2023 (6) TMI 156 - AT - Customs

Valuation of imported goods - machinery oil /machinery lubricant oil - rejection of declared value - redetermination of value - Ash content in the samples - HELD THAT - With respect to rejection of declared value under Rule 12 of Customs Valuation Rules, 2007 and/ or re-determination of the same under Rule 5 ibid is seriously bad in law since for rejection of transaction value, the Ld. Commissioner could not allege that the transaction value of the import consignments of the Appellant were fake and/or forged. There is nothing on-record even to suggest that the transaction value of import was not the correct value for the purpose of assessment. It is settled position of law that unless the transaction value could be established to be improper upon the finding that import invoices were either fabricated or fake or that any relationship exists between the importer and the exporter, the transaction value has to be accepted as correct value for assessment under Rule 3 of the Customs Valuation Rules, 2007. That in the present case, there is nothing on record to show that the transaction value of imports were not actual value of transaction. The basis of re-valuation by the department is re-classification of goods and when the re-classification is itself not proper, question of re-valuation of imported goods and/ or demand of any differential duty on the same, cannot arise. When the Test Reports of examiner cannot classify the goods specifically as base oil , rejection of classification and /or re-valuation of imported goods, is not permissible in law. Re-classification cannot even be reason of re-valuation of imported consignment. Moreover, the attempt of the authority to classify the imported goods as base oil is bereft of any evidence and hence, not maintainable. There is no merit in the impugned order and the same is liable to be set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the rejection of declared assessable value of imported consignments under Customs Valuation Rules, 2007, re-determination of value, confiscation of goods, differential duty demand, imposition of penalties, and the legality of the assessments under the Customs Act, 1962.

Issue 1: Rejection of Declared Value and Re-determination under Customs Valuation Rules, 2007:
The appeal was filed against the rejection of the declared assessable value of imported consignments under Customs Valuation Rules, 2007. The Customs Authority re-determined the value under Rule 5 of the Customs Valuation Rules, 2007 based on the allegation that the imported goods labeled as 'machinery oil' were actually 'base oil'. This re-determination led to the confiscation of goods under section 111(m) of the Customs Act, 1962, and the imposition of a redemption fine of Rs.50 lakhs. Additionally, a differential duty amounting to Rs. 2,32,95,676/- was demanded, and penalties of Rs.20 lakhs and Rs.50 lakhs were imposed under sections 112(a)(ii) and 114AA of the Customs Act, 1962. An amount of Rs.95 lakhs deposited during the investigation was ordered to be appropriated towards the duty demand.

Issue 2: Legality of Assessments under Customs Act, 1962:
The appellant contended that the assessments on the 41 Bills of Entry were not finalized under section 18(2) of the Customs Act, 1962, prior to the demand of any differential duty. The appellant argued that the Show Cause Notice issued under section 18(2) was not maintainable in law, citing a decision of the Hon'ble High Court of Calcutta. The matter was remanded by the High Court for fresh consideration by the Tribunal to examine the experts' reports and come to a conclusion based on the available materials.

Issue 3: Classification of Imported Goods and Supply to M/s. Balmer Lawrie & Co. Ltd.:
The Customs Authority classified the imported goods as 'base oil' based on test reports from CRCL, Kolkata and CRCL, New Delhi. However, the appellant argued that the classification was not supported by the test reports, which suggested that the samples 'may be' of base oil, indicating uncertainty. The appellant also refuted the claim that all imported goods were 'base oil' supplied to M/s. Balmer Lawrie & Co. Ltd., presenting evidence of separate purchases and sales of 'base oil' covered under Central Excise invoices. The appellant contended that the allegation of supplying 'base oil' to M/s. Balmer Lawrie & Co. Ltd. was erroneous and unsupported by the facts.

Issue 4: Rejection of Declared Value and Re-determination under Customs Valuation Rules, 2007:
The appellant argued that the rejection of the declared value under Rule 12 of Customs Valuation Rules, 2007, and the re-determination under Rule 5 were unjustified. The appellant maintained that unless the transaction value could be proven improper, it had to be accepted as the correct value for assessment. The re-classification of goods as 'base oil' without concrete evidence was deemed unlawful, and the attempt to re-value the imported goods was considered baseless. The Tribunal found no merit in the impugned order and allowed the appeals filed by the appellants with consequential relief.