CESTAT Sets Aside Export Undervaluation Demand Against Temple City Developers, Cites Lack of Evidence

April 7, 2026 : The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the demand of differential duty and penalties against M/s Temple City Developers Pvt. Ltd. and its officials, holding that allegations of export undervaluation cannot be sustained without cogent and admissible evidence establishing receipt of additional consideration.

The appeals arose from an Order-in-Appeal dated 26.10.2018, which had upheld a demand of ₹43.01 lakh in differential duty along with penalties on the allegation that the appellants undervalued exports of iron ore fines. The Department alleged that while exports were declared at an FOB value of USD 70 per PDMT, the actual transaction value was USD 89 per PDMT, based on a separate contract between two overseas entities, and that the differential amount was received in cash.

According to the Department, the declared contract between the appellant and the overseas buyer (M/s Pacific Global Resources Pte Ltd., Singapore) was merely a “dummy” arrangement, while the real transaction value was reflected in another contract between foreign entities. The case was primarily built on statements recorded under Section 108 of the Customs Act, email communications, and documents retrieved during investigation.

The appellants contended that exports were made strictly in terms of the declared contract and that payments were received through proper banking channels at USD 70 per PDMT. They denied receiving any additional consideration and argued that the statements relied upon by the Department were unreliable, particularly in the absence of corroborative evidence and denial of cross-examination.

After examining the record, the Tribunal found no material to establish that the appellant was a party to the alleged second contract or that it had received any amount beyond the declared value. It noted that export proceeds had been realised through normal banking channels and supported by Bank Realisation Certificates.

The Tribunal held that while statements recorded under Section 108 are admissible, they require independent corroboration. In the present case, the statements had been retracted and the appellants were denied the opportunity to cross-examine key witnesses, thereby affecting their evidentiary value. It observed that denial of cross-examination in such circumstances undermines the reliability of such statements.

On the admissibility of electronic evidence, the Tribunal noted that the Department relied on emails and computer printouts without complying with the mandatory requirements under Section 138C of the Customs Act. There was no material showing how such records were retrieved or authenticated, nor any panchanama evidencing their recovery. Consequently, such electronic evidence could not be relied upon.

The Bench also found a complete absence of evidence establishing the alleged flow of differential consideration, including how, to whom, and by whom such amounts were paid. It further noted that the shipping bills, finalised based on Bank Realisation Certificates, were not reopened or reassessed prior to raising the demand.

Rejecting the Department’s case, the Tribunal observed that although undervaluation may be established on the basis of preponderance of probability, it cannot rest on presumptions. It emphasised that suspicion, however strong, cannot substitute proof.

Concluding that the evidence on record was either insufficient or inadmissible to establish receipt of additional consideration, the Tribunal set aside the impugned order and allowed all appeals.

Case Details:
Case Title: Temple City Developers Pvt. Ltd. & Ors. v. Commissioner of Customs, Visakhapatnam
Case No.: Customs Appeal Nos. 30602, 30183–30185 of 2019
Coram: Angad Prasad (Member Judicial) and A.K. Jyotishi (Member Technical)
Date of Decision: 07.04.2026