2019 (3) TMI 1447 - AT - Customs

Under Valuation of imported goods - Mis-declaration of imported goods - import of of Cubic Zirconia (cut and polished) - the appellant is engaged in importation of Cubic Zirconia (cut and polished) by mis-declaring the quality by declaring the superior quality as inferior quality before the assessment by the Customs at Air Cargo Complex, Jaipur - retraction of statements - Held that - It is on record that the proprietor of the appellant has accepted the mis-declaration in their various statements and also paid a substantial portion of demand prior to adjudication by the lower adjudicating authority. Although the various case law has been submitted by the ld. Advocate on the issue of undervaluation and reopening of the assessed Bill of Entry on which duty has been finally paid and goods have been cleared from the Customs area - the record has been obtained from the computer of the appellant company and the same was never disputed by their proprietor. The various statements which were tendered under Section 108 of Customs Act were never ever retracted. In the case at hand duty has been demanded under Rule 4(1) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 as indicates that Department is adopting two different methodologies of valuation in the same proceedings emanating from same search and demand for the previous period - in relation to same proceedings, two different methods have been adopted and if in the decision cited supra in relation to seized goods, residual method has been adopted and upheld, then the same cannot have any precedent value for the proceedings in this case as Valuation Method on the basis of which Department proceeds in the instant impugned Show Cause Notice is different being based on Rule 4 of identical goods. Since branding, grading on the basis of quality and packing are processes which are carried out in India, even as per the Show Cause Notice, therefore, the goods as were cleared by the Customs after proper assessment in normal packing cannot be termed to be the same as were being sold by them or imported by them in vacuum packing, after branding and grading. We accordingly held that in the absence of corroboration and cogent evidence, the Department s case is based upon assumption and presumption, that the goods in normal packing were having the same value as the branded and vacuumed packed goods, which in any case cannot be a pragmatic value in commercial world. It is not uncommon to do labour and processing on various imported goods in India as the same compare to India is normally expensive in overseas market. We setting aside of the sustained portion of the demand also. On the same basis, as Ld. Commissioner (Appeals) has held for portion of demand pertaining to earlier period in the impugned Show Cause Notice. - decided in favor of appellant.

Issues Involved:
1. Mis-declaration of quality and undervaluation of imported goods.
2. Reliability of statements recorded under Section 108 of the Customs Act.
3. Application of different valuation methodologies.
4. Validity of the Customs Department's valuation report.
5. Basis of valuation and assessment of imported goods.

Issue-wise Detailed Analysis:

1. Mis-declaration of Quality and Undervaluation of Imported Goods:
The appellant was engaged in the importation of Cubic Zirconia (cut and polished) and packing materials, which were mis-declared in terms of quality. The Customs department, acting on intelligence, conducted an investigation and found that the appellant had imported semi-precious stones and packing materials under various brand names. The investigation revealed that the appellant had another firm, M/s Suhani Gems, engaged in similar activities. During the search, it was discovered that the goods and documents were intermingled, leading to the seizure of the Hard Disk Drive of the server. Statements recorded under Section 108 of the Customs Act indicated that the appellant accepted the undervaluation of the imported Cubic Zirconia and deposited ?5 lakhs towards the anticipated Customs duty liability.

2. Reliability of Statements Recorded Under Section 108 of the Customs Act:
The appellant contested the reliability of the statements recorded under Section 108, arguing that they were obtained under duress and were not voluntarily tendered. The appellant's advocate argued that the statements were distorted by the Customs authorities to prove their point of mis-declaration. However, the Tribunal noted that the statements were never retracted by the appellant and were consistent with the records obtained from the appellant's computer.

3. Application of Different Valuation Methodologies:
The Tribunal observed that the Customs Department applied different valuation methodologies for the same proceedings emanating from the same search and demand. For M/s Suhani Gems, the residual method under Rule 9(1) of the Customs Valuation Rules was applied, while for the appellant, the transaction value of identical goods under Rule 4 was used. The Tribunal found this inconsistent and noted that the same methodology should have been applied for both firms.

4. Validity of the Customs Department's Valuation Report:
The Customs Department obtained a valuation report from an independent valuer, which was contested by the appellant. The appellant argued that the valuation report was not supplied to them and that the valuation was based on assumptions and presumptions. The Tribunal agreed with the appellant, noting that the valuation report pertained to different sizes of Cubic Zirconia and was not applicable to the appellant's case.

5. Basis of Valuation and Assessment of Imported Goods:
The Tribunal emphasized that the goods should be assessed in the form presented at the time of assessment. The appellant argued that the goods in normal packing were not the same as those in vacuum packing, and the value could not be equated. The Tribunal agreed, noting that important processes adding value were carried out in India, and the goods in normal packing could not be equated with those in vacuum packing. The Tribunal also held that the statement of the Director alone could not form the basis of valuation without corroboration and cogent evidence.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential benefits. The Tribunal found that the Customs Department's case was based on assumptions and lacked corroborative evidence. The decision of the Tribunal in the case of M/s Suhani Gems was held to be per incuriam. The Tribunal emphasized the need for consistent application of valuation methodologies and proper assessment based on the form of goods at the time of import.

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