2018 (5) TMI 2037 - AT - Customs

100% EOU - Valuation of imported goods - active identity token - enhancement of declared value - HELD THAT - The appellant is an export oriented unit and the proceedings were initiated as the invoices, issued by their overseas entity based in Milton Keynes, UK, were not reported by price-lists from the original manufacturer, M/s. Active Identity, France and subsequent correspondence dated 19th February, 2008 declared the cost at 13 for each card. It is seen from the records that the said goods had been imported for carrying out the project work and on which a rental was being charged by the parent-company. Therefore, notwithstanding the value at which the goods may have been procured by the parent-company, the importers, even with incorrect declaration of the rental value for assessment, would have been subjected to the appropriate rule under the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Nevertheless, this reassessment order not lead either to any differential duty that was to be recovered nor any other consequences that could lead to confiscation of the goods. The enhancing of value, even if it be for nominal purpose, need not have been accompanied by proceedings under Section 117 of Customs Act, 1962. Even if the goods were to be cleared into the domestic tariff area, the assessment should have to be carried out afresh and, therefore, did not merit confiscation under Section 111 of Customs Act, 1962 - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Reassessment of declared value of imported goods.
2. Confiscation of goods under Section 111(m) of Customs Act, 1962.
3. Impact of being a 100% export-oriented unit on duty liability.
4. Correctness of reassessment order and confiscation.

Analysis:

Issue 1: Reassessment of declared value of imported goods
The appeal challenged the Order-In-Original reassessing the value of imported 'active identity tokens' to significantly higher amounts. The appellant contended that being a 100% export-oriented unit, the revision in value did not impact duty payment or obligations under the Foreign Trade Policy. Citing precedent cases, the appellant argued against any mala fide intentions due to the absence of duty liability. The Tribunal noted that the reassessment did not lead to any differential duty recovery or confiscation consequences, especially since the goods were imported for project work and rental charges were being levied by the parent company. The Tribunal referred to a case where it was held that variations in valuation do not affect customs duty payment for 100% EOUs. Consequently, the Tribunal found that the reassessment order did not warrant any customs duty implications.

Issue 2: Confiscation of goods under Section 111(m) of Customs Act, 1962
The goods were initially held liable for confiscation under Section 111(m) of the Customs Act, 1962, but were allowed to be redeemed for re-export upon payment of a fine and penalty. However, the Tribunal determined that the nominal enhancement of value did not justify confiscation under Section 111. Even if the goods were to be cleared in the domestic tariff area, a fresh assessment would be required, rendering the confiscation unwarranted. Consequently, the Tribunal set aside the impugned order and allowed the appeal, ruling against the confiscation of goods under Section 111.

Issue 3: Impact of being a 100% export-oriented unit on duty liability
The appellant's status as a 100% export-oriented unit was crucial in determining the duty liability in light of the reassessed value of the imported goods. The Tribunal emphasized that even with incorrect declaration of rental value, the importers, as a 100% EOU, were not subject to customs duty payment. The Tribunal referenced a case where it was held that being a 100% EOU insulates from customs duty implications, regardless of valuation discrepancies. This status played a significant role in the Tribunal's decision to dismiss the appeal on the grounds of no customs duty demand due to the appellant's EOU status.

Issue 4: Correctness of reassessment order and confiscation
The Tribunal scrutinized the correctness of the reassessment order and the subsequent decision to allow redemption of goods upon payment of a fine and penalty. It was established that the reassessment, even if for nominal purposes, did not necessitate confiscation proceedings under Section 111 of the Customs Act, 1962. The Tribunal concluded that the reassessment order should not have triggered confiscation, especially considering the appellant's status as a 100% export-oriented unit. Consequently, the Tribunal set aside the impugned order and allowed the appeal, highlighting the lack of customs duty implications and the inappropriateness of confiscation under the circumstances.