2016 (9) TMI 976 - AT - Customs

Demand of differential duty - imposition of penalty - Declaration of consignments - Pressed Distillate Oil - Base Oil - chemical examination of the consignments - no clear statement by chemical examiner. Only indication that the samples have the characteristics of Base Oil - denial of Cross Examination of the chemical examiner before the Adjudicating Authority - principles of natural justice - Held that - In the absence of conclusive evidence of mis-declarations, the Customs Authorities have gone with the declaration and finalized the assessments. Valuation of imported goods - rejection of Declared value - Rule 12 (1) of Customs Valuation Rules, 2007, read with Section 14(1) of Customs Act - Held that - The SPI classification for base oil divides it into five groups based on three parameters.(i) Sulpher %(ii) Saturates %(III) Viscosity Index. The chemical examiner has not indicated the first two characteristics, viz, sulphur % and saturates in his report. Reference has been made only to one of the three parameters mentioned in API. This limited approach to decide the mis-declaration is incorrect. At the most, the viscosity index may raise doubt in our minds that the imported goods may be base oil. However, to conclude that the imported goods were not PDO but base oil and allege mis-declaration on the part of the importer only on the basis of the chemical examiner s report on one out of three characteristics will not be correct - the mis-declaration in the imported goods have not been established. Consequently, there is no basis the disregard the declared value. No valid reason to reject the classification or valuation of imported goods - demand of duty and imposition of penalty failed - consignments to be released immediately - appeal allowed - decided in favor of appellant.

Summary

Issues: Mis-declaration of imported goods as 'Pressed Distillate Oil (PDO)' instead of 'Base Oil', Cross Examination of chemical examiner, Classification of imported goods, Valuation of imported goods

Mis-declaration of Imported Goods:
The appeal challenged the Commissioner's decision to enhance the transaction value of imported goods from ?57.38 Lakhs to ?2.11 Crores based on the belief that the declared 'Pressed Distillate Oil (PDO)' was actually 'Base Oil'. The appellant argued that the Revenue failed to conclusively prove that the goods were not PDO, as the chemical examiner's report only indicated characteristics of base oil, which could also be present in PDO due to their relationship. The appellant stressed the importance of the PDO declaration and the lack of definitive evidence to support mis-declaration.

Cross Examination of Chemical Examiner:
The appellant contended that the Commissioner's refusal to allow cross-examination of the chemical examiner rendered the report inadmissible. The appellant highlighted the importance of seeking categorical answers through cross-examination to clarify the nature of the imported goods and ensure a fair assessment.

Classification of Imported Goods:
The Commissioner relied on the chemical examiner reports and technical literature to classify the imported goods as base oil instead of PDO. The API classification system for base oil was referenced, emphasizing characteristics like viscosity index. However, the Tribunal found the reliance on limited characteristics for mis-declaration flawed, as other crucial parameters were not considered. The Tribunal emphasized the need for conclusive evidence before rejecting the declared classification.

Valuation of Imported Goods:
The Commissioner rejected the declared value under Customs Valuation Rules, 2007, based on the alleged mis-declaration. The re-determination of value was done using the price of contemporaneously imported base oil. The Tribunal disagreed with this approach, as the mis-declaration was not conclusively proven. Consequently, the declared value was upheld, leading to the dismissal of penal proceedings against the importer and other involved parties.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and directing the immediate release of the goods. The judgment underscored the importance of conclusive evidence in determining mis-declaration, the significance of cross-examination for clarity, and the adherence to proper valuation rules based on established facts.