2015 (5) TMI 240 - SC - Customs

Valuation of goods - Demand of differential duty - Redemption fine - Held that - Comparable instance which was taken into consideration by the Commissioner was not that of identical goods but similar goods . This is so stated by the Commissioner in his order itself. - when the Commissioner rejected the transaction value declared by the respondent applying Rule 10A of the Customs Valuation Rules, 1988, on that basis he held that Rule 4(1) would not apply. Thereafter he proceeded sequentially from Rule 5 onwards. As far as Rule 5 is concerned, again he stated that this would not apply as there was no evidence of identical goods . It is for this reason he undertook the exercise, as contemplated in Rule 6, by giving the example of similar goods . We would like to point out at this stage that the instances which were given by the Department and even by the respondent himself, no objection was raised by the respondent that these instances were not of similar goods. Therefore, relying upon those instances by the Commissioner cannot be faulted. Price of ₹ 58/- has not been accepted by the Commissioner, and rightly so, by giving a very valid reason, namely, even in respect of that import by the importer declaring the value of ₹ 58/-, a show cause notice had been issued by the Department and the case was under scrutiny. In the show cause notice which was issued by the Department the price proposed was ₹ 90/- per piece. Thus, the entire basis of the Tribunal s order is misplaced as it is founded on total misconception of law and is also contrary to the facts on record. For the aforesaid reasons we set aside the order of the Tribunal and affirm the order of the Commissioner insofar as it relates to redemption of the value declared by the respondent at ₹ 36/- per piece and fixing the value at ₹ 73.94 per piece, as well as demand of differential duty on that basis. - Decided in favor of revenue. Redemption fine of ₹ 20 lakhs and the penalty of ₹ 5 lakhs which is imposed in the facts of this case is on a higher side. Insofar as redemption fine is concerned, the same is reduced to ₹ 6 lakhs which is the equivalent to the differential duty and penalty imposed is set aside altogether.- Decided partly in favour of assessee.

Summary

Issues:
- Declaration of value for imported goods
- Examination of goods by customs authorities
- Enquiry into branded goods and true value
- Commissioner's order and application of Valuation Rules
- Tribunal's decision and errors in judgment

Declaration of value for imported goods:
The respondent imported a consignment of electronic goods declared as "parts of VCD - LENCE WITH MECHANISM" with a declared value of US $ 0.72 per piece. The customs authorities found discrepancies during examination, leading to doubts about the true value of the goods. The respondent provided explanations regarding branding and valuation, but the Department initiated further inquiries to verify the declared value.

Examination of goods by customs authorities:
After conducting market inquiries and examining similar imports, the Department issued a show cause notice to the respondent. The Commissioner of Customs, in the Order-in-Original, rejected the declared value and invoked Rule 6 to determine the transaction value at a higher rate, resulting in confiscation of goods and imposition of duties, fines, and penalties.

Enquiry into branded goods and true value:
The respondent challenged the Commissioner's order before the Tribunal, which allowed the appeal based on three reasons. The Tribunal found errors in the Commissioner's valuation process, considering the import of "similar goods" instead of "identical goods," and raised concerns about the timing and rates of comparable imports.

Commissioner's order and application of Valuation Rules:
The Supreme Court analyzed the Tribunal's decision and found serious errors in its reasoning. The Court clarified that the Commissioner correctly applied the Valuation Rules and relied on instances provided by both the Department and the respondent. The Court emphasized that the Tribunal misunderstood the facts and misinterpreted the law, leading to an incorrect decision.

Tribunal's decision and errors in judgment:
The Supreme Court set aside the Tribunal's order and upheld the Commissioner's decision regarding the valuation of the imported goods. However, the Court reduced the redemption fine and set aside the penalty imposed, considering them excessive in this case. The appeal was disposed of with modifications to the fines and penalties imposed.