CESTAT: DGFT Minimum Import Price Cannot Be Used To Enhance Value Of Granite Slabs Cleared By 100% EOU Without Proof Of Undervaluation

March 03, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad has held that the Minimum Import Price (MIP) prescribed by the Directorate General of Foreign Trade (DGFT) for imported goods cannot be used to enhance the assessable value of granite slabs and tiles cleared by a 100% Export Oriented Unit (EOU) into the Domestic Tariff Area (DTA) in the absence of evidence showing undervaluation.

The Bench comprising Judicial Member Somesh Arora and Technical Member Satendra Vikram Singh partly allowed the appeal filed by Exotic Granite LLP and set aside the major portion of the duty demand raised by the Department.

Exotic Granite LLP, a 100% EOU located in Mundra, Kutch, manufactures polished granite slabs and tiles classified under Chapter Heading 68029300 of the Central Excise Tariff Act. During scrutiny of its records, the Department alleged that the company had undervalued granite products cleared into the Domestic Tariff Area.

The allegation was based on DGFT Notification No. 38(RE-2013)/2009-2014 dated 26 August 2013, which provides that imports of certain granite products are freely permitted only when the CIF value is USD 80 or above per square metre. According to the Department, since the assessee’s DTA sale prices were lower than this benchmark, the declared assessable value was understated.

The authorities also noted that the Development Commissioner had granted the assessee advance DTA sale permission for goods worth ₹550 lakh subject to conditions, including execution of a differential duty bond and clearance only to DTA units possessing DGFT import authorisation.

A show cause notice was subsequently issued demanding excise duty of ₹3.62 crore along with interest and penalty. The Commissioner confirmed the entire demand and imposed an equivalent penalty, prompting the assessee to file an appeal before the Tribunal.

Before the Tribunal, the assessee argued that DTA clearances made by a 100% EOU cannot be equated with imports since the finished goods were manufactured in India and subject to excise duty under Section 3 of the Central Excise Act. It further contended that although the duty is calculated with reference to customs duties on similar imported goods, valuation must still be determined under Section 14 of the Customs Act read with the Customs Valuation Rules.

The assessee also pointed out that the DGFT notification prescribing minimum import price applied to imported goods and could not automatically be used as the basis for determining the value of goods manufactured domestically and cleared into the DTA.

The Tribunal accepted this contention. It observed that the Department had enhanced the assessable value solely by relying on the DGFT notification prescribing the minimum import price and had not produced any evidence showing manipulation or suppression of the transaction value. The Bench noted that the sales were made to independent buyers and that price was the sole consideration in those transactions.

Referring to the earlier decision in Cristal Granites and Marbles Pvt. Ltd., the Tribunal reiterated that minimum import price fixed for imports cannot automatically be treated as the cost of raw material or the benchmark for determining the sale price of goods cleared in the domestic market. It held that, in the absence of evidence showing undervaluation, the declared transaction value could not be rejected merely because it was lower than the MIP prescribed for imports.

Accordingly, the Tribunal set aside the major duty demand of ₹3.33 crore that had been confirmed on the basis of alleged undervaluation using the DGFT MIP benchmark.

However, the Tribunal took a different view regarding concessional duty claimed on advance DTA sales. It noted that Notification No. 23/2003-CE allows concessional duty only for DTA clearances covered under specific sub-paragraphs of paragraph 6.8 of the Foreign Trade Policy. Since the assessee’s advance DTA sales were permitted under paragraph 6.8(k), those clearances did not qualify for the concession.

The Bench further observed that the Development Commissioner’s permission was conditional upon execution of a differential duty bond with the jurisdictional excise authorities, which the assessee had failed to execute. It also found that the ER-2 returns filed by the assessee merely referred to paragraph 6.8 of the Foreign Trade Policy without specifically disclosing that the clearances were under paragraph 6.8(k).

In these circumstances, the Tribunal rejected the assessee’s plea that the demand was time-barred and upheld the invocation of the extended limitation period. It therefore sustained the smaller duty demand of ₹28.59 lakh along with applicable interest.

However, the Tribunal set aside the penalty imposed under Section 11AC of the Central Excise Act, noting that the assessee had informed the Department about the advance DTA permission and its conditions, indicating absence of deliberate intent to evade duty.

Consequently, the appeal was partly allowed. While the Tribunal set aside the larger demand of ₹3.33 crore based on the DGFT Minimum Import Price, it upheld the duty demand of ₹28.59 lakh with interest but removed the penalty.

Case Title: Exotic Granite LLP v. Commissioner of Central Excise, Kutch
Case Number: Excise Appeal No. 10498 of 2020-DB