2018 (12) TMI 173 - AT - Customs

Demand of differential duty - HR plates - confiscation of goods found in excess than the goods declared in the relevant Bills of Entry - appellant contended that, the steel plates in international trade are traded with reference to their length, width and thickness. The weight of such plates is never the basis or criteria for trading in such goods. The weight of such steel plates is never determined by actually weighing them on a weigh scale but is always computed with reference to a scientifically approved universal formula which is 7.85kg/dm3. Held that - The demand for the differential duty is not sustainable both on facts and as well as in law. It is not in dispute that the transaction value as determined in terms of Section 14 of the Act, is required to be taken as the basis for computing the assessable value on which the duty is to be assessed. It is nobody s case that the importer has paid anything over and above the declared value for the goods in question. It is also nobody s case that any of the exceptions provided for in proviso to Rule 3(2) of the Customs Valuation (Determination of Value of Imported goods) Rules, 2007 are attracted to the facts of the instant case, thereby warranting rejection of the transaction value. It is settled law laid down by the Hon ble Apex Court in the case of Eicher Tractors Ltd vs Commissioner of Customs 2000 (11) TMI 139 - SUPREME COURT OF INDIA that it is only when the transaction value is liable to be rejected, based on the exceptions provided for in Rule 3(ii) of the erstwhile Customs Valuation Rules, 1988, could the assessable value be determined in terms of the valuation provisions - The ratio laid down in the aforesaid judgement applies in all fours even under the amended Section 14 and the Customs Valuation Rules, 2007. In the instant case, the adjudicating authority has not come to a conclusion that the transaction value as adjusted in accordance with the provisions of Rule 10, was incorrect or mis-declared and was required to be rejected and the assessable value re-computed under the valuation rules. The adjudicating authority has in a completely ad-hoc and arbitrary manner, without any reference to any provisions of the law and as also without following the provisions of the Valuation Rules, which lay down a codified manner of re-computing the value, arrived at an assessable value which has no legal basis or sanctity. It appears from the Public Notice No.17/2010 dated 29.6.2010 and Public Notice No.10 dated 17.6.2013, that the weight variation upto 1% is to be accepted and ignored irrespective of the nature and type of the commodity - this proposition cannot be accepted - there cannot be a thumb rule in such cases. The extent of permissible variation between the declared and actual weight has to be with reference to the type of commodity qua which the said difference is being evaluated. Undisputedly, when steel plates are globally traded based on their theoretical weight as has been contended by the appellant, which also appears to be the position as is evident from the Indian Standard specification as also the Japanese Standard specification, the weight tolerance envisaged in the trade notice referred to by the Respondent in the impugned order qua such steel plates has to be taken at 5% / -2.5% and not at 1% as has been adopted by the Respondent - it is not in dispute that the difference between the theoretical weight that has been declared on the bill of entry vis-a-vis the weight that has been physically computed worked out to 3.57% and is well within the 5% tolerance provided for, in the Indian Standard specifications. Also, the manner of computing the physical weight was not the most scientific one inasmuch as the physical weight was arrived at by first arriving at the tare weight of the truck trailer and thereafter arriving at the weight of the truck trailer with the steel plates loaded on it. Further, the allegation of suppression arrived at by the Respondent, on the premise that the difference between the declared and the actual weight being more than 1% would not have come to the notice had physical weighment had not been done, is completely untenable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand for differential customs duty on alleged undeclared excess weight of HR Steel Plates.
2. Confiscation of the alleged undeclared excess quantity of HR Steel Plates under Section 111(d),(j),(l),(m),(n),(o) of the Customs Act.
3. Penalties imposed on the importer.

Detailed Analysis:

1. Demand for Differential Customs Duty:
The primary issue was whether the department was justified in demanding differential customs duty by re-computing the assessable value for the alleged undeclared excess weight of 2605.480 metric tonnes of HR Plates. The adjudicating authority did not reject the transaction value as per Section 14 of the Customs Act and the Customs Valuation Rules, 2007. The transaction value, which is the price actually paid or payable for the goods, was not disputed, and no exceptions provided in Rule 3(2) were applicable. The adjudicating authority's method of enhancing the assessable value was arbitrary and not supported by the Customs Valuation Rules. The tribunal found that the theoretical weight declared by the importer, based on the formula 7.85kg/dm3, was within the permissible tolerance limits of +5%/-2.5% as per Indian Standard specifications. The variation in weight was 3.57%, which is within the acceptable range. Therefore, the demand for differential duty was not sustainable.

2. Confiscation of Excess Quantity:
The tribunal examined whether the alleged undeclared excess quantity of HR Plates was liable for confiscation under various sections of the Customs Act. The adjudicating authority had relied on Public Notices that allowed for a 1% deviation in weight. However, the tribunal found that applying a 1% deviation uniformly for all commodities was unreasonable. For HR Steel Plates, which are traded based on theoretical weight and have specific tolerance limits in Indian Standards, a deviation of up to +5%/-2.5% is acceptable. Since the actual weight difference was within this range, the tribunal concluded that there was no basis for confiscation.

3. Penalties Imposed:
The tribunal also considered the penalties imposed on the importer. The adjudicating authority had imposed penalties under Sections 114(A) and 114(AA) of the Customs Act. However, since the tribunal found that the weight variation was within permissible limits and there was no mis-declaration or suppression of facts, the basis for imposing penalties was invalid. The tribunal noted that the importer had declared the weight based on theoretical calculations, which is a standard practice in international trade for steel plates. The adjudicating authority's reliance on physical weighment, which was not scientifically conducted, was flawed.

Conclusion:
The tribunal set aside the impugned order, finding that the demand for differential duty, confiscation of goods, and imposition of penalties were not justified. The appeal was allowed with consequential reliefs in accordance with the law. The decision emphasized the importance of adhering to established standards and practices in international trade and customs valuation.