2011 (6) TMI 248 - AT - Customs

Import of a consignment of brass scrap - assessment was made provisional - it is settled law that the transaction value cannot be altered/loaded on the basis of values declared in stray imports when the quantity/quality is not comparable - The price quoted in the LME was based on the lots of 10 MTs, whereas the quantity imported in the instant case was 20.010 MTs - After giving marginal allowance towards quantity discount, the fair fob value will be worked out to more than the minimum price accepted by the department for contemporary imports - The fair value, therefore, was fixed under the best judgment assessment, under Rule 8 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - After adjustment of duty paid provisionally, the balance amount recoverable was worked out and demanded .

Summary

Issues:
1. Valuation of imported goods based on LME prices.
2. Application of Rule 4(2) of Valuation Rules.
3. Best judgment assessment under Rule 8 of Customs Valuation Rules.

Analysis:

Valuation of Imported Goods based on LME Prices:
The case involved the import of brass scrap by M/s. Nilesh Metal Corporation, where the declared value was deemed low compared to contemporary imports and LME prices. The original assessment was provisional, with the fair value determined based on LME prices. The Commissioner (Appeals) upheld this decision, citing lack of evidence of similar goods being imported at lower prices. However, the Tribunal noted that the transaction value cannot be altered based on values declared in stray imports when quantity/quality is not comparable. The Tribunal emphasized that LME prices are only indicative and cannot be the sole basis for rejecting transaction value.

Application of Rule 4(2) of Valuation Rules:
The appellant contended that the value cannot be enhanced unless the criteria under Rule 4(2) of Valuation Rules are met. The Tribunal referred to the Supreme Court's decision in Eicher Tractors Ltd. case, highlighting that the transaction value should not be rejected solely based on the vendor's price list. The Tribunal stressed that the Assistant Collector erred in not following Rule 4(2) and rejecting the transaction value without valid reasons. The Tribunal emphasized that the transaction value declared by importers can only be rejected if it falls within the situations enumerated in Rule 4(2).

Best Judgment Assessment under Rule 8 of Customs Valuation Rules:
The original adjudicating authority fixed the fair value under the best judgment assessment, considering the quantity discount and LME prices. However, the Tribunal found this approach erroneous, as the fair value exceeded the minimum price accepted for contemporary imports. The Tribunal concluded that the appeal by M/s. Nilesh Metal Corporation was sustainable, allowing the appeal based on the just and proper contentions raised by the appellant.

In conclusion, the Tribunal set aside the assessment order, emphasizing the importance of complying with Valuation Rules, specifically Rule 4(2), and rejecting the use of LME prices as the sole basis for determining the fair value of imported goods.