2008 (2) TMI 374 - HC - Customs

Imported Mild Steel flat bars mis-declared as MS Scrap metal - Even though the tribunal held that there was mis-declaration, they still cancelled the demand of duty on the higher value on ground that there is violation of Rule 4(2) of CVR, 1988 - Held that when there is mis-declaration, the transaction value declared automatically goes revenue has right to challenge the valuation once there is mis-declaration - Tribunal not right in holding that department is not entitled to reject T.V.

Summary

Issues:
1. Valuation of imported goods declared as scrap.
2. Confiscation and penalty imposition by customs authorities.
3. Tribunal's decision regarding valuation and penalty cancellation.

Issue 1: Valuation of imported goods declared as scrap
The case involved an appeal by the Commissioner of Customs against the Customs, Excise and Service Tax Appellate Tribunal's order allowing the respondent's appeal. The respondent had imported mild steel flat bars but declared them as MS scrap. Customs authorities examined the goods and found them to be flat bars, not scrap as claimed. The authorities rejected the declared value and demanded duty based on a higher value. The Tribunal, while acknowledging mis-declaration, canceled the duty demand and penalty citing a violation of Customs Valuation Rules. The High Court held that mis-declaration allowed the department to question the valuation, especially when the goods were marketable as steel flat bars. The Tribunal erred in interfering with the Commissioner's order, and the High Court reversed the decision, upholding duty demand based on the actual nature of the imported goods.

Issue 2: Confiscation and penalty imposition by customs authorities
Customs authorities had ordered confiscation of the goods and imposed a penalty on the respondent for mis-declaration. The Tribunal upheld confiscation but canceled the penalty, considering a rule violation in valuation. The High Court upheld the confiscation due to mis-declaration but reduced the redemption fine, considering the facts and the nature of the goods. The Court found the redemption fine mandatory due to the confiscation under the Customs Act but reduced it based on the circumstances of the case.

Issue 3: Tribunal's decision regarding valuation and penalty cancellation
The Tribunal canceled the duty demand and penalty, citing a rule violation in valuation. However, the High Court disagreed, emphasizing that mis-declaration allowed the department to question the declared value. The Court found the goods were not scrap as claimed but marketable steel flat bars, justifying the duty demand based on the actual nature of the imported goods. While upholding the cancellation of the penalty due to similar duty rates and a minor difference in value, the Court reversed the Tribunal's decision on valuation and duty demand, allowing the appeal to that extent.