2018 (9) TMI 326 - AT - Customs

Misdeclaration of imported goods - ineligible concessional rate of duty - Import of 'secondary/defective cold rolled grain oriented steel sheet coils' as 'prime cold rolled grain oriented steel sheet coils' - demand of differential duty. Held that - It is apparent from the history of imports made by the appellant, and from the contents of the standing instruction, that there is a substantial variation in the prices of prime and secondary/defective coils. Transformers are undeniably critical to the power transmission and distribution sector and the laminates manufactured from the coiled steel sheets are at the core of the transformer; its physical and chemical properties are crucial to its efficiency and therefore, to its price. Visual examination and photographic display will not suffice as acceptable substitutes. For a legally valid assessment of duty, there can be no escapement from a downward revision in the assessable value of the imported goods. That is the inevitable consequence of misdeclaration and consequent rejection of declared value. Revenue cannot have its cake and eat it too. If the goods are secondary, the constitutional provision mandating the collection of tax chartered by law, cannot be ignored to maximise revenue. To do so is illegal. To affirm so is to abet disregard of the rule of law. The adjudication order is tainted by this lack of validity. The facts are not established and the machinery provisions of law cannot subordinate the charging provisions of the statute. There is no material evidence to sustain the allegation of misdescription and statements, in the absence of facts and circumstances, fail the test of law - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Challenge to order-in-original regarding differential duty on imported consignments
2. Alleged misdeclaration of imported goods as prime instead of secondary/defective
3. Reliance on statements recorded during investigations
4. Appropriateness of confiscation of goods
5. Classification of imported goods under Customs Tariff Act
6. Lack of expert analysis and test report
7. Price variation between prime and secondary goods
8. Assessment of duty based on value
9. Alleged misdeclaration without financial gain
10. Lack of material evidence to support misdeclaration

Analysis:

1. The dispute centered around the challenge to the order-in-original regarding the recovery of differential duty on two imported consignments. The appellant was alleged to have misdeclared 'secondary/defective' cold rolled grain oriented steel sheet coils as 'prime,' leading to the imposition of additional duty and other detriments under the Customs Act, 1962.

2. The differential duty arose from the finding that the appellant attempted to pass off the imported coils as prime to avail of a concessional import duty rate. The appellant, a manufacturer of electrical transformers, argued that the character of the goods should be determined by their chemical composition and electrical properties, emphasizing the substantial price difference between prime and secondary goods.

3. The Authorized Representative relied on statements recorded during investigations to support upholding the impugned order, citing legal precedents that deemed admissions by the importer as sufficient proof. The appellant contested these statements, highlighting the lack of expert analysis and testing to validate the classification of the imported goods.

4. The Tribunal noted that the adjudicating authority failed to address the distinction between prime and secondary goods based on common trade parlance or expert analysis. The standing order emphasized the need for expert analysis to determine the classification accurately, which was not adequately considered in the adjudication process.

5. The judgment highlighted the critical role of expert analysis in distinguishing between prime and secondary goods, especially concerning the efficiency and price of electrical transformers. It emphasized the inadequacy of visual examination and the necessity of factual evidence to support any allegations of misdeclaration.

6. The Tribunal concluded that the impugned order was not sustainable in law due to the lack of material evidence supporting the alleged misdeclaration. The judgment set aside the order and allowed the appeals, emphasizing the importance of valid assessments based on factual evidence rather than presumptions or incomplete investigations.