2022 (7) TMI 1126 - AT - Customs

Valuation - import of betel nuts made by the Appellant - rejection of transaction value - redetermination of value under Rule 5 of the Customs (Determination of Value of Imported Goods) Rules 2007 - evidences of contemporaneous import - HELD THAT - The Adjudicating Authority, by Order-in-Original rejected the transaction value under Rule 12 (1) of the Custom (Determination of Value of Imported Goods) Rules 2007 and re-determined the same under Rule 5, after discussing non-adoptability of valuation under Rule 4 of the Customs Valuation Rules 2007, finding contemporaneous imports during more or less same period on higher value. Appeal against the Order passed by the Original Authority was dismissed, without modifying the original order. Betel nut being an agricultural product, similarity and identical nature of goods can be ascertained only by quality assessment, as the price of betel nuts are largely depended on grade, quality, time of yield, age of the product, level of processing, time of import etc.. Even though Revenue has placed reliance on betel nuts imported through the ports of Chennai and Nhava Sheva, no quality test report is available on records. Even the Betel nuts imported by the Appellants are not tested to ascertain its grade and quality. In the absence of any quality assessment test reports, the contemporaneous nature of goods cannot be ascertained. NIDB data and the documents relied upon by the Department are not made available to the Tribunal and the same is not seen part of the Order-in-Original. Therefore, there is no clarity and specificity on the probative value of the documents on which reliance is placed by the Department in support of its allegation of under-valuation. In the present case, Department has rejected transaction value under Rule 12 (1) and re-determined under Rule 5 of the Customs (Determination of Value of Imported Goods) 2007, finding that there are contemporaneous imports through the ports at Chennai and Nhava Sheva on higher transaction value. Rules are very clear to the extent that, in order to invoke Rule 5, evidences of similar goods at the same commercial level and in substantially the same quantities, as the goods being valued are required and in the absence of the later, conditions contemplated under Sub Rule (1) ( c) of Rule 4 has to be followed. In so far as the present case is concerned no evidences are available on records to prove that the relied upon contemporaneous imports through Chennai and Nhava Sheva were similar goods at the same commercial level and in substantially the same quantities - In the absence of any evidence, the Order in Original as well as Order in Appeal failed to meet the necessities mandated under Rule 5 of the Customs Valuation Rules 2007. In view of the non-availability of evidence of identical or similar goods of same quantity and at same commercial level, the suspicion casted by the Original Authority, leading to the rejection of transaction value is also incorrect. Therefore rejection of transaction value, even at the first place, is misplaced. In the instant case, Revenue has not come with any evidence, either in the nature of any reports or documents to meet the standards prescribed under Rule 5 - the identical nature of the goods, compared in this case, are not proved in the manner established under law and therefore applicability of this rule and sub rule mutatis mutandis to Rule 5 also fails. Appeal allowed.

Issues Involved:
1. Valuation of imported betel nuts.
2. Confiscation of goods.
3. Consequential demand of duty.
4. Application and interpretation of Customs Valuation Rules, 2007.
5. Adherence to procedural requirements by the Adjudicating and Appellate Authorities.

Detailed Analysis:

Valuation of Imported Betel Nuts:
The main issue revolves around the valuation of betel nuts imported by the Appellant through the port of Kochi during October 2010 to January 2011. The Revenue Authorities alleged undervaluation and violation of EXIM Policy, leading to adjudication proceedings under the Customs Act, 1962. The Original Authority rejected the declared transaction value under Rule 12(1) and re-determined it under Rule 5 of the Customs (Determination of Value of Imported Goods) Rules, 2007, citing contemporaneous imports at higher values. The Appellant contested this valuation, arguing that the goods were imported at USD 300 per MT, while the Revenue revalued them at approximately USD 650 per MT.

Confiscation of Goods:
The confiscation of goods was a consequence of the alleged undervaluation. The Appellant argued that the goods were imported legally and that the valuation was done in compliance with the relevant rules and notifications. The Revenue, however, maintained that the goods were undervalued and thus subject to confiscation.

Consequential Demand of Duty:
The demand for additional duty arose from the revaluation of the imported goods. The Appellant contended that the duty demand was unjustified as the original transaction value was correct. The Revenue's stance was that the revaluation was necessary due to the undervaluation detected.

Application and Interpretation of Customs Valuation Rules, 2007:
The Appellant argued that the Original Authority and the Appellate Authority did not properly apply the Customs Valuation Rules, 2007. Specifically, they contended that the authorities failed to provide cogent reasons for rejecting the transaction value and did not follow the sequential application of Rules 4 to 9 as mandated. The Tribunal noted that the valuation under Rule 5 was adopted without adequate evidence of contemporaneous imports of similar goods, and no quality assessment was done to establish the similarity of the goods.

Adherence to Procedural Requirements by the Adjudicating and Appellate Authorities:
The Appellant criticized the 1st Appellate Authority for not applying its mind and merely agreeing with the findings of the Original Authority without providing detailed reasons. The Tribunal observed that both the Original and Appellate Authorities failed to follow the procedural requirements, such as providing a reasonable opportunity to the importer to contest the rejection of the declared value and not adequately considering the evidence and arguments presented by the Appellant. The Tribunal emphasized the importance of recording precise reasons for decisions, as mandated by various judicial pronouncements.

Conclusion:
The Tribunal found that the rejection of the transaction value and its re-determination under Rule 5 were not justified due to the lack of evidence of contemporaneous imports of similar goods and the absence of quality assessment. The authorities did not follow the procedural requirements and failed to provide cogent reasons for their decisions. Consequently, the appeals were allowed with consequential reliefs, and the orders passed by the Original and Appellate Authorities were set aside.

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