive export incentives as per his transaction value since the exporter\u2019s obligation to realise foreign exchange is based on the transaction value.<\/p>\n

Therefore, the Tribunal held that the Commissioner had no power to re-determine the FOB value of export goods. The FOB value can only be determined by the parties to the contract and no stranger to the contract, including a customs officer, could change the FOB value of the goods.<\/p>\n

Consequently, the Tribunal held that the impugned order, passed by the Commissioner, was without authority of law and was therefore liable to be set aside.<\/p>\n

[Mahir Fashions v. Commissioner of Customs New Delhi, 2025 SCC OnLine CESTAT 2103<\/a>, decided on 22-7-2025<\/span>]<\/p>\n

*Order by: P.V. Subba Rao, Technical Member<\/span><\/strong><\/p>\n

\n

Advocates who appeared in this case:<\/p>\n

For the Appellant:<\/span> Prabhat Kumar, Pralabh Mathur, Advocates<\/p>\n

For the Respondent:<\/span> Rakesh Kumar, Authorised Representative<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

“The customs officer can reject the transaction value as the assessable value and re-determine it as per the Valuation Rules for the purpose of imposing duty, but this would not change the transaction value for the purpose of receiving foreign remittance.”<\/p>\n","protected":false},"author":67011,"featured_media":355016,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[29538,57467,86285,86284,86278,86281,86282,86279,86280,86283],"class_list":["post-355008","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-customs","tag-customs-act-1962","tag-customs-valuation-rules-2007","tag-determination-of-fob-value","tag-excise-service-tax-appellate-tribunal","tag-free-on-board","tag-incoterms-fob","tag-justice-dilip-gupta","tag-p-v-subba-rao","tag-transaction-value"],"yoast_head":"\nCustoms Commissioner cannot re-determine FOB value: CESTAT | SCC Times<\/title>\n<meta name=\"description\" content=\"CESTAT held that Customs Commissioner has no power to re-determine FOB value of export goods.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2025\/07\/30\/cestat-customs-commissioner-cannot-re-determine-fob-value\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Commissioner of Customs is a stranger to contract of sale, cannot re-determine FOB value of export goods: CESTAT\" \/>\n<meta property=\"og:description\" content=\"CESTAT held that Customs Commissioner has no power to re-determine FOB value of export goods.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.scconline.com\/blog\/post\/2025\/07\/30\/cestat-customs-commissioner-cannot-re-determine-fob-value\/\" \/>\n<meta property=\"og:site_name\" content=\"SCC Times\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/scc.online\/\" \/>\n<meta property=\"article:published_time\" content=\"2025-07-30T09:00:34+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-08-01T05:01:09+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/07\/customs-commissioner-cannot-re-determine-FOB-value.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"886\" \/>\n\t<meta property=\"og:image:height\" content=\"590\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Editor\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Commissioner of Customs is a stranger to contract of sale, cannot re-determine FOB value of export goods: CESTAT\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Editor\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/07\\\/30\\\/cestat-customs-commissioner-cannot-re-determine-fob-value\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/07\\\/30\\\/cestat-customs-commissioner-cannot-re-determine-fob-value\\\/\"},\"author\":{\"name\":\"Editor\",\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/#\\\/schema\\\/person\\\/84e42bab48238baf12c7e33b3d9761fe\"},\"headline\":\"Commissioner of Customs is a stranger to contract of sale, cannot re-determine FOB value of export goods: CESTAT\",\"datePublished\":\"2025-07-30T09:00:34+00:00\",\"dateModified\":\"2025-08-01T05:01:09+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/07\\\/30\\\/cestat-customs-commissioner-cannot-re-determine-fob-value\\\/\"},\"wordCount\":665,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2025\\\/07\\\/30\\\/cestat-customs-commissioner-cannot-re-determine-fob-value\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/wp-content\\\/uploads\\\/2025\\\/07\\\/customs-commissioner-cannot-re-determine-FOB-value.webp\",\"keywords\":[\"Customs\",\"Customs Act 1962\",\"Customs Valuation Rules 2007\",\"determination of FOB value\",\"Excise & Service Tax Appellate Tribunal\",\"Free on Board\",\"INCOTERMS FOB\",\"Justice Dilip Gupta\",\"P. 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Subba Rao (Technical Member) allowed an appeal which was seeking quashing of Order-in-Appeal passed by the Commissioner of Customs (Appeals) New Custom House, New Delhi which had set aside the impugned order\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":239365,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/11\/19\/cestat-interest-on-delayed-refund-under-the-provisions-of-s-27a-of-customs-act-1962-does-not-arise-tribunal-allows-appeal\/","url_meta":{"origin":355008,"position":2},"title":"CESTAT | Interest on delayed refund under the provisions of S. 27A of Customs Act, 1962 does not arise; Tribunal allows appeal","author":"Editor","date":"November 19, 2020","format":false,"excerpt":"Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P. Venkata Subba Rao (Technical Member) allowed an appeal which was filed against the judgment of Commissioner (Appeals). The appellant imported Benzothiazole through Visakhapatnam Port declaring an assessable value of US$ 3.5 per Kg being the transaction value. The Assistant Commissioner enhanced\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":250939,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/07\/08\/input-services\/","url_meta":{"origin":355008,"position":3},"title":"CESTAT | Whether distribution of credits on input services attributable to final product on a pro-rata basis proportionate to turnover of each unit between manufacturing plants? Tribunal answers","author":"Editor","date":"July 8, 2021","format":false,"excerpt":"Customs, Excise & Service Tax Appellate Tribunal (CESTAT): The Coram of Dilip Gupta (President) and P V Subba Rao (Technical member) allowed three appeals that sought to assail the order dated 28-06-2019 passed by the Commissioner (Appeals). The appeal filed by M\/s. Krishna Food Products had been dismissed and the\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":281119,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/01\/05\/service-tax-not-payable-for-deemed-sales-for-import-transactions-holds-cestat-legal-news-legal-research-updates\/","url_meta":{"origin":355008,"position":4},"title":"Service tax not payable for \u2018deemed sales\u2019; CESTAT sets aside the order passed by the Commissioner LTU, Delhi","author":"Editor","date":"January 5, 2023","format":false,"excerpt":"The supply of ISO Tankers on lease\/rental basis by foreign suppliers to the appellant would amount to a \u2018deemed sale\u2019 under Article 366(29A) of the Constitution as the appellant throughout had effective control and possession over the ISO Tankers.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"CESTAT","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2022\/12\/MicrosoftTeams-image99.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":226168,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/02\/25\/cestat-refund-of-4-special-additional-duty-allowed-where-goods-imported-and-sold-were-co-relatable-goods\/","url_meta":{"origin":355008,"position":5},"title":"CESTAT | Refund of 4 % Special Additional Duty allowed where goods imported and sold were co-relatable goods","author":"Bhumika Indulia","date":"February 25, 2020","format":false,"excerpt":"Customs, Excise and Services Tax Appellate Tribunal (CESTAT): P. Dinesha (Judicial Member), allowed an appeal filed with the issue of denial of refund of 4% Special Additional Duty (SAD) under the Customs Notification No. 102\/2007-Cus. dated 14-09-2007, as amended. During adjudication, the Assistant Commissioner of Customs (Refunds) had granted a\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/355008","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67011"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=355008"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/355008\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/355016"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=355008"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=355008"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=355008"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}