2018 (7) TMI 453 - AT - Customs

Imposition of penalties - undervaluation of imported goods - enhancement of value not based on contemporaneous imports - no evidence for enhancement of value - Held that - It is well settled law that such transaction value has to be first rejected as incorrect value before the Revenue proceeds to enhance the value of the imported goods in the light of the valuation rules, which have to be followed sequentially. The said rejection of the transaction value has to be on the basis of sufficient, positive & tangible evidences - In the present case, no efforts on the part of the Revenue to first reject the transaction value and then proceed to enhance the value by referring to any contemporaneous imports. There is virtually no evidence for establishing the value of the goods on the lower side so as to enhance their value - there is no justification for enhancement, which has led the revenue to impose penalties upon the appellants - penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Enhancement of value of imported goods, imposition of penalties, ownership of goods, undervaluation, challenge to penalties based on valuation.

Enhancement of Value of Imported Goods and Imposition of Penalties:
The judgment pertains to appeals arising from an impugned order passed by the Commissioner, where the value of goods imported by M/s Bhawani Enterprises was enhanced along with penalties imposed on them and other appellants. The Commissioner accepted M/s Bhawani Enterprises and its proprietor as the owner of the goods, enhancing the value from declared ?7.20 lakhs to ?71 lakhs. Duty was imposed on the enhanced value, with an option to redeem the confiscated goods on payment of a fine. Penalties were also imposed on various individuals and entities associated with the import. The appellants argued that the enhanced value made it impossible for them to redeem the goods, which were perishable and had deteriorated while in Revenue custody, leading them to challenge only the penalties imposed.

Ownership of Goods and Undervaluation:
The appellants had imported 'PVC Adhesive Sheeting with Paper liner' for making stickers/labels. Investigations were initiated regarding undervaluation and ownership of the goods. The Commissioner accepted M/s Bhawani Enterprises and its proprietor as the owners, despite initial doubts. The appellants argued that the goods were stock lot second quality, supported by the foreign supplier's invoice. They contended that the comparison made by Revenue with Indian market values and contemporaneous imports was flawed, as the goods were of different grades and qualities. The Tribunal agreed that the goods were not contemporaneous based on grade differences. Additionally, the Tribunal noted that the transaction value should have been rejected with tangible evidence before enhancing the value, citing legal precedents. Lack of evidence to establish lower value justified setting aside the penalties imposed on the appellants.

Conclusion:
The Tribunal allowed the appeals, setting aside the penalties imposed on the appellants. The judgment emphasized the importance of following valuation rules sequentially, rejecting transaction value with tangible evidence before enhancing the value of imported goods. The lack of evidence to establish lower value justified overturning the penalties based on undervaluation allegations.