2011 (4) TMI 909 - AT - Customs

100% enhancement over the assessable value - Held that - Natural justice was denied to the appellant as Joint Commissioner of Customs ordered enhancement of the assessable value to the extent of 100% without any meaningful consideration of the provisions of the relevant agreements and without taking into account any of the submissions of the assessee. Few letters were submitted by the assessee to the original authority clarifying the pricing policy of Bekaert and its impact on the assessable value of the imported goods and also clarifieng certain provisions of the agreements but none of these submissions was considered in the order-in-original. The Joint Commissioner s order recommending provisional assessment for the future and finalization of assessments of past imports on the above basis was of serious consequences for the assessee. The learned Commissioner (Appeals), however, appears to have overlooked this aspect. Thus on the merits of the case, the Commissioner (Appeals), without considering the submissions of the assessee, chose to interpret the provisions of the agreements in his own way and to uphold the order-in-original - it appears that the learned Commissioner (Appeals) proceeded on the premise that the burden was on the importer to establish that the supplier did not impose any such condition - Assessee s appeal is allowed by way of remand

Issues Involved:
1. Enhancement of the assessable value of imported machinery.
2. Alleged violation of principles of natural justice.
3. Applicability of Rule 10 of the Customs Valuation Rules, 2007.
4. Procedures under Rule 12 of the Customs Valuation Rules, 2007.
5. Consideration of evidence and submissions by the authorities.

Detailed Analysis:

1. Enhancement of the assessable value of imported machinery:
The Joint Commissioner of Customs (GATT Valuation Cell) ordered a 100% enhancement over the assessable value declared by the appellant for machinery imported from M/s. N.V. Bekaert SA, Belgium. This decision was based on the relationship between the appellant and the supplier, as defined under Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules. The Commissioner (Appeals) upheld this order.

2. Alleged violation of principles of natural justice:
The appellant argued that both the orders by the Joint Commissioner and the Commissioner (Appeals) were passed in violation of the principles of natural justice. The appellant had submitted several letters providing clarifications on the royalty calculation and the pricing policy of Bekaert, which were not considered by the original authority. Additionally, the Commissioner (Appeals) considered written submissions by an Appraiser of Customs without providing a copy to the appellant, thus denying them an opportunity to respond.

3. Applicability of Rule 10 of the Customs Valuation Rules, 2007:
The appellant contended that the amounts paid under the Engineering Services Agreement and the Technology Agreement should not be included in the assessable value of the imported goods under Rule 10 of the Customs Valuation Rules, 2007. The payments were not related to the imported goods and were not made as a condition of the sale of the goods under assessment. The Commissioner (Appeals) did not consider these aspects correctly, leading to a non-application of mind.

4. Procedures under Rule 12 of the Customs Valuation Rules, 2007:
The appellant argued that the Joint Commissioner should have followed Rule 12, which requires the assessing authority to furnish reasons for doubting the truth or accuracy of the declared value and to request further information from the importer. The failure to do so constituted a breach of natural justice. The Commissioner (Appeals) upheld this breach by not addressing the appellant's grievance.

5. Consideration of evidence and submissions by the authorities:
The appellant provided a report from PricewaterhouseCoopers (PWC) analyzing the transfer pricing policy and the invoice prices of the imported machinery. The report concluded that the transfer prices were in line with the policy and comparable to prices charged to other Bekaert group entities. The Commissioner (Appeals) did not consider this report, nor did he address the appellant's submissions regarding the pricing policy and the agreements. Instead, he interpreted the agreements independently and upheld the order-in-original.

Conclusion:
The Tribunal found that natural justice was denied to the appellant, as the Joint Commissioner did not consider the appellant's submissions and the Commissioner (Appeals) overlooked significant aspects of the case. The orders of both authorities were set aside, and the matter was remanded to the original authority for a fresh decision in accordance with law and the principles of natural justice. The appellant was to be given a reasonable opportunity to present their case and adduce evidence. The appeal was allowed by way of remand, and the related applications were disposed of.

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