2006 (9) TMI 448 - Commission - Customs

Summary

Issues Involved:
1. Mis-declaration of value to evade customs duty.
2. Rejection of transaction value due to related party transactions.
3. Comparison of import values with similar imports by other entities.
4. Calculation of differential duty payable.
5. Application of Customs Valuation Rules.
6. Immunity from penalty and prosecution.

Detailed Analysis:

1. Mis-declaration of Value to Evade Customs Duty:
The applicant, a subsidiary of SGI, USA, imported high-end computer systems and was alleged to have mis-declared the value of these imports to evade customs duty. The Central Intelligence Unit (CIU) officers investigated the matter and found discrepancies in the declared prices compared to similar imports by other entities, such as ONGC.

2. Rejection of Transaction Value Due to Related Party Transactions:
The primary contention by the Revenue was that the transaction value declared by the applicant could not be accepted for customs duty assessment because SGI, USA, is a related party. The legal position under Rule 4(3)(a) of the Customs (Valuation) Rules, 1988, allows the transaction value between related parties unless it is influenced by their relationship. The applicant argued that there was no evidence of reimbursement or additional recovery from its customers, which the Revenue failed to counter effectively.

3. Comparison of Import Values with Similar Imports by Other Entities:
For instance, M/s. ONGC imported similar goods at a higher declared value. The applicant's declared value for goods with higher configurations and additional peripherals was significantly lower than ONGC's imports. The Revenue used this comparison to allege undervaluation by the applicant.

4. Calculation of Differential Duty Payable:
The Show Cause Notice issued by the Revenue demanded a differential duty of Rs. 2,98,30,621/- for certain Bills of Entry and Rs. 4,89,279/- for another. The applicant admitted a duty liability of Rs. 47,12,008/- and sought settlement.

5. Application of Customs Valuation Rules:
- Rule 4: The applicant accepted the Revenue's assertion that Rule 4 was not applicable for settlement purposes.
- Rule 5: The Revenue adopted the value declared for ONGC's imports as a basis for assessment, treating the goods as identical despite minor differences.
- Rule 8: For extra items and peripherals, the Revenue applied Rule 8, which was contested by the applicant, arguing that Rule 8 should be applied only after exhausting Rules 5 to 7.
- Rule 7: For other Bills of Entry, the Revenue applied Rule 7, calculating the CIF value by deducting various costs from the local sale price.

6. Immunity from Penalty and Prosecution:
The applicant sought immunity from penalties and prosecution, which was granted by the Settlement Commission. The Commission also settled the customs duty at Rs. 3,03,19,900/- and allowed the adjustment of the amount already deposited by the applicant.

Final Orders:
1. Customs Duty: Settled at Rs. 3,03,19,900/-. The applicant to pay the balance amount within 30 days, with interest at 18% per annum for any delay.
2. Interest: Levied at 10% per annum from the date the duty was due until payment, with immunity granted for interest beyond this rate.
3. Penalty & Prosecution: Immunity granted to the applicant and co-applicants under the Customs Act, 1962.
4. Release of Bank Guarantee/Bond: Upon payment of the balance duty and interest.

Conclusion:
The Settlement Commission provided a comprehensive resolution by addressing the valuation discrepancies, applying the appropriate Customs Valuation Rules, and granting necessary immunities, ensuring compliance and settlement of the duty liabilities.