2020 (10) TMI 180 - AT - Customs

Valuation of imported goods - Sunglasses of various models - rejection of transaction value - confiscation of goods - imposition of penalty - HELD THAT - Section 14 of the Customs Act provides that for the purpose of valuation the value of imported goods shall be the transaction value of such goods, i.e. to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time of place of importation, or as the case may be for export from India, where the buyer and seller of the goods are not related and price is the sole consideration for the sale, subject to such other conditions as may be specified in the rules made in this behalf. It is further provided that rules made in this behalf may provide for the manner and acceptance or rejection of value declared by the importer or exporter, where the proper officer has reason to doubt the truth or accuracy of such value and determine value for the purposes of this Section. There are no reasons recorded for rejection of transaction value before taking the exercise of revaluation and enhancement of transaction value. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the transaction value of the imported goods was rightly rejected.
2. Whether the revaluation and enhancement of the transaction value were justified.
3. Legality of the order of confiscation and imposition of penalty.

Issue-wise Detailed Analysis:

1. Whether the transaction value of the imported goods was rightly rejected:

The primary issue was whether the transaction value declared by the importer for the consignment of sunglasses was correctly rejected. The consignment, which was cleared under the Risk Management Scheme (RMS), was later investigated for undervaluation. The investigation revealed that the sunglasses were of the "PEPE JEANS" brand, a well-known global brand, and were sold on various e-retail platforms. Statements recorded under Section 108 of the Customs Act from the importer's representatives indicated that the declared values could not be explained satisfactorily. The authorities prepared an inventory and detained the goods for further investigation. The Chief Executive Officer of the importer company agreed to a re-determined value based on the prices listed on e-retail platforms, which led to the rejection of the initially declared transaction value.

2. Whether the revaluation and enhancement of the transaction value were justified:

The authorities re-determined the import values by considering the retail prices on e-retail platforms and calculating the assessable value after deducting duties, profit margins, and freight charges. The importer’s CEO agreed to the re-determined values and signed the chart prepared by the department. The re-assessed values resulted in a significant increase in the declared value, leading to the imposition of differential duty. However, the appellant argued that the revaluation was not justified as the transaction value should be accepted under Section 14 of the Customs Act, which mandates that the value of imported goods should be the transaction value unless there is evidence of extra payment or a relationship affecting the price. The appellant cited the Supreme Court ruling in Eicher Tractors Limited, emphasizing that transaction value should be accepted in the absence of evidence of extra payment or relationship.

3. Legality of the order of confiscation and imposition of penalty:

The adjudicating authority ordered the confiscation of the goods with an option to redeem them on payment of a fine and imposed a penalty under Section 112. The appellant challenged this, arguing that without a proper rejection of the transaction value under Section 14, the revaluation and subsequent confiscation and penalty were void. The appellant also contended that the MRP of third-party retailers could not form the basis for valuation under the Valuation Rules. The Tribunal found that the authorities did not record reasons for rejecting the transaction value before revaluation, making the impugned order legally and factually flawed. Consequently, the Tribunal set aside the order, including the enhancement of the declared value, redemption fine, and penalty, and allowed the appeal, granting the appellant consequential benefits, including a refund of the differential duty with interest under Section 129EE of the Central Excise Act.

Conclusion:

The Tribunal concluded that the rejection of the transaction value and subsequent revaluation were not justified as the authorities failed to record reasons for rejecting the transaction value. The order of confiscation and penalty was also found to be legally unsustainable. The appeal was allowed, and the appellant was entitled to a refund of the differential duty paid, along with interest.

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