2007 (7) TMI 9 - SC - Customs

Valuation(Custom) Department contended that the respondent had under invoiced the value of goods in order to evade huge amount of government revenue - Held that the department contention is correct

Summary

Issues Involved:
1. Assessable value of imported Ceramic Capacitors and Diodes.
2. Allegation of under-invoicing by the importer.
3. Validity of the evidence used by the Department to support under-invoicing.
4. Application of Customs Valuation Rules, 1988, specifically Rule 4 and Rule 8.
5. Sequential application of Customs Valuation Rules as per the judgment in Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai.

Detailed Analysis:

1. Assessable Value of Imported Ceramic Capacitors and Diodes
The dispute centered on the assessable value of Ceramic Capacitors and Diodes imported from Hong Kong. The importer declared prices at HK $6 per 1000 pcs for Ceramic Capacitors and HK $29406 CIF for Diodes. The Department alleged these prices did not represent the actual transaction value under Rule 4 of the Customs Valuation Rules, 1988, and accused the importer of under-invoicing to evade customs duty.

2. Allegation of Under-Invoicing by the Importer
The Department issued a show cause notice based on an overseas investigation report from Hong Kong Customs, suggesting the declared prices were lower than the actual transaction value. The importer contested this, arguing the report was based on uncertified xerox copies of export declarations, which were not admissible as evidence. The importer also highlighted that there was no allegation of paying a higher price than declared.

3. Validity of the Evidence Used by the Department
The Tribunal found that the xerox copies of export declarations from Hong Kong Customs were not genuine evidence. It was noted that the goods originated from China/Taiwan, where export prices might be inflated due to government subsidies. The Tribunal held that the Department had not rebutted the importer's evidence of contemporaneous imports at the same declared prices.

4. Application of Customs Valuation Rules, 1988
The Supreme Court emphasized that the value of goods should be determined under Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 1988. The transaction value under Rule 4 must be the price paid or payable at the time and place of importation. The Department must provide cogent reasons and evidence of higher prices for contemporaneous imports to reject the declared invoice price.

5. Sequential Application of Customs Valuation Rules
The Court reiterated the need for sequential application of the Customs Valuation Rules, as established in Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai. The Department cannot directly invoke Rule 8 without first considering Rules 5, 6, and 7. The show cause notice in this case incorrectly invoked Rule 8 without following the sequential order.

Conclusion
The Supreme Court found no merit in the Department's appeal, affirming the Tribunal's judgment. The Department failed to provide evidence of higher contemporaneous import prices and relied on questionable export declarations. The invoice price declared by the importer was upheld as the transaction value. The Court dismissed the civil appeal with no order as to costs.

Additional Judgments
In Civil Appeal Nos. 5517/2004 and 5518/2004, the importers failed to provide a detailed explanation for different values in import invoices and export declarations. Unlike the previous case, no explanation regarding government incentives was offered. The Tribunal's decision in favor of the Department was upheld, and both appeals were dismissed with no order as to costs.