2021 (11) TMI 492 - AT - Customs

Valuation of imported goods - Related person - stocklot of coated/uncoated papers inrolls seized from NPT, godown Alipur, Delhi - rejection of declared value - declaration of lower value - differential duty demand on the basis of Rule 9, of CVR 2007 - HELD THAT - Neither the Show Cause Notice nor the Order-in-Original rely upon any provision of law under which the documents procured from Belgium Customs have been relied upon against the three importers but the only section under which such documents can be relied upon is Section 139(ii) of the Customs Act,1962. The relied upon documents do not meet the test of Section 139(ii) of the Customs Act, 1962 and hence are not admissible in evidence. Since these documents are neither signed nor authenticated and also full of numerous discrepancies as explained above, no presumption can be raised about its truthfulness - No explanation has been given by the DRI as to if the purported export declaration of higher value was available why corresponding invoices were not provided by the Belgium Customs as export declaration is always prepared on the basis of an invoice. Further, the duty of ₹ 74,640 has been confirmed on the ground that there was a difference in weight to the extent of 8.552 MT in respect of two Bills of Entry both dated 12.9.2014 as the procured invoices showed the actual quantity 447.492 MT where the actual invoices showed the total quantity imported as 438.940 MT. On the issue of inter-relationship between the three importers and the fact that all the three have been treated as related persons on twin grounds. In the first place it has been observed by the Principal Commissioner that Shri Prakash Chand Garg was Director of M/s NPT whereas his sons Shri Vijay Garg and Shri Ashish Garg were Directors of M/s SPPL and M/s SIPPL. He further observed that all three are part of same family and reside at the same residential address. He noted that there had been fund transfers among the three importers during period the financial year 2017-18 and these fund transfers were duly reflected in their financial statements - It has been held that Shri Prakash Chand Garg was one of the Directors in M/s Affluent Enterprises Ltd, Hong Kong and by virtue of that position all the three importers are related persons of M/s Affluent Enterprises Ltd. Further, M/s The Crown Commercial House, Hong Kong which was one of the suppliers to these importers was owned by one Shri Vikash Khatuwala who had a major shareholding in M/s Affluent Enterprises Ltd. Hence by virtue of that position, M/s The Crown Commercial House, Hong Kong was also a related person of these three importers. Merely because there were transfer of funds in India amongst three importers will not make them related persons in terms of Rule 2(2) of CVR,2007. The concept of related person under the Customs Act, 1962 is applicable only with regard to imported goods. The transfer of funds from one entity to another entity in India cannot have any bearing on the concept of related person with regard to the provisions of the Customs Act and Valuation Rules made there under - all the three importers cannot be treated as related persons. In the present case there was no need to redetermine the value as the transaction value under Rule 3(1) was available in view of our detailed findings hereinabove. Though Rule 3(1) is subject to Rule 12 but we find Rule 12 is not applicable to the facts of the present case as there is no credible evidence brought on record to reject the transaction value. We have already held that the documents procured from the Belgium Customs are not admissible in evidence. In this view of the matter, we hold that the transaction value declared by all the three importers were in accordance with Section 14(1) of Customs Act,1962 read with Rule 3(1) of CVR,2007. Further it was for the Principal Commissioner to have rebutted or displaced the detailed evidence which has been discussed by us in the preceding paragraphs which he has chosen to totally overlook and sidetrack. The differential duty demand on all three importers, imposition of penalties on all parties and Redemption Fine on M/s NPT are set aside - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Admissibility of documents procured from Belgium Customs.
2. Alleged undervaluation of imported goods by M/s NPT, SPPL, and SIPPL.
3. Relationship between importers and suppliers affecting transaction value.
4. Confiscation and penalties imposed on importers and their directors.

Issue-wise Detailed Analysis:

1. Admissibility of Documents Procured from Belgium Customs:
The tribunal examined the authenticity of documents obtained from Belgium Customs, which purportedly showed higher values than those declared to Indian Customs. These documents were found to lack signatures, stamps, and proper authentication, failing to meet the requirements under Section 139(ii) of the Customs Act, 1962, which presumes the truth of documents received from outside India if properly authenticated. The tribunal cited Supreme Court judgments (e.g., Commissioner of Customs, Visakhapatnam vs. Truewoods Pvt Ltd) to support the inadmissibility of such unauthenticated documents, concluding that these documents could not be relied upon as evidence.

2. Alleged Undervaluation of Imported Goods:
The tribunal found that M/s NPT, SPPL, and SIPPL had provided ample evidence showing that the declared transaction values were consistent with international market prices for similar goods. This included export declarations and invoices from other suppliers and importers, which supported the declared values. The tribunal noted that the Department failed to provide contemporaneous evidence of higher prices for identical goods. The tribunal emphasized that under Section 14 of the Customs Act and relevant rules, the transaction value should be accepted unless there is credible evidence to doubt its accuracy. The tribunal rejected the Department's reliance on the unauthenticated documents from Belgium Customs.

3. Relationship Between Importers and Suppliers:
The tribunal examined whether the importers (M/s NPT, SPPL, and SIPPL) were related to their suppliers, which could affect the transaction value. The Principal Commissioner had treated the importers as related persons based on family connections and fund transfers among the entities. The tribunal found that such domestic transactions did not establish a relationship under the Customs Valuation Rules, 2007. The tribunal also noted that the prices declared by the importers were consistent with those paid by unrelated parties for similar goods. Citing judgments like Commissioner vs. Clariant (India) Limited, the tribunal held that even if parties are related, transaction values cannot be rejected if similar prices are paid by unrelated parties.

4. Confiscation and Penalties:
The tribunal addressed the confiscation of goods and penalties imposed on the importers and their directors. Given that the transaction values were correctly declared and there was no evidence of undervaluation, the tribunal found no justification for confiscation or penalties. The tribunal set aside the confiscation order and penalties, emphasizing that the Department had not provided sufficient evidence to support its claims. The tribunal also noted that the retraction of statements by the importers' directors was not properly considered by the Principal Commissioner.

Conclusion:
The tribunal allowed the appeals, setting aside the differential duty demands, penalties, and redemption fines imposed on the importers and their directors. The tribunal emphasized the need for credible evidence to reject declared transaction values and the importance of adhering to legal standards for document admissibility and related party transactions.

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