2019 (2) TMI 1508 - AT - Customs

Valuation of imported goods - silver polyester metal yarn - polyester metallic yarn (kasab) - undervaluation - rejection of declared value - enhancement of declared value - Held that - From the records, it would appear that the rejection of the values declared in the bills of entry, and the consequent confirmation of differential duty emanating from re-determination of value, is based entirely on the admissions in the statements of Shri Rajesh Gandhi recorded during the course of investigations. The show cause notice proposes to discard the declared value as a prelude to re-ascertainment of assessable value for determination of the correctness of duty assessed at the time of clearance of the goods. In the scheme of assessment to duties of customs that are leviable on ad valorem, the provisions of section 14 of Customs Act, 1962 are activated. Value of goods, whether viewed from the perspective of commercial practice or economic theory, is not amenable to scientific formulation and further complicated by transactions occurring across boundaries of legal jurisdictions with differing policy practices - In the scheme of valuation, it is trite that the transaction value, evident from invoices, of the goods that are imported is to be the assessable value. Not unnaturally, there are presumptions for such acknowledgement which are embodied as combinatorial expressions in section 14 (1) of Customs Act, 1962. Any transaction that lacks any one or more of the qualifications prescribed therein should, necessarily, be externed from its ambit with recourse to section 14 (2) of Customs Act, 1962 and, thereby, within the coverage of Rules framed thereunder. It is clear from the records that the appellants had not been able to produce any evidence that would counter the grounds for discarding the declared value. To that extent, the declared values can be found to be unacceptable. However, the consequences of such discrediting is not an arbitrary determination of value. The provisions of Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 require that sequential application to be apparent in such proceedings - Insofar as the valuation of goods, based on applicability of rule 6 of the said Rules is concerned, it is seen that the bills of entry pertaining to those imports had not been made available to the appellants. Neither are the details of those bills available on record. It is, therefore, impossible to ascertain if these were similar goods within the definition in the said Rules. The rigour articulated in re Eicher Motors Ltd is not in evidence in the impugned order. Consequently, the re-determination of value fails the test of law. Confiscation - penalties - Held that - With the lack of approbation for enhancement of value, there is no offence that renders the goods liable to confiscation under section 111 of Customs Act, 1962. In the absence of justification for invoking the provisions for confiscation of goods, penalties under section 112 of Customs Act, 1962 fails in relation to the importer-appellants and the partner of such important entity. Appeal allowed.

Issues Involved:
1. Undervaluation of imported goods.
2. Legality of invoking proviso to section 28 of Customs Act, 1962.
3. Rejection of declared value based on statements.
4. Sequential application of Customs Valuation Rules.
5. Confiscation and imposition of penalties.

Issue-wise Detailed Analysis:

1. Undervaluation of Imported Goods:
The appellants, M/s Modern Embroideries and M/s Nageshwar Enterprises, were accused of undervaluing imported 'silver polyester metal yarn' and 'polyester metallic yarn' to evade customs duty. The goods were revalued significantly higher than declared, leading to differential duty and penalties. The Directorate of Revenue Intelligence (DRI) alleged that the suppliers were persuaded to provide documents showing lower prices than the market value to support the undervaluation. Evidence included emails, facsimile messages, and internal computer data, suggesting a conspiracy to misdeclare the value.

2. Legality of Invoking Proviso to Section 28 of Customs Act, 1962:
The appellants argued that without challenging the initial assessment under section 17, issuing a show cause notice for recovery under section 28 was contrary to law. However, the Tribunal cited judicial precedents, including the Supreme Court's decision in Union of India v. Jain Shudh Vanaspati Ltd, affirming that show cause notices under section 28 can be issued post-clearance of goods. The Tribunal found no lack of jurisdiction in the adjudicating authority to issue the notice.

3. Rejection of Declared Value Based on Statements:
The rejection of declared values was primarily based on the confessional statements of Shri Rajesh Gandhi, a partner in the importing firms. The Tribunal noted that the Supreme Court in Surjeet Singh Chhabra v. Union of India held that confessions, even if retracted, are binding. However, the Tribunal emphasized that the statements should be corroborative rather than the sole basis for proceedings. In this case, the Tribunal found that the statements lacked corroborative support and were insufficient to validate the show cause notice.

4. Sequential Application of Customs Valuation Rules:
The Tribunal examined whether the Customs Valuation (Determination of Value of Imported Goods) Rules, 1988 were applied sequentially. The impugned orders relied on rule 6 (similar goods) and rule 8 (residuary provision) without proper sequential application. The Tribunal noted the lack of evidence to support the declared values and the improper invocation of rule 8 based on discredited statements. The Tribunal emphasized the necessity of strict compliance with the rules, as mandated by the Supreme Court in Eicher Motors Ltd v. Commissioner of Customs, Mumbai.

5. Confiscation and Imposition of Penalties:
With the rejection of the enhanced value, the Tribunal found no basis for confiscation under section 111 of the Customs Act, 1962. Consequently, the penalties imposed under section 112 on the importer-appellants and the partner were also set aside. The Tribunal highlighted that without a valid re-determination of value, there was no offence justifying confiscation or penalties.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals. The findings emphasized the lack of corroborative evidence for the statements, improper application of valuation rules, and the necessity of adhering to judicial precedents and legislative intent in customs valuation and assessment proceedings.

(Pronounced in Court on 25/02/2019)

← Previous Next →