2020 (12) TMI 804 - AT - Customs

Principles of natural justice - gist of submissions by the learned counsel for the appellants are that the department did not consider their submissions in entirety - Valuation of imported goods - related party or not - time limitation - HELD THAT - The original authority as well as the appellate authority have gone only on the basis that the buy and seller are related in terms of Rule 2(2) of CVR, 1988 and proceed to judge transactions in terms of 4(3)(a) and 4(3)(b) ibid. The original authority has given a finding that that the onus to prove that their relationship has not affected the pricing lies on the importer in terms of the rules cited above. This is not the correct proportion of law - In terms of Rule 3(a) of CVR, 1988, where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relationship did not influence the price. Neither the original authority nor the appellate authority have given reasons to hold that the relation has indeed affected the price. In case, the department did the same, then the onus would have been transferred to the importer - proviso under Rule 3(a)(b) states that provided that in applying the values used for comparison, due account shall be taken of demonstrate a difference in commercial levels, quantity levels, adjustments in accordance to provision of Rule 9 of these Rules and cost incurred by the seller in sales in which he and the buyer are not related. The submissions of the appellants were required to be considered and reasons, if any, for rejecting the same should have been recorded. It was found that no discussion and findings have been given by both the authorities on the Annexures-B, C, D submitted by the appellants. Time Limitation - HELD THAT - The appellants have taken inordinate time to submit reply to the questionnaire given by Revenue to them in 2003. Department has also not adhered to the time frame given vide CBEC circular 11/2001. In the end there was rush to complete the proceedings. Learned counsel for the appellants submits that no clarification whatsoever was sought from the Appellant as to the relevance (or otherwise) of the Chemical Weekly Report before proceeding to rely on the Report; no opportunity of hearing in this regard was given to the Appellants - the submissions of the appellant have not been considered. Under the circumstances, the case needs to go back to the original authority for a proper examination of all the facts of the case, the submissions of the appellants including case law in this regard and to pass a speaking and reasoned order as per law. Appeal allowed by way of remand.

Summary

Issues Involved:

1. Arbitrary reference to Special Valuation Branch (SVB).
2. Arbitrary loading of transaction value.
3. Non-communication of grounds for enhancement.
4. Non-consideration of appellant's submissions.
5. Use of Chemical Weekly Report for valuation.
6. Absence of test reports for imported goods.
7. Mechanical upholding of the original order by the Commissioner (Appeals).

Detailed Analysis:

1. Arbitrary Reference to Special Valuation Branch (SVB):

The appellants argued that the reference to SVB was arbitrary and without jurisdiction. They contended that the Commissioner of Customs (Appeals) did not provide a prima facie justification for referring the case to SVB, nor did the department test the imported goods to ascertain their quality. The department's issuance of a Questionnaire and Circular No. 04/2003 was claimed to be without jurisdiction, rendering the proceedings legally suspect and ab initio flawed.

2. Arbitrary Loading of Transaction Value:

The appellants asserted that the transaction value was arbitrarily loaded without proof of price influence, relying on incomparable data. The department's reliance on the Chemical Weekly Report was challenged as comparing apples with oranges, given differences in quality, quantity, and period of import. The appellants argued that the transaction value cannot be rejected based on such magazines and journals, citing case law to support their position.

3. Non-communication of Grounds for Enhancement:

The appellants contended that the non-communication of the grounds for enhancement of transaction value amounted to a breach of natural justice. They cited the case of Forbo Siegling Movement Systems India Pvt Ltd Vs UOI, which held that non-communication of grounds is a breach of natural justice.

4. Non-consideration of Appellant's Submissions:

The appellants argued that their submissions, including responses to the Questionnaire and supporting documents, were not properly considered. They highlighted that the Order-in-Original was passed without giving them an opportunity to present their case fully, and the Commissioner (Appeals) upheld the order mechanically without independent application of mind.

5. Use of Chemical Weekly Report for Valuation:

The appellants challenged the use of the Chemical Weekly Report for valuation, arguing that the report was not comparable to the imported goods in terms of quality, quantity, and period. They emphasized that the department did not obtain a test report to assess the quality of the imported goods and relied on the report without proper examination. The appellants cited case law to argue that such magazines cannot be considered as evidence of contemporaneous import.

6. Absence of Test Reports for Imported Goods:

The appellants pointed out that the department did not obtain test reports to determine the quality of the imported goods, which was crucial to assess their claim that the imported wax was impure. They argued that the absence of test reports rendered the department's reliance on the Chemical Weekly Report baseless.

7. Mechanical Upholding of the Original Order by the Commissioner (Appeals):

The appellants contended that the Commissioner (Appeals) upheld the original order in a mechanical manner without independently applying his mind. They argued that the order was non-reasoned and non-speaking, failing to address whether the requirements of Rule 4(3)(a) were met, whether a prima facie case existed for reference to SVB, and whether the original authority examined the circumstances to indicate price influence.

Judgment:

The Tribunal found that the original authority and appellate authority did not provide reasons to hold that the relationship between the appellants and their overseas sellers affected the prices. It was incumbent on the department to show how the relationship influenced the prices before shifting the onus to the importer. The Tribunal noted that the original authority erred in relying on the Chemical Weekly Report without proper examination and without obtaining test reports for the imported goods.

The Tribunal directed the appellants to submit all evidence to the original authority within four weeks and instructed the original authority to consider the issue afresh, taking into account all facts, submissions, and case law, and to pass a speaking and reasoned order within 12 weeks. The appeal was allowed by way of remand to the original authority.