2016 (3) TMI 797 - AT - Customs

Undervaluation of goods - Appellants eschewed cross examination of persons - Demand of Customs duty and imposition of penalty - Held that - it is not in doubt that as statements of various persons whose cross examination was sought by the appellants were relied upon by the Adjudicating Authority against the appellants not permitting their cross examination obviously caused prejudice to the appellants. The minimum consequence of denial of cross examination in these circumstances is that the statement of the persons whose cross examination was sought but was denied have to be ignored which render the impugned order unsustainable. Furthermore, there is an evidence of exchange of emails for negotiating the price of the impugned goods which were supplied on as is where is basis without any warranty. The goods were examined, assessed and cleared by Customs and were no longer available for re-examination. It is trite to say that if the impugned goods were not of prime quality, their value cannot be compared with the value of goods of prime quality. For valuation of non prime quality goods supplied on as is where is basis without warranty, their physical examination is necessary to ascertain their value and there is nothing on record to establish that the impugned goods cleared were of prime quality. Therefore, there is no undervaluation of goods and the impugned order do not sustain. - Decided in favour of appellant

Summary

Issues:
Under-valuation of imported video cassettes, violation of principles of natural justice, comparison of prices with prime grade video cassettes, denial of cross-examination, reliance on statements of various persons, sustainability of impugned order.

Analysis:

1. Violation of Principles of Natural Justice:
The appellants contended that the order in original was issued in violation of the principles of natural justice as they were denied the right to cross-examine various persons whose statements were relied upon. The CESTAT found that the denial of cross-examination caused prejudice to the appellants, as per the case of Dharampal Satyapal Vs. CCE. The primary adjudicating authority based the finding of under-valuation on these statements, and once it was held that these statements had to be ignored, the impugned order became unsustainable.

2. Comparison of Prices and Quality:
The appellants argued that the impugned professional video cassettes were recycled and not of prime quality, hence their prices could not be compared with prime grade cassettes. They also imported Maxell and Fuzi make cassettes, but these were taken to be of Sony Gulf FZE make for valuation purposes. The CESTAT emphasized that for the valuation of non-prime quality goods supplied on an "as is where is" basis without warranty, physical examination is necessary to ascertain their value. Since there was no evidence to establish that the cleared goods were of prime quality, the charge of under-valuation could not be sustained.

3. Reliance on Statements and Denial of Cross-Examination:
The impugned order was based on the statements of various persons, and the appellants sought to cross-examine them. However, the adjudicating authority falsely recorded that cross-examination was eschewed during the personal hearing. The CESTAT found that the denial of cross-examination caused prejudice to the appellants and that the statements of such persons had to be ignored, rendering the impugned order unsustainable.

4. Sustainability of Impugned Order:
After detailed analysis, the CESTAT found that the impugned order was not sustainable due to the denial of cross-examination, lack of evidence regarding the quality and valuation of the goods, and the reliance on statements that were not subject to cross-examination. Therefore, the appeals were allowed, and the impugned order was set aside.

This comprehensive analysis of the issues involved in the legal judgment highlights the key arguments presented by the parties, the findings of the CESTAT, and the reasons for allowing the appeals and setting aside the impugned order.