2023 (9) TMI 576 - AT - Customs

Project Import - demand of differential duty - levy of penalty - undervalued goods - goods procured at a higher price than that shown in the invoice - rejection of transaction value - enhancement of value - delay in passing the assessment - HELD THAT - On perusal of Project import Contract it is seen that the amount fixed by the parties to the contract (M/s.PPN and M/s.Marubeni) is for the entire contract which includes goods which have ben sourced from vendors other than M/s.Stone Webstar. The appellant has to pay in total the contract value. It is this value that has been split into various segments. M/s.PPN has to pay only this contract value and need not pay any amount higher even if M/s.Marubeni has procured some goods at a higher price. There is no allegation that there is some hidden payments made by M/s.PPN to M/s.Marubeni. The documents of payment show that appellant has paid only the amount as per contract. The ground put forward by the department to reject the transaction value declared for some items cannot be accepted when the amount fixed is for the entire project import. In the case of AGARWAL INDUSTRIES VERSUS COMMISSIONER OF CUSTOMS, VIZAG 2005 (8) TMI 225 - CESTAT, BANGALORE the Tribunal held that the transaction value arrived at purely on commercial considerations based on contracts, transaction value not to be rejected unless established with reason. Delay in passing the assessment - HELD THAT - There is considerable delay of more than 13 years after the date of report of DRI (8/2006) till the order of finalization (27.09.2019). The department has not been able to explain this delay. The higher forums have held that in such situations, in unreasonable delay in adjudication / finalization of assessment the show cause notice itself is liable to be quashed. The finalization has happened after 15 years of provisional assessment which is extremely inordinate delay, and also against the instructions issued by CBIC as to finalization of Project Import Assessments The department has not been able to put forward cogent evidence to reject the transaction value - thus it is found that the demand of differential duty the order for confiscation of goods, imposition of Redemption Fine and penalties imposed on M/s. PPN cannot sustain and requires to be set aside. The impugned orders are set aside - Appeals are allowed.

Summary

Issues Involved:
1. Delay in Finalization of Assessment
2. Alleged Undervaluation of Goods
3. Imposition of Penalties and Confiscation of Goods
4. Jurisdiction of Customs Authorities

Summary:

1. Delay in Finalization of Assessment:
The appellant, M/s. PPN Power Generating Co. Pvt. Ltd., registered under the Project Import Regulations, 1986, faced significant delays in the finalization of the assessment by the Customs Department. Despite continuous requests from M/s. PPN for finalization starting from 2002, the final assessment was only completed in 2019, resulting in a delay of over 15 years. The Tribunal noted that this delay was inordinate and against the instructions issued by CBIC, which stipulate a reasonable period for finalization of assessments.

2. Alleged Undervaluation of Goods:
The department alleged that M/s. PPN undervalued goods imported from M/s. Marubeni Corporation, Japan, based on the fact that M/s. Marubeni procured some items at higher prices from other suppliers. The Tribunal found that the transaction value declared by M/s. PPN was based on the contract value agreed with M/s. Marubeni, which included the entire project cost. There was no evidence of any hidden payments or additional amounts paid over the contract value. The Tribunal relied on precedents, such as the case of Agarwal Industries Vs. CC Vizag, to conclude that the transaction value should be accepted unless there are special circumstances warranting its rejection.

3. Imposition of Penalties and Confiscation of Goods:
The original authority imposed penalties and ordered the confiscation of goods based on the alleged undervaluation. However, the Tribunal found that the department failed to provide sufficient evidence to support the rejection of the transaction value. The Tribunal also noted that the delay in finalizing the assessment violated the principles of natural justice, rendering the penalties and confiscation orders unsustainable.

4. Jurisdiction of Customs Authorities:
The Tribunal addressed the issue of jurisdiction, noting that the Assistant Commissioner of Customs is the proper officer to finalize provisional assessments. However, when issues of confiscation and penalty are involved, the case should be adjudicated by an officer empowered to handle such matters. The Tribunal found that the proceedings were ultra vires the powers and jurisdiction of the Assistant Commissioner, further invalidating the penalties and confiscation orders.

Conclusion:
The Tribunal set aside the impugned orders, including the demand for differential duty, confiscation of goods, and imposition of penalties on M/s. PPN and M/s. Marubeni. The appeals were allowed with consequential reliefs. The judgment emphasized the importance of timely finalization of assessments and adherence to legal principles in determining transaction values and imposing penalties.