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2020 (9) TMI 479 - AT - CustomsValuation of import goods - marble blocks and slabs - undervaluation - allegation is that the appellant had presented undervalued invoices to the Customs for assessment of goods and that the amounts indicated in the undervalued invoices were remitted through banking channels and that portion of the value which was excluded from the invoices, was paid in cash or wire transfer - HELD THAT - The learned adjudicating authority in the impugned order at paragraph 12 has held that even though the show cause notice has referred to the recovery of documents during the search operation, but the subsequent investigation did not throw any light on such documents and the entire case was made out only on the basis of 12 Bills of Entry. Further, it has also been noted in para 15 thereof, that the Note-Verbale, which formed the bedrock of the present proceedings, indicated only commencement of criminal proceedings against the indenting agents and that the Deputy Director, DRI was unable to provide information regarding the finality of the proceedings against such persons on the ground that the investigation was under the competency of the Public Prosecutor s office of the Italian Republic at the Tribunal of Massa Carra. Furthermore, the learned adjudicating authority in para 16 thereof, has noted that in the present case, the modus operandi of undervaluation mentioned in the Note-Verbale was not followed (a) intelligence regarding generic descriptions being used without revealing the actual variety of marble, did not stand scrutiny; (b) intelligence regarding price being in the range of 230-240 euros per tonne also did not stand and (c) the investigation did not produce any evidence of financial flowback through nonbanking channels in low tax countries. The learned adjudicating authority in this case has accepted that the Note-Verbale only indicated commencement of criminal proceedings against the indenting agents in Italy and did not conclusively prove the guilt against such persons. In fact, as noted in the impugned order, even the Deputy Director of DRI had also expressed his inability to provide information regarding the final outcome of criminal proceedings against such persons. Since the investigations with regard to alleged fraud committed in exportation of goods in the originating country, has not attained finality, it cannot be hypothetically concluded that the appellant had indulged into the activities of undervaluing the goods - the present proceedings initiated against the appellant were premature and cannot be sustained. Further, in the statement recorded under summon, Shri K.M. Swamy, Director of the appellant had denied the fact regarding involvement of the intermediaries/indenting agents in purchases made by the appellants in respect of the disputed goods from the Italian suppliers. Furthermore, the investigations made by DRI did not produce any evidence of financial flow back through non-banking channels in low tax countries. Thus, under such circumstances, the charges of undervaluation cannot be leveled on the appellant. The learned adjudicating authority has rejected the declared value in respect of the subject Bills of Entry under Section 14(1) ibid read with Rule 12 ibid and re-determined the assessable value under Section 14(1) ibid read with Rule 3(1) ibid, holding that sufficient evidence exists to show that actual invoice values were hidden from the Indian Customs authorities and manipulated invoices were presented for assessment purposes. We find that in support of such contentions, no credible evidences were produced by the department. Further, the procedures laid down under Rule 12 ibid have not been succinctly followed for rejection of the declared value - In this case, it is an admitted fact on record that the mandates of Rule 12ibid read with Rules 4 to 9 ibid have not been complied with by the department. Thus, rejection of declared value is contrary to the statutory provisions and accordingly, redetermination of the alleged transaction value cannot stand for judicial scrutiny. There are no merits in the impugned order - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Allegation of undervaluation of imported marble blocks and slabs. 2. Admissibility and evidentiary value of the Note-Verbale from Italian authorities. 3. Voluntariness and implication of the appellant's pre-deposit of differential duty. 4. Compliance with procedures under Rule 12 of the Customs Valuation Rules, 2007. 5. Justification for re-determination of the transaction value and imposition of penalties. Issue-Wise Detailed Analysis: 1. Allegation of Undervaluation of Imported Marble Blocks and Slabs: The Customs Department alleged that the appellant presented undervalued invoices for assessment, resulting in a loss of revenue. The investigation relied on the statement of Mr. K.M. Swamy, Director of the appellant, and the Note-Verbale from the Italian Embassy. The Commissioner of Customs rejected the declared value and re-determined the value, confirming a duty demand of ?69,34,310/- along with interest and penalties under Sections 114A and 114AA of the Customs Act, 1962. 2. Admissibility and Evidentiary Value of the Note-Verbale from Italian Authorities: The Note-Verbale indicated criminal proceedings in Italy for money laundering and tax fraud involving under-invoicing of marble sales to Indian companies. The Tribunal found that the Note-Verbale was merely a request letter for legal assistance and not a 'document' under Section 139(ii) of the Customs Act, 1962. It did not pertain to investigations under the Indian Customs Act but under Italian laws, and thus, could not be used as conclusive evidence of undervaluation. 3. Voluntariness and Implication of the Appellant's Pre-Deposit of Differential Duty: The Tribunal noted that the appellant's pre-deposit of ?69,34,310/- was made under the term 'pre-deposit' and recorded as 'Receivables from Customs Department' in their balance sheet. This indicated that the payment was not voluntary but made under protest. The Tribunal emphasized that willingness to deposit cannot be construed as an admission of undervaluation without documentary evidence. 4. Compliance with Procedures under Rule 12 of the Customs Valuation Rules, 2007: The Tribunal found that the Customs Department did not follow the mandatory procedures under Rule 12 for rejecting the declared value. The proper officer must have reasonable doubt and seek further information from the importer before rejecting the declared value. The department failed to comply with these procedures, making the rejection of the declared value and subsequent re-determination of the transaction value invalid. 5. Justification for Re-Determination of the Transaction Value and Imposition of Penalties: The Tribunal held that the department did not provide credible evidence to substantiate the charges of undervaluation. The pre-deposit made by the appellant was not voluntary, and the Note-Verbale did not constitute admissible evidence. The Tribunal also noted that the investigation did not produce evidence of financial flowback through non-banking channels. Consequently, the re-determination of the transaction value and imposition of penalties under Sections 114A and 114AA were not justified. Conclusion: The Tribunal set aside the impugned order dated 26.03.2018 passed by the Commissioner of Customs, Nhava Sheva, and allowed the appeal in favor of the appellant, concluding that the charges of undervaluation were not substantiated by credible evidence, and the procedural requirements under Rule 12 of the Customs Valuation Rules, 2007 were not followed.
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