2015 (12) TMI 857 - AT - Customs

Duty demand - Enhancement in value of goods - Violation of principle of natural justice - benefit of the Notification No. 149/95 - Held that - Except for the non declaration of brand in the Bills of Entry the other misdeclaration alleged by the Revenue is lower value declared in the Bills of Entry. To arrive at the correct value, a market inquiry was done. In spite of clear directions by the Commissioner(Appeals) in the first stage, we find that principles of natural justice still remained violated. In the impugned order, the Commissioner(Appeals) has clearly recorded that the Department is duty bound to convey to the respondent the name of the market, name of the address of the person from whom market inquiry was made, name of the product including brand name for which inquiry were made and retail sale price of the product item-wise of brand-wise. Further the method of arriving at the assessable value from the retail sale price needs to be supported with evidence. The department merely considered margin of profit of 50% and 25% at the retail and wholesale stage respectively without giving any supportive evidence as to how this percentage was arrived at. Another flaw in arriving at the assessable value is that although spectacles are said to be of various brands, when it came to the market inquiry the same retail price was considered in respect all spectacles. This itself makes the market enquiry questionable and unreliable. Revenue has not also explained why Rule 5 and 6 which relate to similar or identical goods should not have been considered when the appellant have given the price of contemporaneous goods as observed by the Commissioner(Appeals) and especially when such goods are available in the market as revealed in the market enquiry. Even if the contemporaneous goods do not indicate the brand, it was duty of Revenue to examine documents relating to contemporaneous imports but it failed to do so. - impugned order is not sustainable from both points of view i.e failure to observe principles of natural justice as well as no following appropriate procedure for arriving at assessable value. However, we do agree with order of the Commissioner(Appeals) in denying benefit of the Notification No. 149/95 as the importer admitted that they are not an Actual User. - Decided against Revenue.

Summary

Issues:
1. Violation of principles of natural justice in market inquiry.
2. Allegation of misdeclaration of value in Bills of Entry.
3. Applicability of Customs Valuation Rules.
4. Denial of benefit under Notification No. 149/95.

Analysis:

Violation of Principles of Natural Justice in Market Inquiry:
The case involved the import of spectacle parts, where the Revenue alleged that the brand of the spectacle was not declared intentionally. The Revenue conducted a market inquiry and determined the assessable value based on the retail price of the spectacles. However, the Tribunal found that principles of natural justice were violated as the Department failed to provide essential details to the importer during the inquiry process, such as the source of market inquiry, brand names, and supporting evidence for calculating the assessable value. The Tribunal highlighted discrepancies in the market inquiry process, questioning its reliability and the lack of evidence to support the profit margins used in the valuation.

Allegation of Misdeclaration of Value in Bills of Entry:
Apart from the brand declaration issue, the Revenue also alleged misdeclaration of value in the Bills of Entry. The adjudicating authority imposed duty based on an enhanced value derived from the market inquiry. However, the Tribunal noted that the Department failed to justify why the transaction value could not be accepted under the Customs Valuation Rules, especially when complete descriptions were provided in the invoices. The Tribunal criticized the lack of consideration for Rules 4, 5, and 6, which could have provided guidance on valuing the goods accurately based on contemporaneous imports and similar goods available in the market.

Applicability of Customs Valuation Rules:
The Tribunal pointed out that the Revenue's case did not align with the Customs Valuation Rules, as they failed to explain why the transaction value was disregarded and why alternative rules were not applied effectively. The Tribunal emphasized the importance of following appropriate procedures and conducting thorough assessments when determining the assessable value of imported goods, especially in cases involving complex assemblies like spectacle frames.

Denial of Benefit under Notification No. 149/95:
While the Tribunal dismissed the appeal on various grounds, it agreed with the Commissioner (Appeals) in denying the benefit under Notification No. 149/95 to the importer, as they admitted not being an Actual User. This decision was based on the importer's own admission and was upheld by the Tribunal despite other aspects of the case being found unsustainable.

In conclusion, the Tribunal dismissed the appeal due to the failure to observe principles of natural justice, inadequacies in the market inquiry process, non-compliance with Customs Valuation Rules, and the rightful denial of benefits under Notification No. 149/95. The judgment highlighted the importance of transparency, evidence-based decision-making, and adherence to legal procedures in customs valuation matters.