2018 (2) TMI 28 - AT - Customs

Valuation - freight - includibility - Held that - There is broad agreement on the aspect of quantum of freight cost that will require to be added. It is a fact that as per the Customs Valuation Rules as in force during the material period, even when the cost of transportation of imported goods was ascertainable, for the purpose of adding freight element to form part of the assessable value only 20% of the FOB value would be adopted in respect of goods imported by air - for the limited purpose of re-determining the revised differential duty liability after limiting the freight cost to 20% of the FOB value, the matter is being remanded to the original authority. Redemption fine - Held that - there has been misdeclaration on the part of the importer. It is also noted that in the very same month for similar items, the same omission had occurred. Viewed in this light, we cannot but take the protestations of the appellant into a pinch of salt - taking into account that differential duty liability would be calculated only on 20% of the FOB value, and also taking note of the fact that no research was done on the market value of the goods is evident from the record, it is held that a lower redemption fine of ₹ 1,00,000/- would serve the ends of justice in this case - So also reduction of penalty to ₹ 50,000/- ordered. Appeal allowed in part.

Summary

Issues: Customs valuation rules interpretation, differential duty liability calculation, redemption fine imposition, penalty justification

The judgment by the Appellate Tribunal CESTAT Chennai involved a dispute regarding the customs valuation rules and the consequential differential duty liability calculation. The appellant had imported goods, and discrepancies were found in the declared value and the actual freight cost. The Department contended for a higher assessable value, leading to a significant differential duty liability and subsequent confiscation of goods under the Customs Act, 1962. The Commissioner upheld the revised assessable value but allowed redemption on payment of a fine and imposed a penalty, prompting the appeal.

During the hearing, the appellant's advocate argued that the freight cost should be restricted to 20% of the FOB value as per Rule 10(2) of Customs Valuation Rules, 2007. The advocate emphasized that there was no intent to evade customs duty, as the discrepancy arose due to the supplier's declaration of terms as "CFR-Chennai" in the invoice. Therefore, the appellant sought a reduction in the differential duty liability and challenged the penalty imposition.

On the other hand, the respondent's representative acknowledged the limitation on adding transportation costs to 20% of the FOB value but highlighted a previous instance where the appellant had not declared freight costs. This omission was considered intentional, justifying the redemption fine and penalty imposed according to the Valuation Rules.

After considering both arguments, the Tribunal agreed on limiting the freight cost to 20% of the FOB value for calculating the revised differential duty liability. The matter was remanded to the original authority for re-determination based on this limitation. Regarding the redemption fine, the Tribunal acknowledged the misdeclaration by the importer but reduced the fine to Rs.1,00,000, considering the lower differential duty liability and lack of market value research. The penalty was also reduced to Rs.50,000. The appeal was partly allowed, with adjustments made in favor of the appellant as per law and a partial remand to the original authority for further proceedings.