2018 (10) TMI 412 - AT - Customs

Valuation of imported goods - Cold Rolled Steel Sheet - inclusion of C F value in assessable value - bifurcation of said value in two components i.e. Free on Board (F.O.B.) and Air Freight - proviso to 10 (2) Rule of Customs Valuation Rules - Department formed a view that since the goods have been imported by air, hence, the airfreight amount should have been 20% of FOB value even for those invoices where the C F value does not show any bifurcation, the proviso to Rule 10 (2) of Customs Valuation Rules, has been impressed upon while issuing the impugned show cause notice. Whether the appellant was to discharge the liability on the said C F amount only? Whether the freight irrespective mentioned separately or not, should be considered at the rate of 20% of FOB value while discharging the liability? Held that - Bare perusal of these provisions makes it clear that the value of imported goods shall be the transaction value of such goods i.e. the price which is actually paid or is payable at the time of import with any other amount as mentioned in the proviso to Section 14 above to be added to the said transaction value. Further perusal of Rule 10(2)(c) (i) it details such costs which have to be included while assessing the cost of transport. Rule 10(2) (c) (iii) makes it clear that such cost has also to include the insurance value of 1.125% of FOB value of the goods. It is an admitted case that the said value has been added by the appellant while computing the cost of transport of imported goods herein. For 36 invoices where there is a clear bifurcation about the amount of air freight involved and that the same has been paid by the supplier and has been included in the C F value paid by the appellant, the amount is absolutely ascertainable. In such case the amount has not to exceed 20% of FOB value. It is admitted case of Department that the freight is at the rate of 10% / 11.11 % i.e. much less than 20%. No question arises for enhancing this value to the extent of 20%, in view of the words shall not exceed 20% of freight on board value of goods . Invoices where there is no bifurcation for air freight but the C F amount - Held that - It is observed that the amount paid by the appellant while importing the goods is very much ascertainable. It is an admitted fact of the case that vide all these invoices (81 in No.) appellant have imported the same goods i.e. cold rolled steel sheets, that too, during the same period w.e.f. February 2012 to June 2012. The question of change in the FOB value of the goods does not at all arise. Otherwise also the onus was upon the Department to prove the change if any. There is no such evidence - in the case of invoices of un-bifurcated C F amount as well, the FOB value of the goods is very much ascertainable. No question arises for enhancing the airfreight to the extent of 20% thereof, for these invoices also. The appellants have been discharging their liability properly and completely in accordance of the mandate of law. It is Department who took a wrong opinion. No positive act of the appellants could be proved by the Department to establish the alleged intention to evade the duty. Otherwise also when there is no case of short levy, as alleged, no question of intention of evasion at all arises. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Mis-declaration of value of imported goods.
2. Calculation of freight charges.
3. Imposition of interest and penalties on the importing company and its Directors.

Issue-wise Detailed Analysis:

1. Mis-declaration of value of imported goods:
The appellant, M/s. Rajasthan Prime Steel Processing Centre Pvt. Ltd., imported Cold Rolled Steel Sheets and was accused of mis-declaring the value of these goods to evade customs duties. The Department observed that the appellant used two types of invoices: one showing a consolidated C&F value and another bifurcating the value into FOB and air freight. The Department alleged that the appellant only declared the C&F value in their Bill of Entries, omitting the separate FOB and air freight values as indicated by the supplier's invoices. This led to a show cause notice alleging mis-declaration with the intent to evade customs duties, resulting in a confirmed demand for the difference, along with interest and penalties on the company and its Directors.

2. Calculation of freight charges:
The main contention revolved around whether the appellant should discharge their liability based on the C&F amount alone or if the freight charges should be calculated at 20% of the FOB value as per Rule 10(2) of the Customs Valuation Rules. The appellant argued that the C&F value is the transaction value and that they had correctly included the insurance cost at the rate of 1.125% of the FOB value. They contended that the Department's calculation of freight charges at 20% of the FOB value was erroneous. The Department, however, maintained that the freight charge should be 20% of the FOB value where it was not ascertainable.

3. Imposition of interest and penalties:
The adjudicating authority initially confirmed the demand and imposed interest and penalties on both the importing company and its Directors. The appellant argued that they had discharged their liability correctly and that there was no evidence of any payment over and above the C&F amount. They asserted that the imposition of interest and penalties was unwarranted.

Judgment Analysis:

Mis-declaration of value:
The Tribunal noted that the appellant imported consignments of cold rolled steel sheets with 81 invoices, of which 36 bifurcated the C&F value into FOB and air freight, while 45 did not. The Department's view was that the air freight should be 20% of the FOB value for invoices without bifurcation. The Tribunal emphasized that the value of imported goods should be the transaction value, including any additional costs as per Section 14 of the Customs Act, 1962. The Tribunal found that the appellant had included the insurance cost correctly and that the Department's reliance on Rule 10(2) was misinterpreted.

Calculation of freight charges:
The Tribunal observed that for invoices with bifurcated values, the air freight was ascertainable and did not exceed 20% of the FOB value, as it was 10%/11.11%. For invoices without bifurcation, the Tribunal held that the C&F amount was ascertainable, and the FOB value did not change. Thus, there was no need to enhance the air freight to 20% of the FOB value. The Tribunal concluded that the Department had wrongly interpreted the statutory provisions and that the demand was unjustified.

Imposition of interest and penalties:
The Tribunal referred to the Supreme Court's decision in Union of India vs. Ashok Kumar, emphasizing that the burden of proving malafides lies on the Department. The Tribunal found no evidence of intentional evasion of duty by the appellant and held that the Department failed to prove any mis-declaration with intent to evade customs duty. Consequently, the imposition of interest and penalties was deemed incorrect.

Conclusion:
The Tribunal set aside the impugned order, holding that the appellant had discharged their liability correctly and that the Department's interpretation was flawed. The demand, interest, and penalties were annulled, and the appeals were allowed.