2019 (12) TMI 949 - AT - Customs

Valuation of imported goods - sale and distribution of contactless access control chords and readers - related party transaction - rejection of transaction value - scope of remand - HELD THAT - OIA is very reasoned, logical and maintainable; we find that no cogent reasons have been brought out in the OIO for rejection of declared value; even when it was rejected, the Rules were not sequentially followed; even then, while following the deductive method, due allowances were not given and correct data was not compared. The OIO proceeds on a curious admixture of Rule 5 and Rule 7 which is nowhere provided for. While invoking Rule 5, no values of contemporaneous imports were taken for comparison; arbitrarily 30% has been loaded without any authority of law under Rule 5 and clearly the OIO transgressed the scope of remand. The Review Order passed by the Committee of Chief Commissioners states that the impugned order has given the reason for not accepting the invoice value as per Rule 4(3)(a) of Customs Valuation Rules, 1988 and proceeds to say that as the value cannot be determined as per Rule 5, Rule 6 recourse was taken to Rule 7. This ground of appeal is contrary to the facts stated therein OIO. The OIO has not at all discussed the non-applicability of Rule 5, Rule 6 in a sequential manner and the applicability of Rule 7 - thus, the premise on which the appeal is made is factually incorrect and for the reason stated, no cause has been made by the appellants necessitating to interfere with the impugned order. Appeal dismissed - decided against Revenue.

Issues:
1. Valuation of imported goods under Customs Valuation Rules, 1988.
2. Rejection of declared assessable value and loading of 30% under Rule 5.
3. Compliance with Customs Valuation Rules and procedural fairness.
4. Comparison of prices and expenses for valuation purposes.
5. Sequential application of valuation rules and grounds for appeal.

Analysis:

Issue 1: Valuation of imported goods under Customs Valuation Rules, 1988
The case involves the valuation of imported goods by M/s. HID India Pvt. Ltd. from a related supplier, HID Asia Pacific, leading to Special Valuation Bench (SVB) proceedings. The initial Order-in-Original (OIO) 5756/2007 found no need to interfere with the transaction value. However, subsequent appeals and orders raised concerns regarding the valuation under Rule 5 of Customs Valuation Rules, 1988.

Issue 2: Rejection of declared assessable value and loading of 30% under Rule 5
The Assistant Commissioner, in the de novo Order-in-Original No.783/2015, rejected the transaction value declared by the respondent and imposed a 30% loading under Rule 5. The Commissioner (Appeals) later held that this loading was baseless and not in accordance with the rules, leading to the department's appeal against this decision.

Issue 3: Compliance with Customs Valuation Rules and procedural fairness
The appellate tribunal analyzed the procedural aspects and compliance with Customs Valuation Rules. The Commissioner (A) found that the OIO did not provide valid reasons for rejecting the declared assessable value and failed to follow the sequential procedures as required by the rules. The tribunal noted that the OIO transgressed the scope of remand and combined Rule 5 and Rule 7 in an unauthorized manner.

Issue 4: Comparison of prices and expenses for valuation purposes
The tribunal emphasized the importance of comparing import prices with third-party buyers in India as per the Customs Valuation Rules. It highlighted that the OIO did not consider the period of import or ascertain details of expenses incurred by the respondents, such as transportation and storage costs. The deductive method used did not specify limits for profit and general expenditure, leading to an improper valuation.

Issue 5: Sequential application of valuation rules and grounds for appeal
The tribunal found that the grounds for appeal, including the non-applicability of certain rules and the loading of 30%, were factually incorrect. The OIO did not discuss the sequential application of rules and did not provide a valid basis for rejecting the declared value. As a result, the tribunal rejected the revenue appeal and disposed of the cross objections, concluding that the appeal lacked merit and should be rejected.

In conclusion, the judgment focused on the proper application of Customs Valuation Rules, procedural fairness, and the need for a valid basis for rejecting declared values and imposing additional charges. The tribunal emphasized the importance of following the rules sequentially and comparing prices appropriately for accurate valuation of imported goods.

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